Berlin, Cologne. According to a study, German companies significantly increased their investments in China in the first half of the year. They invested an additional approximately 5.6 billion euros in the People’s Republic, as revealed by an analysis of Bundesbank data conducted by the Cologne-based Institute of the German Economy (IW), which is close to employers, and which was exclusively provided to the news agency Reuters on Sunday.
The amount is roughly one-third higher than that of the same period in the previous year. However, in the longer-term comparison, it remains within the usual range. The average of the half-year values from 2020 to 2025 was also 5.6 billion euros. German companies are increasingly financing this expansion from their own profits generated on-site.
“German companies have little choice but to continue investing in China,” said IW expert Jürgen Matthes. “The country is an important sales market, and some companies use it as a ‘fitness center.’” This strategy is based on a calculation: those who succeed against fierce local competition are more likely to succeed in the global market.
For comparison, German companies are pulling back on investments in the United States. In the first half of the year, they reduced their engagement by nearly two-thirds to approximately 4.3 billion euros. US President Donald Trump has alienated many important trading partners with his economic policy and imposed high tariffs on them, including the EU and thus Germany.
“The State Subsidizes Companies”
According to the IW, the persistently high investments in China are also related to the yuan exchange rate. “Production in China is artificially cheapened – the state subsidizes companies, and the undervalued currency further reduces the cost of Chinese goods,” explained Matthes.
To compete in the fierce global price competition against Chinese companies, firms must therefore increase their own production there and also exploit these competitive distortions for themselves. “For Germany, this means that production and jobs are moving to China,” emphasized the IW expert. “The EU should put a stop to this unfair game and impose countervailing duties on Chinese imports.”
According to the IW, behind the stable total figure of German investments lies a divided development: Some companies are scaling back their China business because the environment has become more difficult and competitive pressure is enormous. Since 2017, the value of dissolved participations has exceeded that of new ones: Between 2017 and 2024, German companies invested two billion euros annually in new participations.
At the same time, they dissolved existing participations worth 3.6 billion euros. As a result, 1.6 billion euros flowed out annually, and the same amount in 2025. A similar picture is shown by direct investment loans: Since 2023, German parent companies have been withdrawing funds from their Chinese subsidiaries; in 2025, this amounted to 2.7 billion euros.
