Localization and digitalization are necessary strategies for multinationals to cope with the disruption of novel coronavirus to global supply chain, said Dieter Beste, vice chairman of German Federal Association of Hidden Champions, as the ongoing epidemic is expected to have a severe impact on German economy, especially its export and supply chain.
The word "hidden champion" was firstly proposed by a German managerialist Hermann Simon, and refers to innovative SMEs that are global market leaders in their respective niches. The German Federal Association of Hidden Champions is in charge of managing those enterprises in the country.
German government data shows that, as of writing time, Germany had registered 1,565 coronavirus cases. The German state-owned development bank KfW estimates that the outbreak will create further stagnation for Germany's already slowing economy.
"We live in times of increasing globalization and in this respect it can be said that everyone will be affected in some way," Beste said.
He mentioned that German automotive industry, mechanical engineering, as well as electrical engineering may suffer losses, as they are highly interlinked with the world through supply chains.
"But I don't think globalization can be reversed. Globalization will continue to develop and, contrary to all predictions that any country can withdraw into itself and be self-reliant again, I don't think that's a smart idea," he stressed.
And he says one lesson that industries and companies have to learn from the coronavirus outbreak is that "globalized trade must be able to cope with disruptions and the industrial structure in individual countries — like in China, as well as in Germany or in Europe — has to adapt accordingly."
To overcome any disruption in the future, multinationals should produce locally and invest more in digitalization, Beste advises.
"I think that the global economic trends are changing, in that they are moving more in the direction of digital flows, while goods themselves are being produced locally," he explained.
China is Germany's largest trade partner. Beste is bullish on the Chinese economy and expects more investment, both in China and Germany, in the future.
"I have no doubt that the Chinese economy will continue to do well. China has, and will continue on an incredible, successful path of industrialization in recent decades. China has become the world leader in many areas of technical development and is in the process of rationally viewing and developing things that make sense for the future," he commented.
(Video provided by China International Investment Promotion Agency (Germany))