Whether as a test for the global market or because there is no alternative: companies from Germany are more involved in China in the first half of the year than a year before. In another market, however, companies exercise restraint.
According to a study, German companies significantly increased their investments in China in the first half of the year. They invested around 5.6 billion euros additionally in the People's Republic, as shown by an analysis of Bundesbank data by the employer-related Institute of the German Economy in Cologne (IW). The amount is around a third higher than in the same period last year. In a longer-term comparison, however, it is within the usual range: the average of the half-year values from 2020 to 2025 was also 5.6 billion euros. However, German companies are increasingly financing the expansion from their own local profits.
“German companies have little choice but to continue investing in China,” said IW expert Jürgen Matthes. "The country is an important market and some companies use it as a 'fitness center'." There is a calculation behind this: those who prevail against tough local competition are more likely to succeed on the global market.
For comparison: German companies are putting on the brakes when it comes to investing in the USA. In the first half of the year they reduced their commitment by almost two thirds to around 4.3 billion euros. US President Donald Trump has alienated many important trading partners with his economic policy and imposed high tariffs, including the EU and thus Germany.
“State subsidizes companies”
According to the IW, the persistently high investments in China also have to do with the yuan exchange rate. "Production in China is artificially discounted - the state subsidizes companies, and the undervalued currency makes Chinese goods even cheaper," explained Matthes. Anyone who wants to survive in the fierce global price competition against Chinese companies must therefore produce more there themselves and use the distortions of competition for their own benefit. “For Germany this means: 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 number of German investments there is a mixed development: Some companies are scaling back their business in China because the environment there has become more difficult and the competitive pressure is enormous. Since 2017, the value of the liquidated investments has exceeded that of the new ones: between 2017 and 2024, German companies invested two billion euros annually in new investments. At the same time, they dissolved existing ones worth 3.6 billion euros. The bottom line is that 1.6 billion euros flowed out per year, and the same amount in 2025. The direct investment loans show a similar picture: since 2023, the German parent companies have been getting money from their Chinese subsidiaries; in 2025 it was 2.7 billion euros.
German industry has recently increased pressure on Chancellor Friedrich Merz to take a tougher course towards China. In view of what they see as unfair competition, business and company representatives are calling for stricter measures. The growing determination of the business lobby marks a turning point after Germany long shied away from trade barriers out of fear of Chinese retaliation. The federal government now wants to develop proposals to respond to the trade imbalances. Germany's position is also likely to shape the attitude of the entire European Union, whose talks with the government in Beijing are scheduled for October.
According to a June report by the OECD industrialized nations group, Chinese manufacturers received three to eight times more government aid relative to their sales than competitors from OECD countries. Germany's trade deficit with China, its largest trading partner, widened by around 22 billion euros to around 89 billion euros last year. “We have to discuss with China what is going on there,” says Volker Treier, head of foreign trade at the German Chamber of Commerce and Industry (DIHK). "If it is confirmed that this is due to subsidies or unfair competition, then that is an issue."
