German economy: Dependence on China greater than ever

Germany is buying more and more products from China, but German exports to China are only increasing slowly. The industry-related Institute of German Business considers this a dangerous development.

China is Germany’s most important trading partner, but according to a study by the German Economic Institute (IW), the dependence of the German economy on China is greater than ever. The gap between imports and exports in the China business is therefore widening.

According to IW calculations, the trade deficit with China grew to more than 84 billion euros last year. It has more than doubled compared to the previous year.

“Full speed in the wrong direction”

On the one hand, imports from China increased by 33 percent in 2022 compared to the previous year. On the other hand, however, German companies exported only three percent more to the People’s Republic in the same period.

The warning conclusion of the IW: Germany is becoming increasingly dependent on China. According to IW expert Jürgen Matthes, the numbers are alarm signals. Foreign trade with China is developing “at full speed in the wrong direction”.

The dependence on imports from China is a geopolitical risk for Germany, in the event of a conflict over Taiwan, for example, the German economy could be blackmailed. You must therefore find ways “to emancipate yourself from China,” emphasizes Matthes.

Political pressure from the government

The IW criticizes that Chinese companies are able to offer their products particularly cheaply thanks to massive government subsidies. At the same time, China is trying to make itself less dependent on Western imports and to produce more domestically.

In addition, according to the IW, the Chinese government is exerting increasing political pressure on German subsidiaries in China to integrate Chinese companies into their supply chains.