German investment in China hit record levels in 2024, despite repeated calls from the German government to reduce economic dependence on Beijing. According to Bundesbank data, German direct investment in China reached €7.3 billion in the first half of 2024, already exceeding the €6.5 billion invested in the whole of 2023.
Record German investment in China despite threats from Berlin!
German economic data show that German direct investments in China reached 7.3 billion euros in the first half of 2024, already exceeding the 6.5 billion euros invested in the whole of 2023. In the first quarter of 2024, investments amounted to 2.48 billion euros, rising sharply to 4.8 billion euros in the second quarter of 2024.
Despite calls for caution from Chancellor Olaf Scholz and European Commission President Ursula von der Leyen, German companies continue to invest heavily in the Chinese economy. Tensions in the Taiwan Strait and Europe's energy dependence on Russia have reinforced these warnings.
However, giants like Volkswagen are adopting an “In China, for China” strategy to localize production and better serve this key market, reducing the risks of supply chain disruptions, such as those seen during the pandemic and the blockage of the Suez Canal.
Experts believe that the increase in German investment in China is due to the profits of companies already present. A study by IW Köln reveals that more than half of the 19 billion euros in profits were reinvested in the local economy.
Risks for the German economy
This strategy is not without risks. Jürgen Matthes, a trade expert at IW Köln, warns that this increased reliance could harm the German economy and jobs market in the long term. Geopolitical tensions, particularly in the Taiwan Strait, could disrupt critical supply chains, depriving Germany of essential materials for industries ranging from chemicals to electric vehicle production.
Although German investment in China continues to grow, the geopolitical risks associated with this dependence remain a major concern. As Germany navigates a period of turbulence in its economy, German companies will need to navigate carefully to balance economic opportunities.
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