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

Christian Sewing, chief executive of Deutsche Bank, acknowledged that a recession in Germany is inevitable and urged leaders to accelerate its decoupling from China.

Denis Balibouse | Reuters

Deutsche Bank CEO Christian Sewing warned on Wednesday that a recession in Germany was inevitable and urged the country’s leaders to accelerate its decoupling from China.

In a speech at the Handelsblatt banking summit in Frankfurt, Sewing noted that Russia’s war in Ukraine had “destroyed a number of certainties” on which the global economic system had been based in recent decades.

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He cited a standstill in globalization due to major geopolitical tensions, which are not expected to ease anytime soon and have disrupted global value and supply chains, as well as a bottleneck in the labor market. and a shortage of gas and electricity driving up costs, as the main reasons why Eurozone inflation is at record highs.

“As a result, we will no longer be able to avoid a recession in Germany. Yet we believe our economy is resilient enough to weather this recession well – provided central banks act quickly and decisively now.” , Sewing said, according to a translated transcript.

He added that for now, many people still have pandemic savings to fall back on to meet rising energy costs, while most businesses remain “sufficiently funded”.

“But the longer inflation stays high, the greater the tension and the greater the potential for social conflict,” he said.

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The German economy stagnated in the second quarter, while producer price inflation hit a record high in July. Germany’s finance ministry cited reduced gas supplies from Russia, rising costs for energy and other goods, and continued supply chain disruptions partly due to the “zero zero” policy. -Covid” from China.

Russia’s war in Ukraine has forced the European Union to step up efforts to reduce its dependence on Russian imports of energy and raw materials, and Sewing said the invasion has highlighted the dangers to become too dependent on individual countries and regions.

“With regard to dependencies, we also have to deal with the delicate question of how to deal with China. Its growing isolation and rising tensions, especially between China and the United States, pose a considerable risk to the world. ‘Germany,” Sewing said, adding that China had become a “cornerstone” of the German economy.

He pointed out that China accounts for around 8% of German exports and 12% of imports, while more than a tenth of the sales of companies listed on the country’s DAX stock index go to China, adding that the pandemic has clearly shown to what extent Germany’s supply chains depend on Russia.

“Reducing this dependence will require a change no less fundamental than the decoupling of Russian energy,” he said.


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