Germanys Chinese Growth Engine Stalls

BERLIN—For three decades, Chinas burgeoning demand for German cars, machines and engineering tools has been a steady engine of growth for Europes largest economy, gratefully championed by successive governments in Berlin.

But the engine is starting to splutter. Chinas economy is slowing and its factories are becoming rivals to the German giants that once supplied them.

The slowdown is not helping at a challenging time for Germany. Its economy contracted 0.1 percent in the second quarter and some analysts expect third-quarter gross domestic product (GDP) data due on Nov. 14 to show a similar decline—which would leave the economy in recession for the first time since 2013.

While German trade with China is only a small part of the countrys 3.4 trillion euro (3.8 trillion) economy, it has been one of the few components of GDP that Berlin could count on to grow year after year.

Now, with growth in Chinese demand for goods “Made In Germany” ebbing, and by some measures falling, the once lucrative export market is proving less supportive as the economy stagnates.

“China is our most important trading partner but the future trend is hard to predict,” said Axel Mattern, a senior manager at the Port of Hamburg, where there are signs Chinas slowdown and Sino-U.S. rifts are putting a brake on trade.

While it is too early to call the demise of the Sino-German trading relationship, the cooling of its red-hot growth has rekindled doubts about whether years of ever-closer economic ties have helped Germany.

Chancellor of Germany Angela Merkel (L) gives a speech next to Chinese Premier Li Keqiang during the German-Chinese Dialogue Forum at the Great Hall of the People in Beijing on Sept. 6, 2019. (Andrea Verdelli/AFP/Getty Images)

In September, Chancellor Angela Merkel completed her 13th trip to China in 14 years.

Some industrialists say politicians who looked past human rights abuses in China in the hope trade would turn the Asian country into a Western-style state with an open economy and equal market access were deluded.

“That turned out to be wishful thinking,” said the Federation of German Industrys (BDI) Stefan Mair, a leading advocate for a more pragmatic German policy towards China.

Growth Downgrades

When the Berlin Wall fell in 1989, Sino-German trade was tiny. As Beijing embraced globalization, Chinas share of German exports soared from 0.6 percent in 1990 to 7.1 percent last year. In 2016, China overtook the United States to become Germanys biggest trading partner, and it still is.

Over the years, the relationship helped Germany shake off its 1990s reputation as “the sick man of Europe” and recover from the global financial crisis much faster than others.

Carmakers BMW and Volkswagen, industrial giants such as Siemens and Germanys “Mittelstand,” the smaller companies that form the backbone of the economy, have all benefited.

Since the 2008-09 financial crisis, German exports to China have grown every year except 2015—and last fell prior to that in 1997—hitting a record 93 billion euros in 2018. But even before Trumps dispute with China, growth had started to recede, from 13.3 percent in 2017 to 8 percent in 2018 to 2.7 percent in the first nine months of 2019, according to official German data.

Home in on the recent months and the trend appears starker.

Chinese container ship “Cosco Shipping Aries” is unloaded at a loading terminal in the port of Hamburg Germany July 27, 2018. (Fabian Bimmer/Reuters)

Chinese customs data shows imports from Germany fell 3.6 percent in August from the same month last year and 9.2 percent in September. Cumulatively, the Chinese data shows imports from Germany fell 2 percent during the first nine months of 2019.

The International Monetary Fund downgraded its growth forecast for Germanys economy last month to 0.5 percent in 2019 and 1.2 percent in 2020, saying in its World Economic Outlook that weaker Chinese demand was one factor behind a broader slowdown in industrial output, along with the fallout from trade tensions.

The Association of German Chambers of Industry and Commerce (DIHK) also cited the Sino-U.S. dispute and the broader cooling of Chinas economy as factors behind its prediRead More – Source

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