Germany's Dependence On China Is Growing "at An Enormous Rate," Studies Show

A China Shipping container is loaded at a loading terminal in the port of Hamburg on July 27, 2018. Portal/Fabian Bimmer/File Photo

BERLIN, Aug 19 (Portal) – The German economy became more dependent on China in the first half of 2022, with direct investment and its trade deficit hitting new heights, despite political pressure on Berlin to turn its back on Beijing, according to a study by Portal.

At the same time, the growth in German exports to China weakened significantly, said the German Economic Institute (IW) in its study, citing a trend towards more local production on the Chinese market.

“The German economy is much more dependent on China than vice versa,” says study author Jürgen Matthes.

He warned that this dependency poses a political problem, as Beijing’s stance on the Ukraine war and its military stance on Taiwan are putting Germany’s deals with the world’s second-largest economy to the test.

“Despite these dangers and problems, the economic ties with China developed in the wrong direction at enormous speed in the first half of 2022,” said the economist.

The study showed that German investments in China between January and June amounted to around 10 billion euros and thus far exceeded the previous half-yearly high of 6.2 billion euros since the turn of the millennium.

“The Chinese sales market and the short-term profits there just seem too attractive,” said Matthes.

China’s share of German imports rose to 12.4% in the first half of 2022, compared with 3.4% in 2000, while Germany’s imports of Chinese goods rose 45.7% in value in that six-month period year-on-year, the IW found Celebration.

Germany’s trade deficit with the country had risen to nearly €41 billion by mid-2022, the institute said, adding that the gap will continue to widen.

The IW called for a policy reversal, urging a reduction in incentives to do business with China and a shift towards more trade with other emerging markets, particularly in Asia.

Matthes also called on German companies to curb their dependence on China and warned that Western sanctions against Beijing, for example in the event of an invasion of Taiwan, would threaten particularly exposed companies with bankruptcy.

“Otherwise we risk getting into a ‘too big to fail’ situation, as we have seen with the banks,” he said.

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Reporting by Klaus Lauer; writing by Rachel More; Editing by Paul Carrel and David Holmes

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