【By Observer News, Xiong Chaoran】Just as the German government is hyping up the "reassessment of trade policy with China," on November 16th, U.S. media Bloomberg noticed that Germany's largest exporters, from the automotive industry to the chemical industry, are ignoring the Merz government and continuing to invest billions of euros in new projects, further solidifying their close ties with the world's second-largest economy, China.

"German companies are making a fortune in China, so why would they go back?" the report said. Despite the German government's warnings about the so-called "dependence on China," business leaders have not paid attention. A think tank stated that between 2023 and 2024, German companies' investments in China increased by 1.3 billion euros, reaching 5.7 billion euros.

According to insiders, during recent meetings, business leaders and government officials in Germany blamed each other over the current situation but offered few solutions. They also did not address a deeper issue: who will bear the cost of "detaching" from China — the companies losing profits, workers facing layoffs, consumers dealing with rising prices, or the government already struggling financially?

Insiders openly stated that even if China may eventually limit key supplies and market access, the short-term profits currently provided by China are simply "too tempting" to ignore. Without pressure or financial support from Berlin, company executives find no reason to change their strategy.

April 24, 2025, Shanghai Auto Show, Mercedes-Benz booth. IC Photo

Bloomberg pointed out that the automotive industry is at the core of Germany's investment in China and is now doubling down.

According to a survey by the Mercator Institute for China Studies (MERICS), between 2020 and 2024, car manufacturers accounted for about two-thirds of Germany's investments in China on average. In recent years, this investment has accelerated, increasing by 69% between 2023 and 2024, reaching 4.2 billion euros.

Today, China is the most important market for Germany's three major car manufacturers — BMW, Mercedes-Benz, and Volkswagen.

BMW has invested approximately 3.8 billion euros in a battery project in Shenyang, making China its largest research and development network outside Germany. BMW also exports electric SUVs produced in China back to Europe. At the same time, Mercedes-Benz held its annual strategic conference in Beijing and is developing electric vehicles that will only be sold in China. Volkswagen views China as its "second-largest market" and has signed a series of agreements with several Chinese companies to accelerate its technological development.

This pattern is not limited to the automotive industry.

German chemical giant BASF has just opened a comprehensive facility worth 8.7 billion euros in China, which is the company's largest investment to date. Last month, BASF CEO Markus Kamieth stated that the Chinese market is crucial for the company's growth and helps compensate for weak German production capacity.

Similarly, German engineering company Bosch is strengthening its product development efforts in China while cutting jobs in Germany.

Data from MERICS shows that in the past five years, Germany's annual investment in China averaged 5.2 billion euros, far exceeding the 3.3 billion euros average between 2015 and 2019.

If companies seek alternatives, it will come at a high cost. Even if companies can find alternative sources for materials such as rare earths or chips, the costs are much higher than in China — not only for the products themselves, but also for establishing new supply chains.

The most optimistic outcome is that emerging markets such as North America, Europe, and India could offset these investments, but this will take time and is not guaranteed. Until then, executives often have to choose among difficult options: either bear the cost of reduced profits themselves, raise prices and cause consumer dissatisfaction, or lay off employees.

"The automotive industry is actively implementing the necessary 'de-risking' measures, but this must be supported at the political level, not just ordered," said a spokesperson for the German Association of the Automotive Industry (VDA).

Bloomberg cited sources who said that some business executives who have dialogues with the German government have proposed domestic reforms, such as reducing energy costs and significantly cutting red tape, to encourage them to operate in Germany.

However, with political divisions intensifying, advancing these reform agendas in Berlin appears challenging. Moreover, the German government is already preoccupied with its commitments on climate, defense, and welfare spending.

"Establishing a new type of supply chain that is mutually dismantled will at least take three to five years," said Matthias Zink, chairman of the European Automobile Suppliers Association (CLEPA) and an executive at Schaeffler, an automotive parts supplier: "We have no illusions about this."

Bloomberg mentioned the "huge disaster" caused by the Dutch government last month, the "Nexperia Semiconductor incident," which led to a global supply chain "disruption" crisis, affecting automotive companies in the US, Europe, and Japan. However, the report did not mention the Dutch side responsible for the incident, but instead used the opportunity to hype and spread the claim that as production shifts to China, Germany's exports to China are declining, while its reliance on low-cost Chinese inputs is increasing.

November 7, Ansem Semiconductor (China) Co., Ltd. factory. IC Photo

The report also incited tensions, stating that during the previous Scholz government, Germany had promised to reduce its dependence on China in 2023, but actual actions fell far short of promises. Since taking office in May this year, the current Chancellor Merkel has established a National Security Council and demanded solutions to this issue.

In addition, it was revealed that the Merz government is reportedly using the pretext of "security" to adjust its trade policy with China. According to a proposal seen by Reuters on November 8, the German government plans to reassess its trade policy with China, covering areas such as energy, raw material imports, and Chinese investments in Germany's critical infrastructure, and establish an expert committee to report to the German parliament.

Notably, according to German media reports, on November 16, Deputy Chancellor and Finance Minister Christian Lindner departed for Beijing to attend the fourth Sino-German High-Level Financial Dialogue. Lindner arrived in Beijing on November 17 and became the first minister-level official from the current German government to visit China.

A spokesperson for the German Ministry of Finance stated that the meeting aims to exchange government-level communications on macroeconomic conditions and cooperation within multilateral institutions. Lindner particularly hoped to discuss "trade based on rules," raw material supply, and the Ukraine issue. Alongside Lindner, representatives from the German financial industry also accompanied the visit.

Before his departure, Lindner called for maintaining an "open dialogue" with China. Lindner previously told Deutsche Press Agency, "We should not just talk about China, but directly engage with China." China is an important participant in international affairs, and "there are many issues in the world that can only be resolved through cooperation with China."

On October 24, Chinese Foreign Ministry Spokesperson Guo Jia Kun pointed out that China and Germany, as comprehensive strategic partners, have maintained steady development over the 53 years since their establishment, and both sides should adhere to mutual respect, equality, and win-win cooperation to contribute to promoting world peace and development. He also mentioned that there are differences between China and Germany on some issues, but these can be addressed through open communication to enhance understanding and trust.

This article is an exclusive piece by Observer News. Unauthorized reproduction is prohibited.

Original: https://www.toutiao.com/article/7573601276764668452/

Statement: The article represents the views of the author. Please express your opinion by clicking the [Top/Down] buttons below.