German FDI in China climbed by 4.3% and hit a record high of €11.9bn last year, official Bundesbank data cited by Reuters shows.
According to a press release from the Bundesbank, German direct investments abroad increased by €9.7bn last year due to a rise in the number of transactions. In addition, German companies reported €4.8bn more in equity capital abroad.
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“Foreign companies also provided additional direct investment funds to affiliated companies in Germany (€5.9bn),” the statement published on Tuesday reads. “They increased equity capital by €2.6bn and expanded the loan volume by €3.3bn.”
The latest figures come at a time when German and European officials are urging companies to reduce their exposure to the Chinese market. Tensions between Brussels and Beijing are at an all-time high after, in October last year, EU Commission President Ursula von der Leyen announced the launch of an investigation into Chinese subsidies for electric vehicle (EV) imports into the EU.
News about an increase in FDI outflows follows a survey published in November 2023, when one-third of the 3,600 German businesses interviewed reported plans to expand investments abroad in the next 12 months.
However, according to GlobalData’s FDI Database, the number of German FDI projects announced in China has gone down since pre-Covid levels. In 2019, German businesses reported 112 new investment projects across China’s territory, which dropped to just 60 in 2020 and has since tumbled down to 50 in 2023.
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By GlobalDataIn the past four years, German companies in China financed their projects by reinvesting profit and withdrawing capital, showing a much more complicated picture.
Juergen Matthes, an economist with the German Economic Institute, said in a report: “We can assume that there remains a split between the few big companies and the majority of small and medium-sized enterprises.
“Other studies and anecdotal evidence support the thesis that some medium and small-sized businesses are seeking to reduce their engagement with China or even to exit entirely,” he continued.
