The Bundesbank has issued a stern warning that decoupling from China will inevitably lead to turmoil in Germany. At the beginning of Biden's presidency of the United States, Germany was more active in decoupling from China, cooperating with the United States' intention to reduce the EU's dependence on China's economy. But with the passage of time, especially after the huge impact of the Russia-Ukraine conflict, the direction of the wind in Germany has really changed.
Recently, the Bundesbank made it clear that in the event of a sudden and widespread deterioration in economic relations with China, Germany could experience serious economic turmoil. According to the Bundesbank, Germany exported 107 billion euros worth of goods to China in 2022, accounting for 7% of the country's total exports. In the same year, 13 percent of Germany's total imports came from China.
In the event of a decoupling from China, the German economy, especially industry, will suffer a serious blow. For example, many German companies active in China will lose a considerable sales and profit base. To make matters worse, the circle of German companies that rely directly or indirectly on China's key intermediate goods is much larger. In addition, Germany is also extremely dependent on imports from China in terms of new energy TVs, rare earths and antibiotics.
In addition to the industrial sector, the Bundesbank sees potential risks in its financial sector as decoupling from China. If relations between Germany and China break down and many German companies that rely on the Chinese market go bankrupt, defaults on loans by German banks will increase systematically. According to data from the Bundesbank, German banks hold 756 highly dependent companies with a total of nearly 220 billion euros in claims against China.
As a matter of fact, economic globalization is already the trend of the times, and any behavior that goes against the trend will be counterproductive. China's close economic ties with Germany and Europe as a whole are far more beneficial than disadvantageous to both sides. The complementarity between China's economy and Europe's economy is inevitably greater than that between the United States and Europe. The Germans should see the situation clearly and not be a "victim" of the Americans in defending their own interests!
