Record investment by German companies in China

According to calculations by the German Economic Institute (IW), investment by German companies in China has increased significantly in the past two years, after a steady decline after 2016.

German companies invested a record 11.5 billion euros in the country last year, despite growing concerns about the German government’s economic dependence on China, according to IW data.

MOST OF IT COMES FROM ITS MILLS IN CHINA

Most of the investments of German companies in China came from profits in that country.

According to a study conducted by the Rhodium Group last year, a third of German investment in China between 2019 and 2021 came from the country’s three largest automakers, Volkswagen (VW), BMW and Mercedes-Benz, as well as the chemical group BASF.

IW foreign trade expert Jürgen Matthes told the German business newspaper Handelsblatt that “if a war breaks out in the near future, the German economy will face a crisis of enormous dimensions.” But if that doesn’t show up in the statistics soon, politicians will have to act.” he used the phrase.

FOREIGN TRADE DEFICIT WITH CHINA 84.1 BILLION EUROS

12.8 percent of Germany’s total imports come from China. The country’s next largest trading partner after China is the Netherlands, with around 8 percent. The Netherlands are followed by the United States.

In exports, China ranks fourth in Germany’s exports. The United States leads the ranking of the most important export markets for German products, followed by France and the Netherlands.
It is also worth noting that Germany’s foreign trade deficit with China, which was 23.5 billion euros in 2010, increased to 84.1 billion euros last year.

German companies depend on imports from China, especially when it comes to critical raw materials such as rare earths or magnesium.

According to the analysis of the Federation of German Industry (BDI), about 94 percent of all rare items imported into Germany come from China. Similarly, for other critical raw materials, Germany is heavily dependent on China.

It is also worth noting that some of the profits of German companies come mainly from China. More than 30 percent of the revenue of the German automakers VW, Mercedes and BMW comes from China.

ADDICTION TO CHINA IS THE TOPIC OF DISCUSSION

While China has been on record as Germany’s largest trading partner for the past 7 years, the German public has been discussing economic dependence on China after Russia’s recent energy dependence resulted in an “energy crisis.”

The German government has been warning for months about the dependence of German companies on China.

Prime Minister Olaf Scholz warns that German companies should not “put all their eggs in one basket”.

GERMANY-CHINA RELATIONS

While Western countries, especially the US, Canada, and Australia, have started to take a tougher stance against China, which is expanding its economy and influence, Germany is seen failing to address this by keeping its trade relations ahead of politics. .

China’s increasing effectiveness in Europe through investments and acquisitions in critical sectors such as infrastructure and technology, including European Union (EU) countries, has long been a topic of public debate.

The fact that the economic relations of Germany, which has the largest economy in Europe, with China play a decisive role in political relations, also provokes criticism on the continent.

Former German Chancellor Angela Merkel visited China 12 times during her 16-year tenure.

The government prioritized economic relations over human rights. While Merkel-era Chinese policy was frequently criticized by opponents, it should be noted that Prime Minister Olaf Scholz continued his economic cooperation with China, with a similar approach to Merkel’s, taking trade balances into account.

BENEFIT FROM CHINA’S OPENING TO THE GLOBAL ECONOMY

While the EU sees China as a negotiating partner of the union, as well as an economic and systemic competitor, Germany, which has an export-oriented economy, has been one of the countries that has benefited most from China’s opening to the global economy for years. .

German cars and machines are in great demand in China. While exports to China supported Germany’s strongest post-World War II economic growth in the past 10 years, China became Germany’s largest trading partner in 2016.

Germany’s dependence on China is striking in foreign trade, supply chains or the large market. Germany appears to have a “heavy import dependency” on China, including for raw materials such as lithium batteries and rare-earth elements, which are increasingly important for electric cars.

COMMERCIAL VOLUME EXCEEDED 245 BILLION EUROS

The Covid-19 lockdown in Shanghai, which has severely affected supply chains around the world in recent years, has also revealed how dependent the German economy is on primary and intermediate products from China.

According to data from the German Chamber of Foreign Trade (AHK), approximately 5,000 German companies operate in China. 1.1 million jobs in Germany depend on trade with China.

The Chinese market is of great importance for German companies, especially German car manufacturers, both in terms of sales and growth. German companies develop and test the latest technologies in China for the global market.

Although China has been Germany’s largest trading partner for the past 7 years, the trade volume between the two countries exceeded 245 billion euros (246 billion dollars) in 2021. (BRITISH AUTOMOBILE CLUB)