[Source/Observer Network, Zhang Jingjuan] Germany recently topped the list of global creditor countries with external net assets exceeding $3.6 trillion, breaking Japan's 34-year reign as the top creditor nation.

According to a report on May 27 by Frankfurter Allgemeine Zeitung, German economists reacted calmly to this news. Some economists pointed out that although Germany has become the largest creditor nation, it is a poor investor.

Data released by Japan’s Ministry of Finance on May 27 showed that by the end of last year, Japan’s external net assets increased by 12.9% year-on-year, breaking through 500 trillion yen for the first time, reaching 533.05 trillion yen (approximately $3.5 trillion). Germany, with its large current account surplus, had external net assets exceeding Japan, reaching 569.65 trillion yen (approximately $3.6 trillion).

The report stated that external net assets are the difference between a country’s overseas assets and liabilities. Germany's surpassing Japan was due to its massive trade surplus and long-term substantial current account surpluses.

A current account surplus refers to the balance in a country’s international balance of payments statement during a certain period (usually one year), where the total income from the trade account exceeds the total expenditure, forming a surplus. In 2024, Germany's current account surplus reached a record high of 248.7 billion euros. By comparison, Japan's current account surplus during the same period was 29.4 trillion yen (approximately 180 billion euros).

However, German economists held a cautious attitude toward Germany's huge accumulation of foreign assets.

Clemens Fuest, director of the Munich Ifo Institute for Economic Research, said that the high level of foreign assets also reflects the disadvantages of Germany as an investment destination. "Many companies tend to invest abroad. This is good for businesses. However, for Germany's employment, wages, and taxes, more domestic investment would be better."

Moritz Schularick, director of the Kiel Institute for the World Economy, said, "A problem often overlooked is that we are the largest creditor nation but a poor investor. This is too costly."

The situation of Japan's external net assets published by Japan’s Ministry of Finance shows that Japan was surpassed by Germany in 2024. Bloomberg News

According to a study co-authored by Schularick, over the past few decades, the nominal return rate of Germans' investments abroad has only been 4.8%, which is two percentage points lower than France. The study showed that if Germany's foreign investment performance were as good as that of the United States or Canada, Germany could have earned up to 4.5 trillion euros from foreign investments over the past decade.

The report stated that from 2023 to 2024, the euro-to-dollar exchange rate remained almost unchanged, but the yen-to-dollar exchange rate depreciated by 8%. This means that Germany's increase in external net assets was exaggerated compared to Japan's net foreign assets.

Last year, direct investments in Germany fell again, while cross-border investments surged. According to data from the Bundesbank, by the end of 2024, Germany's total overseas claims amounted to 13.9 trillion euros, while the total domestic liabilities were 10.4 trillion euros.

The report also noted that Germany's new role as the largest net creditor may further irritate Trump, as it indirectly reflects Germany's persistent large current account surplus. Trump often criticized Europe, particularly Germany, for taking advantage of the U.S. in trade issues, complaining that European countries exported goods to the U.S. with higher value than what they imported from the U.S.

The U.S. has no net assets abroad, but according to data from the International Monetary Fund, America's net external debt has reached $26.2 trillion. This indicates that the U.S., as a borrower, has benefited greatly from economic globalization.

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