German-Chinese Economic Relations: Opportunities and Risks for Germany

During the last few years, the People's Republic of China has become an increasingly important trading partner for Germany. Particularly in the wake of the global economic and financial crisis that began in 2008, trade with China has been an important driver of economic growth in Germany as German industry benefited from the increase in Chinese import demand more than other European countries. However, Chinese economic growth has slowed somewhat since then. After recording double-digit growth rates in the past, the new Chinese government is now attempting to stabilize annual economic growth at 7.5 percent. It is therefore likely that future German export growth rates to China will be lower than in recent years. Further, according to the government's new plans, Chinese economic growth should rely less on export and investment, as has been the case to date, and more on domestic performance and private consumption in the future. It is anticipated that this shift will also have a negative impact on German export industry, which is dominated by capital goods. Additionally, Chinese demand for imports is likely to decline as China's domestic production of cars and machinery expands.