Fewer German Companies Dependent on China

Fewer companies in Germany say they are dependent on intermediate products from China. This is the finding of an ifo Institute survey, according to which 37 percent of all manufacturing companies in Germany are currently dependent on important intermediate products from China. In February 2022, immediately before the start of the war in Ukraine, the figure was 46 percent. “At the same time, we see that fewer companies are looking to reduce their imports from China in the future,” says Lisandra Flach, Director of the ifo Center for International Economics. Two years ago, nearly half of manufacturers were still planning to do so. In the latest survey, this proportion fell to 38 percent.

Manufacturers of data processing equipment (65 percent), electrical equipment manufacturers (60 percent), and companies in the automotive industry (59 percent) were particularly likely to state that they were dependent on important intermediate products from China. “Compared to the 2022 survey, the proportion of companies sourcing important intermediate products from China decreased in almost all industrial sectors,” says Andreas Baur, coauthor of the study. The decline was particularly sharp among furniture manufacturers (down 29 percentage points) and in the automotive industry (down 17 percentage points). The only exception is the chemical industry: in the latest survey, 46 percent of all chemical companies stated that they were dependent on inputs from China. Compared to 2022, this was an increase of 5 percentage points.

The decline is mainly due to the fact that fewer companies are dependent on inputs from Chinese manufacturers. “In contrast, the proportion of companies that source intermediate products from their own production facilities in China is practically unchanged,” Baur says. German companies that manufacture in China themselves are also significantly less likely to plan on reducing their imports from China (31 percent) than are companies without their own production sites in China (41 percent). The reasons for companies to import less from China are fundamental efforts to diversify and growing political uncertainty.

Questions can be directed to: Andreas Baur, 0049 89 9224 1280, Bauer@ifo.de