ZURICH (Reuters) – The coronavirus pandemic could damage European competitiveness by accelerating the economic dominance of the United States and China, Siemens <SIEGn.DE> Chief Executive Joe Kaeser warned.
The European Union needs a common economic policy if it is not to be squeezed out by the two giants, Kaeser, who is also chairman of the Asia-Pacific Committee of German Business (APA), told Reuters in an interview.
“It is likely that the U.S. and China will emerge stronger from the corona crisis,” he said.
“The U.S. is home to the big technology and digitalization companies,” he added, pointing to the country’s huge domestic market and the increasing importance of digitalised industries.
China, the first country to be hit by COVID-19, now had a time advantage of several months over other countries in kick-starting its economy, he said.
“China’s companies are already working on major projects, while we are still discussing how interrupted supply chains can be restored,” Kaeser said.
Much of Chinese industry like the automotive sector is back to operating at the levels similar to the end of 2019, while domestic sales were being boosted by infrastructure spending and economic stimulus.
“We can already see that in the infrastructure sector, such as power plants and other major projects, China is filling the international voids,” Kaeser said.
As a major exporter, Germany in particular could be affected by a decoupling of multilateral ties between the United States and China, Kaeser added.
There is a danger of localisation of value creation if the United States and China insist on local production, which companies like Siemens would have to adapt to by splitting up their businesses, he said.
This would mean jobs and value creation being lost to Germany, he added.
“Decoupling was already a big issue before corona and will continue to accelerate.” Kaeser said.
Europe with its 500 million-strong population could still be a third major player alongside the two giants, Kaeser added, although it would need to be radically focused on innovation.
“So what is the answer to this threatened bilateral dominance by China and the U.S? Europe, Europe, Europe – the order is up to the governments themselves,” Kaeser said.
(Reporting by Andreas Rinke, writing by John Revill; Editing by Emelia Sithole-Matarise)