Record High: German FDI Surges in China

In a notable development, German foreign direct investment (FDI) in China soared to €11.9 billion ($12.76 billion) in 2023, marking a substantial increase, with a parallel rise in equity capital reported by companies operating in the region, amounting to €4.8 billion.

Official data from the Bundesbank, as cited by Reuters, reveals that German FDI in China witnessed a remarkable 4.3% uptick, reaching a historic high of €11.9 billion last year.

A press release issued by the Bundesbank highlights that German direct investments abroad surged by €9.7 billion in the same period, fueled by a surge in transaction volumes. Additionally, German companies augmented equity capital abroad by €4.8 billion.

“Increased foreign investment also translated into additional direct investment inflows to affiliated companies in Germany, amounting to €5.9 billion,” the statement elucidated. “Equity capital expanded by €2.6 billion, complemented by a €3.3 billion increase in loan volume.”

These latest statistics emerge amidst calls from German and European authorities for companies to reconsider their exposure to the Chinese market. Heightened tensions between Brussels and Beijing, exacerbated by the EU Commission’s investigation into Chinese subsidies for electric vehicle (EV) imports last October, underscore the complexities of international business relations.

The surge in FDI outflows coincides with findings from a November 2023 survey, wherein one-third of 3,600 German businesses surveyed expressed intentions to expand their investments abroad within the next 12 months.

However, while FDI inflows into China from Germany have surged, data from GlobalData’s FDI Database reveals a decline in the number of new German FDI projects announced in China since pre-COVID levels. In 2019, German businesses reported 112 new investment projects across China, a figure that decreased to 60 in 2020 and further dropped to 50 in 2023.