German direct investment into China has risen sharply this year, in a sign that companies in Europes largest economy are ignoring pleas from their government to diversify into other, less geopolitically risky markets, the Financial Times said.
Figures provided to the Financial Times by the Bundesbank, Germanys central bank, show that German direct investments in China stood at 2.48 billion euros in the first three months of 2024, rising to 4.8 billion euros in the second quarter. That brings the total for the first half of 2024 to 7.3 billion euros, compared with 6.5 billion euros for the whole of 2023.
The investment, much of it driven by big German carmakers, comes despite warnings from Chancellor Olaf Scholzs government about the growing geopolitical risks associated with the Chinese market, the paper said.
The Financial Times referred to European Commission President Ursula von der Leyen’s call on businesses across the EU to “de-risk” from Asias largest economy. Many in Europe worry that Germanys busin
ess leaders have not learnt the lessons of what happened with Ukraine, which exposed its dangerous entanglement with Russia and its over-reliance on Russian gas, von der Leyen said.
The fear is that an escalation of geopolitical tensions in the Taiwan Strait could prove disastrous for the many German companies with extensive and deepening ties to China, the paper said.
The paper quoted experts as saying that much of the investment dollars are reinvested profits earned in China. Research by the Cologne Institute for Economic Research (IW Koln) has shown that more than half of the 19 billion euro in profits made by German companies in China last year was reinvested there.
They said the uptick in German direct investment reflected a new “In China, for China” strategy pursued by companies such as Volkswagen aimed at shifting more production to one of their biggest markets.
But Jurgen Matthes, an expert on German-China trade at IW Koln, warned the strategy would end up harming the German domestic economy.
The
latest figures, the paper said, come just over a year after Scholzs government adopted Germanys first ever China strategy, a plan that was predicated on the need for Europes largest economy to “de-risk” its relations with China.
Source: Qatar News Agency