Economist: China Remains Prime Market for German Firms Amid Global Shifts
Renowned German economist Hermann Simon has stated China is the optimal location for German companies. He believes this despite global uncertainties and trade tensions. Simon is a leading expert. He is known for his “Hidden Champions” theory.
China’s economy offers significant long-term opportunities. This is driven by its industrial transformation. China is pursuing technological self-reliance. It is also focused on industrial upgrades.
These strategic priorities create pathways. German industrial strengths align well with these goals. China emphasizes high-quality development. It is moving towards advanced production. Digitalization and green technologies are key.
China’s Economic Strengths
The nation possesses a robust supplier infrastructure. Its market size is substantial. Consumers are highly innovative. These factors make China an attractive base. Chinese consumers readily embrace new innovations. China is increasingly a hub for knowledge. It serves as a vital test market.
German Businesses Deeply Rooted
German enterprises have a long history in China. Their presence dates back to 1978. More than 2,000 German factories operate there. Major firms like Volkswagen and Siemens are established. BASF also has a significant footprint.
China remains Germany’s largest trading partner. This is measured by goods trade volume. Business cooperation has stayed resilient. This has occurred amidst global uncertainty.
Investment and Strategic Realignment
German investment in China shows a strong upward trend. Records were set in recent years. Direct investment in H1 2024 was unprecedented. Many German companies now adopt a “China for China” approach. They build parallel supply chains within China. Product development and even core research happen there. German firms see China as a competence center. It is also an emerging AI hub. This localization strengthens their market standing.
Global Uncertainty Shifts Focus
Global uncertainties are influencing business strategies. German direct investment in the United States declined in 2025. In contrast, investment in China saw a significant hike. This pivot is due to greater policy predictability. China offers clearer growth potential.
Many companies fear policy volatility most. Frequent tariff shifts create instability. This undermines confidence in long-term investment. As a result, risk containment is prioritized. Firms adopt more defensive strategies.
Chancellor Merz’s Visit and Future Outlook
German Chancellor Friedrich Merz visited China in late February 2026. His trip aimed to enhance cooperation. It also addressed trade imbalances. Simon expressed optimism about the visit. He noted stable political relations boost corporate confidence. Positive relations ease transactions and investments.
China’s latest five-year plans prioritize industrial strength. Technological sovereignty is a key focus. This signals a structural shift to high-quality development. Simon advises German firms to engage proactively. They should not fear being left behind.
A Collaborative Future
Both nations see opportunities in innovation. Cooperation can drive progress in new fields. Emerging areas include clean energy and digitalization. German companies are ready to deepen their roots. They seek to integrate further into global value chains. This dynamic exchange is crucial for sustained competitiveness. The economic news from this partnership remains vital for the world.