“It’s as if the German economy is paralyzed,” said Timo Wollmerhäuser, an economist at the Ifo Institute in Munich, one of Germany’s leading economic think tanks. “The atmosphere is bad and insecurity is great. »
In this context, Scholz’s trip to China contains more than a hint of despair. Even if China opened its doors to more foreign competition and ended its price-dumping practices in Europe, the Chinese economy would no longer be the growth engine it once was. A real estate crisis and overcapacity in key sectors have left China’s economy on the ropes.
What is more worrying for Germany is that China no longer needs the machinery and other high-tech capital goods that have driven the growth of German exports to that country in recent decades. This is not just due to lower demand; Chinese companies have largely caught up with their German competitors, making the country less dependent on imports.
These trends are leading some politicians, particularly among China-critical Greens, to argue that Germany should extricate itself from China. According to a recent study by the Kiel Institute, a major break with China would cause the German economy to contract by around 5%, a figure comparable to the economic slowdown Germany experienced following the crisis financial crisis of 2008 or the Covid-19 pandemic. In other words, it would be brutal and not fatal.
“Our country has enough resilience to handle even such an extreme scenario,” said Schularick from Kiel.
However, braving this storm is easier said than done. Moreover, Scholz cannot afford a further erosion of trade ties between Germany and China, at a time when his country’s economy is already struggling.
Politices
