Germany’s foreign direct investment in China increased by 4.3 percent last year to a record €11.9 billion. China’s share of the country’s total investment also increased. This is according to an analysis of German central bank data by the IW economic institute.
Persistent German Investment in China
The data confirms fears that German firms continue to invest heavily in China, despite calls from the government to reduce their links to China. Investment guarantees for the country have already fallen significantly.
The report also showed that German companies have invested in China in the last three years as much as in the previous six years. However, in the last four years, investments in China have been financed entirely from reinvested profits. Companies have also been withdrawing capital. This supports the view that some small and medium-sized enterprises are trying to reduce their activities in China or leave, said IW economist Jürgen Matthes.
Changing Investment Trends
The proportion of German firms leaving the Chinese market or considering it has more than doubled over the past four years to nine percent, according to a survey by the German Chamber of Commerce in China released last month.
The IW report, according to Reuters, also showed that Germany’s total foreign direct investment fell to 116 billion euros last year from about 170 billion euros the previous year. The reason for this is that the German economy was on the brink of recession, the report said.
The share of investment in China in total investment abroad rose to 10.3 percent last year, the highest since 2014. Meanwhile, the share of investment in other Asian countries stagnated at around eight percent.
Germany faces a dilemma. While it wants to reduce its links to China, the country was Germany’s most important trading partner for the eighth year in a row last year, according to data from the statistics office.
Source: čtk
