Where Germany is dependent on Chinese imports

Berlin How dependent is Germany on China? For months, a lot has revolved around this question in Berlin. A new analysis by the Kiel Institute for the World Economy (IfW) now provides more details. It is to be presented on Wednesday and is available to the Handelsblatt in advance.

The survey shows that Germany is heavily dependent on imports from China for numerous products – in an emergency, it would be difficult to quickly replace them with suppliers from other countries. The authors have chosen goods for which a high proportion of imports come from China and for which the People’s Republic is dominant worldwide.

“You have to take a very close look at which products Germany is dependent on China for and, above all, which products China is so dominant in the world at the same time that substitution is very difficult in the short term,” explains Alexander Sandkamp, ​​one of the authors of the IfW Analysis.

According to the IfW, the tricky combination mentioned by Sandkamp arises particularly in the case of electronic products. For laptops, for example, the combined share of imports from China and Taiwan is more than 85 percent – with the majority coming from Chinese production.

At the same time, the People’s Republic has a world market share of around 75 percent in this product category. In the event of a conflict, it is therefore likely that many countries would look for new suppliers, so that shortages could quickly arise given China’s dominance, the authors write. Germany is similarly dependent on mobile phones – 68 percent of them come from China. Many manufacturers, such as the US company Apple, rely on production in the People’s Republic.

Horror scenario: escalation of the Taiwan conflict

The IfW researchers have in mind a scenario in which an escalation of the Taiwan conflict would not only suddenly decouple the European and Chinese economies, but also make imports from Taiwan more difficult.

>> Also read here: How dependent is the German economy on China?

The background to this scenario is that Beijing considers Taiwan to be part of its territory. The Chinese government has repeatedly emphasized that although it is in favor of peaceful “reunification”, it expressly does not rule out the use of force. If it came to that, it would be clear that Europe would, among other things, impose massive economic sanctions.

The analysis also shows other product levels for which Germany is dependent on imports from China – and sometimes also reveals strange dependencies. Germany imports 99 percent of its fireworks and 88 percent of its bamboo chopsticks from China and Taiwan.

However, it is now widely known that the German economy is also dependent on China for numerous critical raw materials. According to an analysis by the Federation of German Industries (BDI), more than 60 percent of the raw material gallium comes from China – it is used in the manufacture of semiconductors and light-emitting diodes, for example.

According to a survey by the Ifo Institute, Germany accounts for 50 percent of Chinese deliveries of magnesium, which is used in robotics and 3D printing, for example. These dependencies are also pointed out in the IfW study. The IfW states that 85 percent of rare earth metals are imported from China and Taiwan.

Researchers advocate a two-pronged strategy

With regard to the critical products, the IfW researchers advocate a multi-pronged strategy: On the one hand, free trade agreements should be expanded to make it easier for companies to diversify. In addition, the authors of the study suggest promoting developments that lead to better material efficiency, and greater warehousing could also help to overcome bottlenecks, at least in the short term.

The federal government is also working to ensure that Germany positions itself more broadly, for example in the procurement of critical raw materials. As a recent survey by the German Economic Institute (IW) showed, the overall dependency on imports from China is not particularly great in relative terms.

>> Also read here: FDP wants China stress tests for Germany

The IfW has made a similar statement. According to his analysis, primary products sourced directly from China account for just 0.6 percent of German production. The dependency is greater for what is known as end use, i.e. what German consumers buy directly. The Chinese share there is 1.4 percent.

If you also take indirect imports into account, however, there is a slightly greater dependency on China – over which Germany has little influence. Accordingly, the share of Chinese added value in German production will increase to 1.5 percent and in German consumer consumption to 2.7 percent. The study authors argue that even if Germany were to succeed in reducing its imports from China to zero, the German economy would still not be independent of China.

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