What does the decline in German exports to China mean?

2023-05-30 03:38:44


Trade exchange between China and Europe

German exports to China witnessed a remarkable decline of 11.3 percent during the first four months of this year 2023, compared to the same period last year, which raised widespread concerns about the economic strength of the European Union in general, and in light of the broad challenges facing the industrial power on the continent.

Decreased demand from Asia’s largest economy (China) also threatens to shake Berlin’s strategy to overcome the industrial challenges it also faces.

According to a report published by the British newspaper “Financial Times”, “the decline in German exports to China has shaken Europe’s largest economy.”

In parallel, the report talked about the impact of the decline in the huge manufacturing sector in Germany, compared to the performance of the manufacturing sector in other competing countries that benefited from the recovery of Chinese demand.

The report quoted economists as saying:

  • German automakers are losing share in the Chinese market.
  • Chemical producers and other energy-intensive businesses are reeling from high energy prices.
  • The euro’s rise against the dollar made German goods less competitive.

According to the newspaper, the decline in German exports to China is among a number of indicators that indicate that the German manufacturing sector has suffered a sharp decline since the beginning of this year, including a decrease in factory production, a decline in demand and a shrinking backlog, which may slow growth in the largest economy in the world. European Union.

German exporters felt “victims of escalating security and trade tensions between Beijing and Washington,” according to Carsten Brzeski, global head of macro research at Dutch bank ING, who noted that “Germany is now seen as an ally of the United States, which has led to more – explicit or Implicit – from discouraging the purchase of German products.”

Several major German companies that maintain large businesses in China have reported large declines in first-quarter sales in the country, including chemicals group BASF, the country’s leading automaker Volkswagen, and auto parts maker Bosch.

  • BASF reported sales of €2.3 billion in Beijing in the first quarter of this year (a decrease of 29 percent).
  • Volkswagen said deliveries in the country fell 15 percent in the first quarter.
  • Bosch also reported a decline in Chinese demand, which led to first-quarter sales in the Asia-Pacific region falling 9.3 percent.

Germany avoids repeating “dependency”!

From Berlin, the economist, Dr. Najeh Al-Obeidi, says in exclusive statements to “Sky News Arabia Economy”:

  • China is Germany’s most important trading partner, yet Berlin (and Europe in general) is reviewing its strategy towards China to avoid a kind of dependency as happened with Russian gas.
  • There is also a major imbalance in the trade balance with China.
  • It is true that German exports to China are growing at a good rate, but imports from China are growing even faster. That is why the trade balance with China in 2022 recorded a record deficit of nearly $90 billion.

He added, “This deficit is due to Beijing’s pressure on German companies to open branches in China and carry out production there instead of importing from Germany, in addition to the artificial devaluation of the Chinese currency.”

The economist stresses that “there are also fears of China’s expansion into the European economy through the acquisition of infrastructure projects such as ports and airports and the purchase of stakes in companies with the aim of transferring technology to China.”

Therefore, the German government began to impose tighter control on Chinese investments, as happened recently with the container port in Hamburg, where the Chinese contribution was set at 42.9 percent (i.e. less than the obstructing quarter) in order to reduce the role of the Chinese side in decision-making.

  • In 2022, China maintained its position as Germany’s largest trading partner, for the seventh year in a row.
  • The volume of trade exchange between the two countries amounted to 297.9 billion euros (318.9 billion dollars), an increase of 20 percent, according to the German federal statistics agency “Destatis”.
  • Germany’s trade deficit with China was €84.3 billion (the highest since the agency began recording data in 1950).
  • The value of imports from China rose to 191.1 billion euros in 2022, up 33 percent from the previous year.
  • German exports recorded 106.8 billion euros (an increase of only 3 percent over 2021).
  • In 2022, China fell two places to fourth in the ranking of export destinations for German goods.

This came at a time when German fears of widespread dependence on Beijing are increasing, in light of the current tension between the latter and the West, a tension that is due in large part to Chinese-Russian relations. And the IfW Kiel Center (a German economic research center) warned in a report last February that it was necessary to diversify sources of supplies related to commodities and raw materials away from China.


The impact of trade tensions

Also from Berlin, the journalist writer specializing in international relations, Muhammad Al-Khafaji, indicates in exclusive statements to the “Sky News Arabia Economy” website that: the German economy depends heavily on exports, as exports represent about 47 percent of the gross domestic product, and China is considered a partner important trade for Germany; Beijing imports products from the Germans worth more than 100 billion euros annually, and he adds:

  • In recent years, China has been one of the largest foreign markets for German exports.
  • Now there has been a significant decline in German exports to China due to various reasons, such as trade tensions between the two countries or changes in demand for German products in the Chinese market.
  • This significant decline may affect German companies that depend on exports to China and may cause a slowdown in economic growth in Germany.

