Germany Economy And Auto Industry At Risk Due To Heavy Exposure To China, Fund Manager Warns

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Germany’s strong economic ties with China present substantial risks for the leading European economy, warns the country’s second-largest fund manager, Union Investment. The fund manager, overseeing assets worth 432 billion euros ($462 billion), conducted a global study of nearly 2,000 listed companies, revealing a heightened vulnerability among German companies, especially in the electric vehicle sector. 


The study emphasizes that no other country, including China’s immediate neighbors like Japan and South Korea, has as many large companies with such extensive exposure to China, affecting nearly a quarter of the focused German companies.


China has been Germany’s primary trade partner since 2016, surpassing even the United States with bilateral trade nearing 300 billion euros. This dynamic poses a challenge for the German government, actively working to encourage companies to reduce their risk exposure to China. 


The study also notes a noteworthy trend: German companies are increasingly relocating research and development activities to China, a move that contrasts with some others shifting operations for security reasons. This strategy carries multifaceted risks, impacting Germany as a business hub by moving significant value creation abroad and causing the supplier industry to lose orders.


Union Investment, holding stakes in nearly all major German blue-chip companies, including Volkswagen, BMW, Mercedes-Benz, and BASF, highlights the exposure of these companies to the Chinese economy. German carmakers, in particular, face risks such as potential exclusion from the Chinese market and heightened competition in Europe due to this exposure. 


The fund manager underscores the possibility of retaliatory measures in China if Berlin takes protective actions against Asian rivals domestically. Furthermore, it points out that the technology offered by German car manufacturers is now replaceable, a shift from a decade ago.

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