As its firms look overseas, China overtakes US to become top foreign investor in Germany
Deteriorating transatlantic relationship and high energy and labour costs are making American firms think twice before moving into German market
China overtook the US to become Germany’s top single-country source of foreign direct investment (FDI) last year, a German government report said.
There were 228 greenfield and expansion projects from Chinese companies recorded in Germany last year, compared with 206 from the United States, Germany Trade and Invest (GTAI), the government’s economic development and foreign trade agency, said in its annual report, which was published on Thursday. The country’s top five foreign investment sources were rounded out by Switzerland, the United Kingdom and the Netherlands.
Germany registered a total of 1,564 FDI projects last year, down 9.3 per cent year on year. The European Union bloc accounted for 33 per cent of the FDI registered in Germany, ahead of both China and the US.
“International uncertainties such as tariffs and trade conflicts mean that companies are more cautious at present about investment decisions,” GTAI managing director Achim Hartig said, while adding that the decline seen in Germany was moderate by European standards and that the country remained a “robust business location.”
German Chancellor Friedrich Merz urged Chinese companies to invest more in Germany during a visit to Beijing in February.
Merz said his government had spent months improving Germany’s investment climate, was seeing early results, and wanted Chinese businesses to invest in the automotive, machinery, chemicals, energy and electromobility sectors.
Meanwhile, a deteriorating transatlantic relationship and structural issues in Germany such as high energy costs are making American firms think twice before moving into the market.
A report published by the American Chamber of Commerce in Germany in November said only 27 per cent of US firms saw Germany as an attractive business location, citing challenges such as high energy and labour costs, the need for adjustments to economic and industrial policy and the quality of digital infrastructure.
Nearly 70 per cent of US companies operating in Germany said geopolitical shifts were having a negative effect on their strategic positioning, the report said.