Exports collapse: why Germany’s exporters are missing out on China’s upswing

Exports collapse
Why Germany’s exporters are missing out on China’s upswing

May 10, 2023, 4:11 p.m

Hard corona lockdowns will cause China’s economy and thus also German exports to the second largest economy in the world to decline in 2022. China’s economy is now gaining momentum again. But the German exporters do not benefit – on the contrary.

The hopes of German exporters for a comeback of their China business after the abandonment of the zero-Covid policy there have not yet been fulfilled. On the contrary: In the first quarter, exports to the People’s Republic fell by 12.0 percent compared to the same period last year to 24.1 billion euros. This is the result of preliminary calculations by the Federal Statistical Office, which are available to the Reuters news agency. Total German exports, on the other hand, grew by 7.4 percent to more than 398 billion euros from January to March.

The world’s second largest economy after the USA grew surprisingly strongly in the past first quarter: From January to March, gross domestic product rose by 4.5 percent compared to the same period last year – the strongest quarterly growth in a year. “China’s economy may be recovering, but the impact on German exports will be very different from when the global financial crisis emerged in 2009,” said Mercator Institute for China Studies (MERICS) chief economist Max Zenglein. “The economic recovery this time will depend mainly on consumers and services and is likely to bypass many German exporters.”

After the leadership in Beijing surprisingly announced the end of the strict corona policy with recurring lockdowns of entire metropolises at the end of 2022, the Chinese are traveling more again, going out and dressing in new clothes. “Post-corona growth is fueled by consumption,” said Zenglein. “So that goes past Germany.” In addition, the government is striving for more self-sufficiency, i.e. less dependence on western high technology through its own production. “There is a risk that German exports to China may have peaked,” said Zenglein.

China is only the fourth most important buyer of German goods

The share of exports to the People’s Republic in total German exports should “level out at a lower level”. It is already only around six percent after being around eight percent at times, said Merics chief economist Zenglein. Business in China was already sluggish in 2022: exports only increased by 3.1 percent, while business in the US increased by 27.9 percent. As a result, the People’s Republic slipped from second to fourth place among the most important buyers of goods “Made in Germany” – behind the USA, France and the Netherlands.

Things are not going well locally either: 29 percent of German companies active in China rate their business situation as good and 22 percent as bad, according to a survey of members of the Chamber of Commerce Abroad. All in all, this is a more pessimistic assessment of the situation than last autumn.

“Uncertainties surrounding future trade relations with China are also affecting our local companies,” said Volker Treier, head of foreign trade at the German Chamber of Commerce and Industry (DIHK). “The discussion about de-coupling, i.e. detachment from the Chinese market, is like mildew over the China business of the companies active there.”