How European companies are gradually reducing their dependence on China
China has been Germany’s most important trading partner for a long time. However, the US is increasing its imports to the country, knocking China off its perch. Washington wants to reduce its dependence on China by all means, both its own and that of its partner states.
The export-import volume between the US and Germany in the first quarter of 2024 was 63 billion euros. At the same time, trade with China amounted to 60 billion euros in the same period. Such a trend suggests that the European country is reassessing its trade relations. Carsten Brzeski of ING Research believes that Germany has changed its strategy towards China. This is due to several factors, including:
– increased demand for German products from the US amid a surge in economic growth;
– reduced activity in the Chinese domestic market;
– lower production of goods that were previously supplied to Germany from the PRC.
At the same time, the US market offers ample export opportunities for the European country. The downturn in the property market has significantly weakened the Chinese economy, which has had a negative impact on trade relations with its partners. At the same time, the US is showing a growing interest in German products and increasing trade turnover.
Relationship problems
It is becoming increasingly difficult for German companies to operate in the Chinese market. The government mainly subsidises local companies. Under such conditions, it is difficult for foreign agents to compete with them. In most cases, companies from the PRC offer their products at underprices. For German companies, underpricing leads to losses and an inability to develop.
Against this background, the role of the US in Germany is growing. The White House is implementing a strategy to reduce dependence on China and build new supply chains. Despite the decline in export-import, the German government notes the importance of China as a trading partner. At the same time, analysts highlight the tensions in the relationship between the two countries. One of the reasons for the cooling is the investigation into trade activities between the EU and China. Experts believe this could lead to increased tariffs and the introduction of new import duties.
Specialists from the Ifo Economic Institute conducted a survey among representatives of the German business community. The analysts were interested in the degree of companies’ dependence on cooperation with China. The results were as follows:
– the number of companies dependent on China in February 2024 was 37%;
– in February 2023, this indicator was 46%.
Such trends suggest that German companies are becoming less dependent on relations with China. Many companies see the United States as a promising trading partner.
