BERLIN, July 7 — The shift is unmistakable. Germany, long Europe’s most enthusiastic economic partner with China, is quietly but deliberately putting distance between itself and Beijing. The trend underneath is a strategic recalibration the government calls “de-risking,” and the data now shows it’s more than just talk.
Chancellor Olaf Scholz first articulated this policy shift in 2023, and that July the German government published a formal China strategy. The document called for reducing the country’s dependence on Chinese imports and markets.
For a nation that built much of its post-reunification export boom on Chinese demand, this was a significant departure. The numbers tell the story. According to the German Federal Bank, German foreign direct investment in China fell by 12% in 2023, landing at €11.5 billion.
That is a sharp drop for a country whose industrial giants had long treated China as an essential manufacturing base and growth market. German companies are voting with their wallets.
Industrial heavyweights like Volkswagen and BASF have invested in new production facilities in the United States and other countries, rather than doubling down on China. This is not a wholesale exit — both firms still have enormous operations in China — but it signals a clear hedging strategy. The German Chamber of Commerce, known as DIHK, conducted a survey in 2023 that found 40% of German companies operating in China were actively considering diversifying their supply chains.
That is nearly half of the German business community in China looking for alternatives. The trend is not just at the top; it runs through the mid-sized Mittelstand companies that form the backbone of the German economy. ### The mechanics of de-risking De-risking is a careful term. It is not decoupling — the complete severing of economic ties that some in Washington have advocated.
Berlin is trying to thread a needle: maintain access to the Chinese market, which remains enormous, while reducing vulnerability to supply chain disruptions, technology transfer requirements, and geopolitical pressure from Beijing. The German government’s China strategy document from July 2023 laid out this approach explicitly.
It acknowledged that China is simultaneously a partner, a competitor, and a systemic rival. That three-part framing is now official policy. The 12% drop in FDI is significant, but context matters.
German companies had invested heavily in China for years, so the base was high. The €11.5 billion figure still represents substantial exposure.
The shift is in the direction of travel, not the absolute level. ### What’s changing on the ground For German automakers, the calculus is shifting. Volkswagen has invested billions in new electric vehicle production capacity in the United States. BASF, the chemical giant, has similarly expanded in North America.
These moves are not just about China; they reflect broader supply chain reorganisation post-pandemic and post-Ukraine invasion. But the China dimension is central. The DIHK survey’s finding that 40% of German firms in China are considering diversifying supply chains is a leading indicator.
If even half of those firms follow through, the impact on German-Chinese trade flows will be significant over the next several years. Watch this space.
The German government’s policy framework is in place. The investment data is moving. The business surveys show intent.
The question now is execution: will German companies actually shift production and sourcing at scale, or will the gravitational pull of the Chinese market keep them anchored? The trend underneath is clear.
Germany is no longer all-in on China. The de-risking strategy is real, and the data from 2023 — the FDI drop, the DIHK survey, the government policy document — provides the evidence. What’s changing is the German business model itself.
The coming years will show just how far that transformation goes.
