UPDATE 1-Merck KGaA aims to build domestic supply chains in China

Reuters · 05/11/2023 05:26
UPDATE 1-Merck KGaA aims to build domestic supply chains in China

Adds more CFO comments paragraphs 4-5, background on global tensions from paragraph 6

- German technology group Merck KGaA MRCG.DE said it was determined to invest further in China and aims to build domestic supply chains there to curb imports of key raw materials amid rising tensions between Beijing and Western powers.

"We are trying to limit, when it is reasonably possible, imports of important raw materials from other countries into China, especially from the U.S. into China," finance chief Marcus Kuhnert said on a media call on Thursday on first-quarter results.

"At the same time we are creating a China-for-China approach, so that also the vast majority of products we are going to produce in China is actually supposed to be for the Chinese market," he added.

He said that the maker of drugs, lab equipment and semiconductor chemicals had a sizable footprint in China, which accounts for about 3 billion euros ($3.3 billion) of 22 billion euros group sales.

"We are determined to further invest in China," he said.

The German government has been trying to counter the country's economic dependence on China.

A political row erupted over plans by China's Cosco to buy a minority stake in a container terminal of Hamburg's port, but the transaction was eventually cleared by Berlin late on Wednesday.

German Economy Minister Robert Habeck in March suggested that Berlin could impose export restrictions on China to prevent Germany from losing its technological edge, and the government under Chancellor Olaf Scholz's is working on a strategy paper on China to be rolled out this year.

The German government said last month it currently has plans to ban the export to China of chemicals used to manufacture semiconductors, which would have hit Merck, denying a media report that suggested such a move could be in the works.

($1 = 0.9084 euros)

(Reporting by Ludwig Burger; editing by Matthias Williams and Emelia Sithole-Matarise)

((ludwig.burger@thomsonreuters.com; +49 30 220133634;))