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Economics

Economics

Exclusive: German investment in China eases in H1 after record high

A man walks past the Chinese and German national flags before a meeting of officials between the res... A man walks past the Chinese and German national flags before a meeting of officials between the respective trade and economy ministries in Beijing, China, November 1, 2016. REUTERS/Thomas Peter/File Photo
A man walks past the Chinese and German national flags before a meeting of officials between the res... A man walks past the Chinese and German national flags before a meeting of officials between the respective trade and economy ministries in Beijing, China, November 1, 2016. REUTERS/Thomas Peter/File Photo

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German investment in China eases in H1 after record high. According to IW Institute data, German direct investment in China dropped in the year’s first half but remained close to its record high in 2022. It increased as a share of the country’s overall investment overseas.

In an analysis published exclusively with Reuters, the IW reported that investment in China fell to 10.31 billion euros ($11.02 billion) in the first half of 2023 from 12 billion euros last year.
However, that was nearly twice as much as the 5.5 billion euros invested in 2019 before the coronavirus epidemic. It was more than twice the 4 billion euros invested in the first half of the year over the previous decade.

The report raises concerns that German firms continue to invest substantially in China despite the government’s calls to decrease exposure and dramatically cut investment guarantees.

As Europe’s largest economy struggled with recession, German direct investment fell substantially to 63 billion euros from 104 billion euros last year.

The IW reported that Germany’s first-half investment in China rose to 16.4% from 11.6% last year and 5.1% in 2019.

“The trend towards China remains mostly unchanged also this year,” said IW analyst Juergen Matthes. “New direct investments in China remain nearly as high as before, even though the German economy invests less abroad.”

Germany’s government has recently advised firms to minimize their strategic reliance on China, viewing Asia’s expanding superpower as a worldwide security concern.

German corporations may be rethinking their China strategy due to the economic recession and new security rules, but the data is still ambiguous.

Some China analysts attribute that to a divide between a few huge corporations like Volkswagen (VOWG_p.DE) and BASF (BASFn.DE), who are doubling down on the country and the rest that are becoming more cautious and diversifying, especially elsewhere in Asia.

Germany was investing more in Asia as a whole, Matthes noted. “Nearly a quarter of German direct investment flows recently went to Asia,” he remarked.


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