German businesses bet big on China, and they’re starting to worry

economictimes.indiatimes.com:

Karl Haeusgen’s grandfather invented a hydraulic pump he was so proud of that he founded a company to sell it. Back then, there were no revenue projections or five-year growth strategies. The plan was survival: “It was just about grabbing chances,” Haeusgen said.

Seven decades and three generations later, the family business, Hawe Hydraulics, ships some 2,500 parts around the globe. Instead of scrambling for sales, though, Haeusgen must parse the geopolitics of an ever more polarised world. “A third of my business, if not more, depends on how Biden and Xi get along,” he said.

“I sometimes wish I ran a restaurant and didn’t have to care about global politics.” With China and North America as Hawe’s biggest trade partners, Haeusgen doesn’t have that luxury. As tensions between China and the West rise, Hawe officials are working to hedge the company’s dependence on the huge Chinese market. Long a linchpin of Chinese trade in Europe, Germany is increasingly caught in the diplomatic tussle between the world’s two largest economies — wooed by China but urged by Washington to move further away from Beijing, even as Treasury Secretary Janet Yellen arrives in China on Thursday for talks seeking common economic ground.

How Hawe and other midsize German companies navigate these new global forces will be critical to the country’s future prosperity. Although Germany’s 20th-century success as the economic powerhouse of Europe is often seen through its biggest brands — like Volkswagen, Mercedes and Siemens — it is small and medium enterprises that are the backbone of its economy. These companies, known in German as the “Mittelstand,” are struggling to create a model for the future as the country’s socioeconomic order begins to falter