German media: German companies' investments in China surge again in 2025

German companies invested 7 billion euros in their Chinese operations over the past year, with all the funds coming from profits generated by their Chinese subsidiaries. In the same period, Germany's investments in the United States nearly halved. However, the localization strategy of German companies also puts pressure on the German economy.

The German Institute for Economic Research (IW) released new data showing that German companies' investments in China reached the highest level in four years in 2025, indicating that the trade war initiated by US President Trump prompted industries and governments around the world to shift out of the United States while strengthening business relations with other regions.

According to IW data, German companies' investments in China exceeded 7 billion euros between January and November last year, a 55.5% increase compared to 4.5 billion euros in 2024 and 2023, and also surpassed the average of 6 billion euros during the period from 2010 to 2024.

This investment data can be interpreted as a deep impact of the tariffs imposed by Trump on EU products in his first year in office, forcing German companies, Europe's largest economy, to seek alternatives and turn their attention toward China.

On Wednesday, January 28th, UK Prime Minister Starmer led a government delegation to visit China, expecting to reach multiple commercial agreements across industries ranging from automobiles to pharmaceuticals. The EU is expected to approve a recently concluded agreement with South America. Meanwhile, Canada's prime minister has officially visited China after many years, and the country is accelerating efforts to expand trade with China and India.

Soon after, German Chancellor Merkel will also visit China. Berlin has long been working to balance its relationship with its largest trading partner, China, walking a tightrope on trade and security issues, taking a tough stance towards Beijing while trying to avoid damaging its economic foundation.

German Investment: Rise in China, Fall in the US

Juergen Matthes, head of international economic policy at the German Institute for Economic Research (IW), told Reuters, "German companies continue to expand their operations in China, and are doing so faster." He pointed out that the trend of strengthening supply chains locally has become more pronounced. Not only are more supply chains being moved away from Germany, but some German companies have also established research centers locally to develop products.

Regarding the financing sources of direct investments by German companies, the survey results show that the funds mainly come from the profits of German subsidiaries in China, which are used for reinvestment in China rather than being repatriated to Germany.

In contrast, in the first year of President Trump's second term, German companies' investments in the United States almost halved: according to another study by IW, the total amount of direct investments by German companies in the United States between February and November 2025 was approximately 10.2 billion euros, a sharp drop of 45%.

Matthes said that another driver of this shift is "concerns about geopolitical conflicts," as major companies expand their business scale in China to be able to operate independently in the event of serious trade disruptions. He said, "Many companies say: [If I produce and supply the Chinese market in China, I can reduce the impact of tariffs and export restrictions]."

Localization: "In China, for China"

Reuters noted that German companies such as BASF, Volkswagen, Infineon, and Mercedes-Benz, BMW are deeply dependent on the Chinese market, which is the largest sales market for global cars and chemical products.

German fan and motor manufacturer ebm-papst said that the company invested 30 million euros in China last year, accounting for more than 20% of its total investment. The company stated that production, sales, and R&D of its products are all conducted in Xi'an, and the purpose of the investment is to implement the slogan "In China, for China."

ebm-papst stated in a statement, "This model has proven to be an important pillar of stability, especially during periods of tariffs and geopolitical tensions." The statement added that the company also plans to expand its business in the United States in 2026.

Source: DW

Original: toutiao.com/article/1855484088912903/

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