Economic Crisis

A Slower Boat to China

china audi dpa
Customers not lined up at the door. China's stock market turmoil may disrupt a fruitful and growing economic co-dependency with German exporters.
  • Why it matters

    Why it matters

    • China’s market downturn could lead to reduced consumer spending and declining sales for German exporters.
  • Facts


    • In 2014, Chinese exports to Germany were €79.3 billion; German exports to China were €74 billion.
    • Germany is much more exposed than other euro zone economies to China, which buys almost 7 percent of total merchandise exports.
    • The only DAX company without business ties to China is the energy firm E.ON.
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For Germany, which has built close ties to China, these are frightening times.

Many European countries have looked for growth in China, but Germany more than most.

A note by Morgan Stanley in early August showed that Germany is much more exposed than other euro-zone economies to China, which buys almost 7 percent of total merchandise exports. France, the next biggest euro trading partner with China, has just under 4 percent, while other major euro-zone companies have less than 3 percent.

China is now Germany’s fourth-largest trading partner behind France, the United States and Great Britain.

But its economic dependence on China is arguably greater.

Germany has come to rely on China in a way it does not rely on the other countries, as a significant driver of growth, and of political influence. In 2014, Chinese exports to Germany were €79.3 billion, while German exports to China were €74 billion.

The 30 firms listed on Germany’s blue-chip DAX stock index alone have 672 subsidiaries in China, according to EAC, a consultancy. The only DAX company without business ties to China is domestic energy firm E.ON.

On average, DAX firms last year relied on China for 13.3 percent of sales, worth some €132.1 billion, or $146 billion, according to calculations made by Handelsblatt and EAC.

Volkswagen, Europe’s largest automaker, currently generates nearly a third of its global sales — 32.2 percent — from China alone.

For frugal Germans, Chinese consumers had been a godsend.

The country’s growing, acquisitive-minded middle class were keen to buy products Made in Germany, and their consumption had for most of the last decade offset traditionally tight-fisted Germans, as well as many Europeans whose spending was curbed by the impact of the global financial crisis.

But this summer, the shopping Shangri La that was China may be turning into a mirage.

For years a source of good economic news for producers and uncharted export vistas worldwide, China has suddenly become a source of trouble and fear.

The Shanghai Stock Index is in free fall: Four of the biggest 10 daily declines in the index in the last 15 years occurred during the last two months.

Monday’s huge market sell-off in China spooked markets across the world, including the Dow Jones in New York, which at one point on Monday lost 1,000 points before rebounding.On Tuesday China’s central bank said it would cut interest rates in an attempt to revive the economy and the stock market.

The current crisis began on August 11, when the Chinese central bank made a surprise devaluation of the yuan currency, to boost its struggling exporters, an open, indisputable admission that the engine of global growth was sputtering, if not stalling.

A day later, a massive fire at a warehouse storing toxic chemicals in northeast city of Tianjin killed at least 129 people, and injured over 600. Many blame the fact that residential areas were built too close to the industrial zone, and health and safety regulations were not correctly enforced, for the tragedy.

Fraser Howie, the author of “Red Capitalism: The Fragile Foundation of China’s Extraordinary Rise,” told Handelsblatt Global Edition the events of this summer in China showed that Chinese government is not as in control of its economy and society as many had believed.

“The real story out of this summer turned out to be the failed intervention in the stock market at the start of July, the currency devaluation, and last week, the explosion. If you had any confidence in the Chinese government it should be pretty thin by now,” Mr. Howie said.

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