Foreign trade: Strong increase in dependence on China

For the seventh time in a row, the People’s Republic of China was Germany’s most important trading partner in 2022. Since foreign trade shows an import surplus of 84.3 billion euros, Germany’s dependency is dangerously high, warns the German Economic Institute.

In 2022, the trade volume between Germany and China rose to a new record high. According to preliminary information from the Federal Statistical Office, goods worth 297.9 billion euros were traded between Germany and the People’s Republic of China (exports and imports). This means that the People’s Republic of China is Germany’s most important trading partner for the seventh time in a row.

The German Economic Institute (IW) sees Germany’s increased dependence on China as a “dangerous” development. In view of an increasing imbalance between the imports and exports of the two countries, the institute called for Germany to become more independent of China as a matter of urgency when it comes to imports. The trade deficit had recently grown to more than 84 billion euros and had more than doubled within a year.

China becomes the most important importer of Russian food and agricultural products

China becomes the most important importer of Russian food and agricultural products

The reason for the sharp increase in the trade deficit is that imports of goods increased significantly in 2022, while exports of goods grew only slightly. Last year, imports of goods from China increased by more than 33 percent compared to the previous year, while trade with all countries grew by 24 percent. In the same period, German companies exported only three percent more to the People’s Republic than in 2021.

J├╝rgen Matthes, head of the Global and Regional Markets Cluster at IW, therefore warned that foreign trade with China was developing “at full speed in the wrong direction”. The dependence on imports from China is a geopolitical risk for Germany, especially in the event of a conflict, which is why Germany must emancipate itself, advises the economist:

“Our import-side dependency is a geopolitical risk, because the German economy could be blackmailed in the event of an armed conflict over Taiwan.”

However, the dependency between the different branches of the economy varies greatly. Analysts also see reasons for this in the fall in domestic demand due to the COVID pandemic in China, which could possibly stabilize again this year thanks to measures taken by Beijing.

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