German companies continue to invest in China

German companies continue to invest heavily in China, despite government calls to diversify risks. According to the Bundesbank, Germany's direct investments in China in the first half of 2023 reached 7.3 billion euros, which is almost one and a half times more than in the whole of 2022. 

Experts note that a significant part of investments is directed to reinvest profits earned in China. Last year, German businesses reinvested more than half of the 19 billion euros of profits earned in China. 

Localization of production in China is becoming an increasingly popular strategy for German companies seeking to reduce risks in their supply chains. However, this strategy could have a negative impact on the German economy by reducing exports and creating dependence on the Chinese labor market.

The German government recommends that companies diversify their investments and sales markets, but does not call for a complete cessation of cooperation with China. 

Despite this, major automakers such as Volkswagen and BMW continue to invest heavily in China. In the last five years, Germany has been the leader in terms of EU investments in China, which indicates the continued attractiveness of the Chinese market for German businesses.