Germany businesses increasingly shift manufacturing to Asia

Germany, which is by far the strongest of any of the 27 European Union (EU) economies, has moved to shift its manufacturing away from EU member nations as it works to take advantage of booming growth in China. The change, however, is hurting the overall recovery on the continent, according to a published report.

The New York Times reports that in the wake of the global recession, Germany's businesses have emerged newly strengthened by surging demand for their industrial products. While German companies used to boost the economies of countries like Italy and France as they set up manufacturing facilities and other distribution centers, a growing slice of that work is going to Asian and other emerging economies.

The shift, however, is worrying economists as Europe has historically relied on Germany to drive its overall economy. German companies are achieving business cost reductions in Asian countries where labor is cheaper and they are overhauling their strategic sourcing of goods as they endeavor to meet demand from international markets.

"It reinforces a shift that we have seen in recent years for Germany to become rather more focused on its own national interests rather than sacrificing for some defined European interest," London School of Economics professor Kevin Featherstone affirmed. "Germany is not giving up on Europe, but it is certainly frustrated."

German companies are increasing production capacity in countries aside from EU member nations. China is currently the biggest market for Germany-based carmaker Volkswagen, and analysts assert that the same could soon be true for both Mercedes and BMW.

Businesses like Fresenius, which is a healthcare company located outside Frankfurt, are reporting exceedingly strong growth in Asia, while European growth is strong but not overwhelmingly so. For example, in Asia Fresnius said sales increased by 20 percent in 2010, while European growth was up only 8 percent.

Nonetheless, experts note that European countries comprise the largest component of German businesses' revenue, though that figure is falling. In 2010, the euro zone's share of German exports hit 41 percent, which was down from 43 percent in 2008. Asia's share, on the other hand, was up to 16 percent from 12 percent.

With Germany largely funding the recent bailout package for Greece that was passed this week, the country has increasingly moved to exert its national interests. With an unemployment rate of roughly 6 percent, its economy is churning and as businesses look to continue to log hefty earnings gains, Asian countries are seen as a source of potentially huge growth.