German exports to China rose by just over 3 percent in 2022, while imports increased by 34 percent. Jürgen Matthes, head of the Global and Regional Markets cluster at the Institut der deutschen Wirtschaft Köln e. V. (IW), explains the unusual development of German foreign trade with China.
Imports
Although there were some special effects on the import side, such as a very strong but only temporary increase in a subgroup of chemical products, Matthes said, the impact of these special effects on the import side was notable. Price increases would also have had an impact on foreign trade statistics. However, these special effects should not be overestimated, as the bottom line shows a significant increase in German imports from China.
The main contributors to the increased imports from China were product groups in the electrical industry. There was also a clear increase across the board. In other words, the increase in Chinese exports to Germany was seen in almost all product groups. It is worrying that dependencies, which were already very high in some product groups, have increased even further. Here, a noticeable diversification or spreading of risks in Germany does not yet seem to have taken place.
EU comparison2023
The available foreign trade data for the current year 2023 cover the months January to March. These show a 12 percent decline in total German exports to China. Other EU countries were obviously better able to benefit from China's slight economic recovery at the beginning of the year than Germany.
The even greater export slumps of Austria and Ireland are cushioned by the fact that the two countries - in contrast to Germany - had managed a positive development in 2022.
The vehicle sector and formative upheavals
Matthes notes a "remarkable" trend in German foreign trade with China in vehicles: the German vehicle sector as a whole contributes more than 80 percent to the decline in exports in the first quarter of 2023. German exports of motor vehicles and parts to China account for a large share of this, while other relevant levers can be found in the subgroups of motor vehicles and other vehicles (especially ships and aircraft and spacecraft).
In the first quarter of 2023, imports from China in the motor vehicles and parts product group increased by almost 340 percent compared with the same quarter of the previous year. However, imports in these product groups accounted for only about 0.6 percent of total imports from China in the first quarter of 2022. In the first quarter of 2023, this share is now 2.9 percent. In contrast, German exports of motor vehicles and engines to China fell by a high 26 percent year-on-year in the first quarter of 2023.
"With all interpretive caution, this could be the beginning of a longer-term upheaval due to China's strong catch-up especially in electric vehicles."
Matthes points out that trade data for just one quarter is difficult to interpret. In addition to the upheavals in vehicle manufacturing, a growing presence of German companies in China could also have contributed to the development, as companies would thus serve the Chinese market more through local production than through exports from Germany. However, if the German export figures to China are indeed an expression of these structural and ongoing trends, the export prospects of the German economy to China appear in a gloomy light.
