BERLIN :The volume of investment guarantees provided by the German government to companies investing in China has collapsed this year, a government document showed, highlighting the impact of Berlin’s efforts to end over-reliance on the country.
Only EUR51.9 million (US$56.26 million) in guarantees have been issued so far this year, according to the document seen by Reuters, less than a tenth of the EUR745.9 million in guarantees issued over the whole of last year.
China became Germany’s biggest trading partner in 2016 and both countries prospered from Germany selling the precision machinery that let China become the main supplier of manufacturing goods to a globalised world.
Slowing growth, however, has concentrated minds in Berlin, where officials fret that ever-more-advanced Chinese manufacturing poses a threat to Germany’s economic model. Russia’s 2022 invasion of Ukraine, which disrupted energy supplies, further highlighted the dangers of reliance on a single partner.
Germany’s new China strategy, introduced in July, warned that investments in plants in China could lead to sensitive technologies being given away, and promised new measures to deal with that security risk after trade between the countries hit a record US$320 billion in 2022.
“China has changed, and that’s why our policy towards China also needs to change,” Foreign Minister Annalena Baerbock said on Tuesday.
Last November, Berlin introduced caps on the size of guarantees, offered by the government to protect investors from political risks such as expropriation, that could be given to investors in a single country.
The measure was designed to diversify the portfolio of risks carried by the government and encourage companies to invest in a broader range of countries.
Companies can invest without government guarantees, meaning real changes in levels of German FDI in China may have fallen by less. But export volumes are suggestive: Germany sold 6.2 per cent less by value to China in July compared with last year, at a time when sales to the US jumped 10.4 per cent.
