Fatal Attraction

Germany’s Bad China Habit

Sorry, we've carried you long enough Angie. Source: DPA
Sorry, we've carried you long enough Angie.
  • Why it matters

    Why it matters

    No other large industrial economy is set to suffer more from China’s slowing growth than Germany.

  • Facts


    • The 30 firms listed on Germany’s blue-chip DAX stock index alone have 672 subsidiaries in China.
    • DAX firms on average relied upon China for 13.3 percent of their sales.
    • The devaluation of the yuan has caused double-digit percentage losses for some German stocks.
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Earlier this month when presenting quartly results, Harald Krüger, the chief executive of BMW, chose to lead with the good news, telling shareholders that the German luxury carmaker again sold a record number of vehicles in the second quarter.

Then he followed with a less-than-cheery announcement that the company’s pre-tax profit had dropped by nearly 3 percent – primarily because of weak sales in China.

The country used to be a dream market for the German carmaker, with sales surging 20 fold over the past decade, but sinking demand forced BMW to reduce production this spring.

The long boom in China is over, creating problems not only for BMW but also for a number of leading German companies, including rival Volkswagen, auto parts supplier Continental and chipmaker Infineon, as well as consumer goods maker Henkel and industrial giant Siemens.

No European country is as affected by the slowdown in China as Germany, because of the strong German-Chinese trade relations, high German direct investment in the country and heavy exposure to China by Germany’s leading companies. The 30 firms listed on Germany’s blue-chip DAX stock index alone have 672 subsidiaries in China, according to the EAC consultancy. The only DAX company without business ties to China is the energy firm E.ON.

On average, China accounts for 7 percent of German industry’s total revenues, but many companies are much more reliant on the giant Asian economy. Carmaker Daimler, for example, booked 10.2 percent of its total sales in China last year, BMW 18.7 percent and VW a whopping 32.2 percent. On average, DAX firms last year relied on China for 13.3 percent of their sales, worth some €132.1 billion, or $146 billion, according to calculations made by Handelsblatt and EAC.

“China’s importance for Germany’s leading companies continues to grow,” said Daniel Berger, an EAC partner in Shanghai. “But China’s free-fall has also increased.”

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