Last year, Germany acknowledged its overreliance on China for essential materials needed post-COVID-19. Despite calls for distancing from China, Germany’s first “Strategy on China” paper aimed to reduce dependency without disconnecting entirely. However, Bundesbank data shows a possible doubling of German FDI in China, particularly in industries like automotive and chemicals.
German auto sector and China
Germany’s auto sector, heavily dependent on China, experienced significant trade both ways. Some German SMEs are adopting a “China plus one” strategy to diversify. Concerns arise due to potential parallels with Russia’s fossil fuel dependence debacle.
German firms navigating China exposure
A survey revealed mixed intentions among German companies in China, with some planning to increase investments while others consider divestment. As tensions heighten, experts warn of the risks in cutting ties drastically without pivoting strategically.
Challenges and opportunities
Amidst escalating geopolitical issues, German firms aim to serve China while diversifying. The emphasis on green tech and innovation in China poses both competitions and opportunities for German companies, necessitating increased R&D investments.
Global implications
While German and US investments in China rise, global FDI into China faces a decline. With the EU imposing tariffs on Chinese electric vehicles, the need for an industrial strategy to enhance competitiveness and mitigate China’s growth is paramount.
Edited by: Uwe Hessler
[ad_2]
Source link
