Economy: Germans are Betting Big on China Despite the Threats!

German investments in China reached record levels in 2024, despite repeated calls from the German government to reduce economic dependence on Beijing. According to Bundesbank data, direct German investments in China reached 7.3 billion euros in the first half of 2024, already surpassing the 6.5 billion euros invested throughout 2023.

Record German investments in China despite Berlin’s threats!

Data on the German economy shows that direct German investments in China reached 7.3 billion euros in the first half of 2024, already surpassing the 6.5 billion euros invested throughout 2023. In the first quarter of 2024, investments amounted to 2.48 billion euros, quickly rising 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 a “In China, for China” strategy to localize production and better serve this key market, thereby reducing the risks of supply chain disruptions, like those observed during the pandemic and the Suez Canal blockage.

Experts estimate that the increase in German investments 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 have been 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 dependence could harm the economy and the job market in Germany 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 investments in China continue to grow, the geopolitical risks associated with this dependence remain a major concern. As Germany experiences a period of turbulence in its economy, German companies will need to navigate carefully to balance economic opportunities.