First the war in Ukraine, then the tough lockdown in many cities in China: the economic situation in Germany is currently very tense thanks to globalization. But how dependent are we really on China? The German Economic Institute comes to a worrying conclusion.
China is Germany’s most important trading partner. Last year we imported goods worth almost 150 billion euros, according to the German Institute for Economics (IW). But in the course of political tensions and the Corona crisis, the joy about this is giving way to more and more uncertainty.
“The system competitor is becoming a system rival,” is how the Cologne institute describes the current situation. Against the background of the war in Ukraine and the associated economic sanctions against Russia, the geopolitical significance of economic interdependencies would also be put to the test. “In addition, the reputation of the People’s Republic of China as a reliable trading partner and supplier of important intermediate products and raw materials seems to be permanently endangered by the lockdown chaos of the zero Covid strategy.”
The IW has therefore now initiated a study to determine how much Germany is economically dependent on China and vice versa. Among other things, they analyzed the dependencies in relation to certain raw materials.
“In terms of trade in goods, the People’s Republic of China has become Germany’s most important trading partner in recent years,” writes the institute. With the goods imports of Germany
In terms of exports, China was in second place with 104 billion euros, just behind the USA.
The IW first examined the economic mutual dependencies of China and Germany, or the EU. They found the following things:
“At the economic level, analyzes of direct and indirect value-added links show that China plays a relatively important but by no means dominant role for Germany as a supplier and sales market,” the authors conclude.
The situation is different with the critical raw materials. Here, too, the IW analyzed the dependency using the United Nations’ Comtrade database from 2019. This was particularly critical for the following raw materials:
2. Raw materials for renewable energies (especially rare earths)
“In recent years, balanced trade relations between Europe and China have been established,” the IW authors summarize. “But Germany is more dependent on Chinese inputs than the other way around.” The Chinese sales market also plays an important role for our country. Both economic interdependencies but are “by no means dominant”.
Due to the high future relevance and the low substitution possibilities, however, there is a “critical dependence of the world and Germany on China” for certain raw materials, such as rare earths. The authors warn that on the way to independence from Russian energy sources, Germany could also become dependent on China. It is therefore important to “emphatically represent the EU’s common trade policy here.”