In German trade, US may surpass China in 2024 amid geopolitical tensions and weak investments
- Berlin economic report says China’s once ‘huge’ lead waned heavily last year, and the trend looks to intensify as US and Chinese economies head in ‘opposite directions’
- Findings follow survey by German Chamber of Commerce in China showing China’s investment appeal declining among members
China is in a position where the United States could overtake it as Germany’s top trading partner, owing to changing geopolitical situations and a slow recovery in the world’s second-largest economy, according to a German government report.
The report pointed out that the economies of the US and China are currently “developing in practically opposite directions” because there is “no recovery in the Middle Kingdom” but the US is “developing better than expected”.
“If these trends continue in 2024, the US will replace China at the top of the ranking of Germany’s most important foreign trade partners,” said the report released on Saturday by Germany Trade and Invest, the nation’s international economic promotion agency. “Overall, the environment for German importers and exporters will remain tense in 2024.”
The report also said that the real estate crisis, geopolitical tensions in relations with the US and the EU, and weak industrial investments have contributed to this evolving trend.
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Based on Germany Trade and Invest calculations, German exports and imports to China totalled around €254 billion (US$275 billion) in 2023.
China “has been the most important trading partner for [Germany] since 2016”, said Katharina Viklenko, the manager for East Asia with Germany Trade and Invest, who authored the report. However, she noted that, “in 2023, imports from China fell by around 19 per cent, and German exports to China fell by around 9 per cent”.
As a result, China’s lead over the US had dwindled to just €1 billion to €2 billion, the report explained. That marked a big drop-off from 2022, when the gap between China and the US was “huge”, at about €50 billion, as €300 billion worth of goods were traded between China and Germany.
China’s customs figures also show that Germany was China’s seventh-largest trading partner in 2023, with bilateral trade totalling US$206.7 billion, down 8.7 per cent, year on year.
Chinese electric-car manufacturers … are preparing for major expansions
In addition to “de-risking” calls, the survey showed that German companies operating in China were facing a range of challenges, including increased competition from local companies, unequal market access, economic headwinds and geopolitical risks.
Germany has always been a crucial player in trade between China and the European Union, but the innovation bar has also been raised for German firms because Chinese companies have ramped up their competitiveness in the industrial and automobile sectors.
“[China] will have overtaken Japan as the world’s largest exporter, in terms of car sales, for the first time in 2023,” Viklenko said in her report. “Chinese electric-car manufacturers, in particular, are preparing for major expansions and are increasingly pushing into the international market.”
Official Chinese customs data for 2023 showed that Germany accounted for nearly 15 per cent of China’s total export value of lithium batteries – an important component for electric vehicles. That put Germany second behind the top-ranked US at 20 per cent.
