Deutsche Bank CEO warns of recession, says Germany must cut China reliance

Christian Sewing, Chief Executive Officer of Deutsche Bank, has acknowledged {that a} recession in Germany is inevitable, and urged leaders to speed up its decoupling from China.

Denis Balibouse | Reuters

Deutsche Bank CEO Christian Sewing warned Wednesday {that a} recession in Germany is inevitable, and urged the nation’s leaders to speed up its decoupling from China.

In a speech on the Handelsblatt Banking Summit in Frankfurt, Sewing famous that Russia’s warfare in Ukraine had “destroyed a number of certainties” on which the worldwide financial system was predicated over the previous few a long time.

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He cited a halting of globalization resulting from main geopolitical tensions, which is unlikely to abate any time quickly and has disrupted world worth and provide chains, together with a bottleneck within the labor market and a shortage of gasoline and electrical energy resulting in hovering prices, as key explanation why euro zone inflation is at file highs.

“As a result, we will no longer be able to avert a recession in Germany. Yet we believe that our economy is resilient enough to cope well with this recession — provided the central banks act quickly and decisively now,” Sewing stated, based on a translated transcript.

He added that for now, many individuals nonetheless have pandemic financial savings to fall again on so as to meet rising power prices, whereas most corporations stay “sufficiently financed.”

“But the longer inflation remains high, the greater the strain and the higher the potential for social conflict,” he stated.

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The German financial system stagnated within the second quarter, whereas producer value inflation hit a file excessive in July. The German finance ministry cited lowered gasoline provides from Russia, rising prices of power and different items, and chronic provide chain disruptions partially resulting from China’s “zero-Covid” coverage.

Russia’s warfare in Ukraine has compelled the European Union to speed up efforts to cut back its reliance on Russian power and uncooked materials imports, and Sewing stated the invasion had shone a highlight on the hazards of changing into too depending on particular person international locations and areas.

“When it comes to dependencies, we also have to face the awkward question of how to deal with China. Its increasing isolation and growing tensions, especially between China and the United States, pose a considerable risk for Germany,” Sewing stated, including that China had turn out to be a “cornerstone” of the German financial system.

He highlighted that China accounts for round 8% of German exports and 12% of imports, whereas greater than one-tenth of the gross sales of corporations listed on the nation’s DAX inventory index go to China, including that the pandemic made clear the extent to which German provide chains depend on Russia.

“Reducing this dependency will require a change no less fundamental than decoupling from Russian energy,” he stated.


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