Who created China

China - Economic Relations

Sino-German economic relations continue to develop positively despite the recent moderate growth of the Chinese economy and increasingly difficult framework conditions. Germany is by far China's largest European trading partner. In 2020, China was Germany's largest trading partner for the fifth time in a row.

In 2020, the bilateral trade volume amounted to 212.1 billion euros (2019: 205.6 billion euros). This means that Germany accounts for more than a third of the EU's total trade volume with China (around 586 billion euros).

German exports to China amounted to 95.9 billion euros. The main German export goods were machines, motor vehicle and motor vehicle parts, electrical engineering and chemicals. In 2019, German exports to China amounted to 96 billion euros, which is only a slight decrease (- 0.1 percent). In 2019, German exports to China rose by 3.2 percent, slightly less than in 2018 (8 percent).

German imports from China in 2020 amounted to 116.3 billion euros (2019: 109.9 billion euros).

German direct investments in China totaled EUR 86.12 billion in 2018. Chinese direct investments totaled 3.2 billion euros in 2018 (Bundesbank figures).

Strengthen fair trade relationships between partners

China benefits from the open markets in the EU and Germany. At the same time, German companies in China are still subject to numerous restrictions and discrimination compared to Chinese companies (joint venture obligation in individual industries, no access to certain economic sectors, only minority stakes possible in certain areas, including in the financial sector, etc.).

The central prerequisite for the further development of bilateral cooperation is therefore that China opens up its markets further and reduces discrimination against foreign companies.

As part of this, the EU and China agreed on December 30, 2020 on the political conclusion of the negotiations on the EU-China Investment Agreement (CAI).
The EU's long-term strategic goal is to anchor more reciprocity in trade relations with China and to further level the playing field. The EU-China investment agreement can make an important contribution to this and primarily creates improvements in the areas of market access, equalization of competitive conditions and sustainability (environmental and labor standards).

Despite the slowdown in growth, China remains an attractive sales market

After a phase of very dynamic growth, China's economic growth leveled off at 6.1 percent in 2019, according to the International Monetary Fund (IMF). 2020 was shaped by the effects of the Corona crisis, so that the Chinese GDP is likely to amount to around 2 percent. An economic recovery is expected for 2021. Given the size of the market and the continued high growth of the Chinese market to be expected in the future - despite the current slowdown - China is likely to remain an interesting target market for German companies for the foreseeable future. In addition to the classic manufacturing industries, an increase in demand in the areas of transport, energy generation, environmental technology and the health sector is expected in the next few years. In view of the rapid economic development of the last few decades, the number of consumers with purchasing power in China is also increasing, who demand western and thus also German consumer goods. Today, around 200 to 300 million people in China belong to the middle class.

It is important, however, that China now follows up its recent announcements of market opening with concrete action. What is needed are measures that open up markets and create stable, reliable framework conditions and lead to equal treatment of foreign companies and domestic companies in China. The aforementioned EU-China investment agreement is a first step in this direction. It will be important that this is supplemented by further suitable foreign trade policy measures by the EU in order to achieve the goal of a “level playing field” in relations with China.

At the same time, the Chinese leadership is increasingly relying on technological independence and self-sufficiency, which is currently being politically discussed under the heading of “dual circulation economy”. It is about becoming more independent of fluctuations in the world market and strengthening one's own domestic market. It is still unclear what long-term effects this may have on foreign companies.

Strengthen fair trade relations, create fair competitive conditions

When China joined the WTO in 2001, China took on extensive market opening obligations. Progress has also been made in some areas, but it is important to continue on this path consistently, including in the fields of "non-discriminatory market access" (for example by reducing the participation limits of foreign companies, removing technical market access restrictions through standards and certification requirements, streamlining lengthy licensing procedures, etc.) , but also in the area of ​​"public procurement" (equal access of foreign companies to public tenders, China's accession to the Government Procurement Agreement of the WTO).

In the area of ​​digitization / automation, the main concern is to ensure data protection, data security and the protection of intellectual property. At the same time, this requires free access to a fast Internet, which also has to guarantee the protection of business secrets.

Federal government advocates better protection of intellectual property rights

The protection of intellectual property remains a particular challenge for German companies in China. China is one of the countries in which cases of infringement of industrial property rights are particularly numerous. In 2019, 33 percent of the cases reported in the EU and 61 percent of the cases reported in Germany came from China (source: DG TAXUD; General Customs Directorate). The Chinese government has now created a legal situation that comes close to international standards with its laws and other legal provisions. However, administrative implementation, judicial practice and the sanctioning of offenses must be significantly improved.

For many German companies, the compulsion to involuntarily transfer technology is a central problem. Criticism is above all given to legal regulations and special practices that require technologies to be disclosed or transferred to Chinese economic actors free of charge, for example within the framework of certification processes. This non-market economy and questionable behavior under WTO standards should be abandoned as soon as possible. Here, too, the EU-China investment agreement can bring about improvements, as it will contain regulations prohibiting forced technology transfers.