"Germany is now the world's largest creditor country!"

This explosive news has been widely reported around the world in the past two days! Germany's net foreign assets have risen to 3.6 trillion euros, exceeding Japan for the first time in over 30 years. China was already surpassed by it six years ago. The whole world is praising Germany and "Made in Germany." However, Germany itself is not feeling cheerful.

German economists have issued warnings that Germany's rise as the largest creditor country hides "four hidden dangers." This fact may exacerbate U.S. President Trump's anger!

From the bright map of Europe, Germany's prosperity can be seen.

After more than 30 years of development, Germany has officially replaced Japan as the world's largest creditor country. As of the end of last year, Germany's net foreign assets reached 3.6 trillion euros, slightly higher than Japan's 3.5 trillion euros. Mainland China ranks third with net external assets of 3.3 trillion euros, followed by Hong Kong, China with 1.96 trillion euros and Norway with 1.35 trillion euros.

According to the Ministry of Finance of Japan, Japan has been at the top since 1991. Data from the International Monetary Fund (IMF) show that the third largest creditor country is our China, and Germany had already surpassed us in 2019.

Net foreign assets refer to the assets held abroad by households or companies (including direct investment or financial assets) minus the domestic assets held by foreigners. Since Germany's trade surplus is driven by net capital outflows, its role as a creditor country naturally accompanies a huge current account surplus.

A report from the Frankfurter Allgemeine Zeitung

In the eyes of German economists, Germany's new status as the largest net creditor country poses four risks.

Firstly, it may exacerbate U.S. President Trump's dissatisfaction in the trade dispute. This indirectly reflects Germany's persistent huge current account surplus. Trump criticizes European countries, especially Germany, for exporting more to the U.S. than importing American goods, thereby exploiting America.

The U.S. has no net foreign assets, but according to IMF data, the cumulative total of U.S. net liabilities amounts to 26.2 trillion dollars. This indicates that Americans, as borrowers, benefit greatly from integrating into the global economy.

Comparison between Germany and China and Japan

Secondly, Germany's vast overseas assets reflect the weakness of Germany as an investment destination. Munich's Ifo Institute president Clemens Fuest commented: "Many companies prefer to invest overseas. This benefits them. However, increasing domestic investment would be more beneficial for Germany's employment, wages, and taxes," Fuest stated.

Last year, Germany's direct investment once again declined, while cross-border securities investment surged significantly. According to the data from the Bundesbank, as of the end of 2024, Germany's overseas assets amounted to 13.9 trillion euros, while domestic liabilities were 10.4 trillion euros.

Mt. Fuji in Japan

Thirdly, high overseas assets pose geopolitical risks. Commerzbank's chief economist Joerg Kramer pointed out that German companies have made massive investments in regions such as Asia in recent years. If these areas experience geopolitical risks, one cannot help but question whether Germany's overseas assets remain safe.

Germany's total net foreign assets account for about 81% of annual economic output. In Japan, the proportion of net assets is even higher, reaching 87.5%.

Chinese port

Fourthly, Germany's investment capability is very poor. "We are the largest creditor country, but we are bad investors. This is costly," said Moritz Schularik, director of the Kiel Institute for the World Economy.

Schularik and his co-authors' research shows that over the past few decades, Germany's nominal return on foreign investment has been 4.8%. This is two percentage points lower than France, which ranks second among the G7 countries. The study suggests that if Germany's performance in foreign investment had been as good as that of the U.S. or Canada, Germany's returns on foreign investment over the past decade could have increased by up to 4.5 trillion euros.

In addition, although the euro-to-dollar exchange rate remained basically unchanged between 2023 and 2024, the yen-to-dollar exchange rate depreciated by 8%. This exaggerates the growth of Germany's net foreign assets relative to Japan.

Original article: https://www.toutiao.com/article/7510202183570211365/

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