As for the impact of this on the European Union, he adds: Germany’s economy is the largest economy in the European Union and has a significant impact on the European economy in general. Accordingly, if German exports to China were affected, this may have a negative impact on the economic strength of the European Union in general. This may be associated with a decline in economic growth in the European Union and a negative impact on other European companies that depend on exports to China.

Moreover, China is an important market for German companies in sectors such as automobiles, machinery and equipment, electronics, and chemicals, and therefore, any contraction in German exports to China could in turn affect German companies in these sectors, and thus could affect the economic growth of Germany and the Union. Europe in general, and he added:

  • “This is the fundamental point that the leaders of Germany and the European Union fear.”
  • However, Germany has a diversified and solid economy, with many advantages such as strong infrastructure, outstanding higher education, cutting-edge technology and the ability to adapt to economic changes.
  • In addition, Germany is in a leading position in innovation, research and development, which helps it recover from economic challenges.
  • The German government is constantly working to strengthen the German economy and stimulate economic growth by opening new markets, and is also trying to strengthen its position in important markets such as China.

However, Khafaji, at the same time, points out the warnings of a number of economists in Germany that one should deal with caution with China. On the one hand, the interaction must be equal and in the process of growth, and on the other hand, we must not repeat the mistakes of the past such as dependence on Russian gas, and thus bear economic consequences after the war and its interruption, and this matter must be taken into account by Germany, on the basis that it is in favor of expanding Trade exchange with China is not supposed to make certain economic fields dependent on dealing exclusively with China and not others.

The writer specializing in international relations states that in the year 2022, Germany’s imports from China amounted to 191 billion euros (a growth rate of 33 percent), while China’s imports from Germany were 106 billion euros (a growth rate of 3 percent). Also, 40 percent of German car exports were to China, and this indicates that the German economy tends to be dependent on the Chinese market, and therefore any decline in German exports to China will have a negative impact on the German economy.

relative European supremacy

Despite the decline in German exports to China, the British “Financial Times” report warns that Berlin seems to be far from European countries, as most European Union countries had higher shipments to China this year, indicating that German exporters are losing market share in the second Their largest market outside of Europe.

  • Exports from the 27 EU member states to China rose 2.9 percent year-on-year in the first quarter, according to Eurostat.
  • China accounted for only 6 percent of Germany’s total exports in the first three months of this year (the lowest share since 2016).
  • This contrasts with previous expectations that Germany’s vast manufacturing sector would benefit from increased Chinese demand after the “zero Covid” policy was lifted.
  • German exporters, who account for more than a quarter of all EU exports outside the bloc, have also been hampered by the euro’s recent rise below par with the dollar late last year to trade between $1.07 and $1.10 in recent weeks.
  • Manufacturing activity also fell to a six-month low in Germany this month, according to S&P Global’s latest survey of purchasing managers.

The economic consequences of “European political intransigence”

Political analyst and international relations expert from Berlin, Dr. Abdel-Masih Al-Shami, says in exclusive statements to “Sky News Arabia Economy” that China is Europe’s most important and largest trading partner by all standards, and in many sectors and economic fields it excels in its relations with the United States of America, which is likely Beijing’s balance in trade exchanges with the countries of the continent, referring to the raw materials that enter into many basic industries, including the automobile industry, medicine, and others, come from China, in addition to European investments inside China through the presence of many European companies and factories.

Al-Shami points out that European intransigence with China “would clearly and negatively affect the European economy,” speaking at the same time about the economic position that Beijing represents, which affects not only the European economy, but also the global economy, especially in In light of its influence within many countries, and the need of these countries for it in general.

The political analyst from Berlin talks about the political dimensions affecting economic relations, saying:

  • In the aftermath of the war in Ukraine, European-Chinese relations worsened significantly. As a result of “hostile positions” and permanent criticism by the European Union and the West in general of China over a role – assumed by the West – for China, so that the West views Moscow and Beijing as two sides of the same coin.
  • At first, the economic situation was not affected, but with the escalation of the confrontation in one way or another, there were effects of hostile policies and even large sanctions imposed on Russia, which is a major and major partner of China.
  • Relations deteriorated greatly after the recent visit by the Chinese president after his election to Russia, the positions he launched from there, and the different reactions by the Europeans, despite the fact that President Xi Jinping went to Moscow with a peace initiative and a diplomatic solution regarding the war in Ukraine.
  • Western repercussions and attitudes towards the Sino-Russian rapprochement, which may have grown stronger after the Chinese president’s visit to Moscow, had a great impact on Sino-European relations.
  • After the visit, there were shuttle visits by the leaders of the European Union to China, which carried, as usual, “threat and intimidation”, and at the same time “contracts for negotiation and trade exchange”, according to the principle of “carrot and stick”.

However, he believes that China has passed the stage of accepting this form of dealing (the carrot and stick principle) on the part of any party (..), and therefore the recent European visits may lead to counterproductive results in relations, and China has begun to think seriously about punishing the Europeans for their positions. conflicting and volatile (…), explaining that European policies were not smart enough to deal with China.

China and Europe.. difficult relations

#decline #German #exports #China

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