German companies increase China investments as US spending drops

German companies significantly increased their investments in China during the first half of the year, reaching approximately 5.6 billion euros. This represents a one-third increase compared to the same period last year, according to an analysis by the German Institute for Economic Research (IW) based on central bank data.

Economist Jürgen Matthes noted that companies often view China as a critical market and a ‘fitness center’ where surviving intense local competition prepares them for the global stage. However, he warned that manufacturing in China is artificially cheap due to state subsidies and a low yuan exchange rate. Matthes cautioned that this trend could lead to the relocation of production and jobs away from Germany, prompting calls for the EU to address unfair market practices.

In contrast, German investment in the United States saw a sharp decline, dropping by nearly two-thirds to approximately 4.3 billion euros in the first half of the year. This shift is partly attributed to US economic policies and high tariffs that have impacted key trading partners, including the EU and Germany.