German companies increasingly want to serve the Chinese market through production in China itself instead of exporting from Germany.
This is the result of the China study by several business associations and institutes.
Although China is important for Germany, Germany is not dependent on China as a whole, write the authors. After all, around 1.4 million jobs in Germany depend on exports to China.
According to a study, the importance of China for German exports will decrease in the coming years. German companies are increasingly serving the Chinese by investing in factories in China – with possible consequences for jobs in Germany. At the same time, there is increasing “system rivalry” with China, as the study by the Federation of German Industries (BDI), among others, shows.
In Germany there is a debate – both in politics and in business – about a new China strategy. The second-largest economy is increasingly ruled by the Communist Party and its leader, Xi Jinping. China has been criticized for human rights violations and saber-rattling against Taiwan. Economics Minister Robert Habeck therefore wants to avoid or reduce Germany’s dependence on China, for example for raw materials.
The BDI had already repositioned itself on China in 2019. A policy paper spoke of “system competition” between the model of a liberal, open and social market economy and China’s state-controlled economy. The new study speaks of increasing “system rivalry”. It comes from the Bertelsmann Foundation, the German Economic Institute, the China Institute Merics and the BDI.
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In the past decade, China has become significantly more important as an investment and production location for German companies. According to the study, however, there is no economic dependence on direct investments in China. In 2020, almost seven percent of German direct investments abroad went to China. Compared to the EU and Great Britain with 34 percent and the USA with 27 percent, China’s importance as an investment location for German companies is lower. Still.
According to the analysis, between 2017 and 2021, profits of seven to eleven billion euros flowed back to Germany from investments by German companies in China. Compared to the EU, China therefore continues to play a subordinate role for the German economy. From a macroeconomic point of view, the profit reflows from China did not create any critical dependency.
China remains an important investment location for German companies – however, the framework conditions for German companies have changed significantly under President Xi Jinping. China is pursuing the long-term goal of becoming the world‘s leading industrial and technological nation by 2049. “To this end, Chinese dependencies on foreign and, in particular, western technologies are to be reduced. In return, the global economy should become more dependent on Chinese technology and the Chinese sales market.”
The aim is to achieve targeted company acquisitions abroad, more innovation by Chinese companies – but also more production, research and development by foreign companies in China. This should be achieved through a mix of incentives, requirements and pressure.
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A survey of three dozen large companies with relevant involvement in China shows that a clear majority wants to replace exports from Germany with local production by 2030. China should also increasingly be used as a research location and for export to neighboring countries.
China’s importance for the growth of German exports could decrease. However, exports from Germany to China have strong positive effects for Germany as a location and create many jobs here. According to an analysis by the German Economic Institute, around 2.7 percent of the total value added in Germany and 2.4 percent of employment depended on exports to China in 2018 – in the meantime it should be around 3 percent each. With around 45 million people employed, this corresponds to around 1.35 million jobs.
According to data from the Federal Statistical Office, China was Germany’s most important trading partner outside of Europe last year. However, while the value of goods imported from China rose by 34 percent year-on-year to 191 billion euros, the value of goods exported to China rose by only around three percent to 106.8 billion euros. This resulted in a record trade deficit of 84.3 billion euros. Most German exports in 2022 went to the United States, followed by France and the Netherlands – and then China. German trade with China is also developing weakly in the new year.
DPA/ro
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