China’s slowdown, a “considerable challenge” for the German economy

“Withdrawing from China is not an option, we have to work it out. “ The confession, unambiguously, was made by Nicola Leibinger-Kammüller, patron of the famous machine builder Trumpf, on October 26. The laser specialist, who presented its annual results, acknowledged its growing dependence on the Chinese market: the company achieved, in 2020-2021, 525 million euros in sales in China (out of a total of 3, 5 billion euros), against 579 million in Germany and 485 million in the United States. The gap between the group’s first markets has never been so small.

When China sneezes, Germany catches a cold. The expression is not new: since 2015, the Middle Empire has been the leading economic partner of the German economy. In 2020, bilateral trade between the two countries amounted to 212 billion euros (206 billion in 2019), or one third of the total volume traded between China and the European Union. Germany exported 96 billion euros to the Asian giant, down only 0.1% from 2019, despite the pandemic. Machine builders like the Trumpf group, but also automotive, electrical engineering and chemicals, key sectors of “made in Germany”, are extremely dependent on Chinese orders.

Read also Article reserved for our subscribers The specter of a Chinese slowdown hangs over the global economy

The current strong turbulence observed in the Chinese economy – Covid-19 pandemic, regulation of technology groups, real estate crisis, energy shortage – and the resulting slowdown in growth will have significant effects on German companies. “Of course, Chinese growth is not going to stop, but it will definitely run out of steam in the next quarter. This is going to be a considerable challenge for the German economy ”, confirms Jörg Krämer, chief economist at Commerzbank. This, while Germany is already fighting on another front, that of supply shortages in intermediate products, such as electronic components, metals or raw materials, which considerably slow down production.

“The situation is absurd”

“The current situation is absurd: despite full order books, production in industry has been reduced since the start of the year”, emphasizes Timo Wollmershäuser, member of the Munich Ifo Institute for Economic Research. According to Ifo estimates, these supply problems have caused a loss of added value for the industry equivalent to 40 billion euros. “This corresponds to more than 1% of the total production of Germany in one year”, continues Mr Wollmershäuser. For Jörg Krämer, the Chinese slowdown and these supply problems could lead the German economy to stagnation in the fourth quarter.

You have 34.13% of this article left to read. The rest is for subscribers only.

We would like to give thanks to the writer of this short article for this amazing content

China’s slowdown, a “considerable challenge” for the German economy