September 29
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Germany's economy became more dependent on China in the first half of 2022, when direct investment and its trade deficit reached new heights despite political pressure on Berlin to move away from Beijing, Reuters reported.

At the same time, German export growth to China has weakened significantly, according to a study by the German Economic Institute (IW), citing economists who point to a trend toward more local production in the Chinese market.

"The German economy is much more dependent on China than the other way round," said Juergen Matthes.

He warned that this dependence poses a political problem, as Beijing's stance on the war in Ukraine and its stance on Taiwan have put German businesses with the world's second-largest economy under scrutiny.

"Yet despite these dangers and problems, economic interdependencies with China have been moving in the wrong direction at a tremendous pace in the first half of 2022," the economist said.

The study found that German investment in China totaled about 10 billion euros between January and June, well above the previous six-month peak of 6.2 billion euros recorded since the turn of the millennium.

"The Chinese sales market and the profits beckoning there in the short term simply seem too attractive," Matthes said.

China's share of German imports rose to 12.4 percent in the first half of 2022, up from 3.4 percent in 2000.

Germany's trade deficit with the country jumped to nearly 41 billion euros by mid-2022, the institute said, adding that the gap will widen.

The IW called for a change in policy, calling for a reduction in incentives to do business with China and a shift toward more trade with other emerging markets, especially in Asia.

Mattes also urged German businesses to curb their dependence on China, warning that any Western sanctions against Beijing, such as if it invades Taiwan, would threaten to bankrupt particularly vulnerable companies.

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