Germany, Today, Is Dependent On China

Lidia Conde (Frankfurt) | Germany is the country with the world’s largest current account surplus, amounting in 2019 to $293 billion, or 8 per cent of its GDP. Far behind Germany were Japan with $194 billion and China with $183 billion. Germany’s budget surplus was also a record 13.5 billion euros in 2019, the sixth consecutive year without a deficit. (But most of the surplus will go into the 48 billion euro refugee fund. In 2019, one in four people who sought asylum in the EU did so in Germany. By 2018, that percentage was 28%, and by 2017 it was 31%. More than a million refugees arrived in 2015).

However, the barometer of the Munich research institute Ifo is pessimistic: the economic climate index fell last autumn to its lowest level in 10 years. Because until now the German industrial giants had benefited from globalisation and the excellent opportunities to export to the world. A process that was accelerated by the emergence of China as a major market for Germany. But now, trade conflict and weak Chinese economic growth are taking a heavy toll on the German economy, which grew by only 0.6% in 2019. This year it had expected to grow by 1.1%. Will this still be possible?

This dependence on China is mainly in the automotive industry: VW, Daimler and BMW sell a third of their vehicles to China. And the world’s leading automotive supplier, Bosch, says it clearly: “2020 will be the third consecutive year in which global vehicle production falls. According to Volkmar Denner of Bosch, “we will probably have reached the zenith of car production.” The consequences for employment are immediate: Germany will lose half of its current 850,000 jobs in the automotive industry by 2030.

The world has changed a lot because China has changed a lot. China’s share of global GDP has risen from a negligible 2% in 1990 to 15.9%. Meanwhile, the other powers have fallen in that period: Japan, from 14 to 5.8%; Europe, from 35% to 21.9%; and the USA, from 27% to 23.9%, according to Weltbank data. So hundreds of thousands of jobs in Germany are now dependent on China. And all over the world, because China today accounts for 1/3 of world growth. It remains to be seen, therefore, what consequences the current health crisis will have for the world, since in January China already reported that in 2019 – before the epidemic – it had only grown by 6.1%, the lowest percentage since 1990.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.