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The disparity between the amount of goods Germany buys in China and the goods it sells to China is growing. Germany’s trade deficit with China even reached a record high in 2022. This begs the question: How can political liberation from dependence be achieved under these conditions?
We expect policymakers to clearly articulate, uphold, and assert our values toward Beijing, but we do exactly the opposite of what might help them do so. Instead of less, we buy and consume more Chinese products. Obviously, the strategically sound consideration of keeping dependence on an autocratic system as low as possible to preserve our freedoms “is ultimately less important to Germans than the question of how much is left in their wallets at the end of the month,” concludes Frank Sieren.
Those who are concerned about the growing dependence on the People’s Republic may see a glimmer of hope in the EU Commission’s upcoming legislative initiative on safeguarding critical raw materials. Brussels plans an initiative based on four pillars: strategic priorities, monitoring and risk management, strengthening the value chain within the EU, and equal treatment regarding non-EU countries. Environmental and social standards are also to be strengthened, write Leonie Duengefeld and Amelie Richter.
It is a step in the right direction, but one that comes not a day too soon. The Commission has already brought forward the presentation of the draft several times so that it can already be discussed in early March. This, too, can be seen as a positive sign that key players in European politics have recognized the urgency of not increasing dependence on China even further.
Germany increases imports from China
In 2022, a decades-long trade trend reached a new peak: Germany imported more goods from China than ever before. Imports reached a record level of €195 billion. The value of goods purchased from China increased in one fell swoop by 37 percent, or around €50 billion, compared to the previous year. This is the estimate of Germany Trade & Invest (GTAI). “This increases the dependence on the Chinese procurement market,” the experts conclude.
This makes China Germany’s biggest trade partner for the seventh consecutive time. A short- or medium-term decoupling thus appears more illusory than ever. Rising inflation even amplifies this trend. The more difficult the economic situation and the higher the inflation rate, the more Germans demand low-priced goods. But many importers believe that China continues to offer the best mix of price and quality. For its large market, manufacturers can produce in large quantities and thus offer better prices worldwide.
Less domestic demand: China’s surpluses rise
At the same time, trade becomes more and more unbalanced, because China demands fewer foreign goods. The country’s trade surplus is rising at a rapid pace. Conversely, Germany has to cope with an ever higher trade deficit with China. Last year, the gap between imports and exports amounted to €88 billion, reports the GTAI. This is also a record.
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