GDP data may confirm Germany in recession for first time since 2013

For three decades, China’s burgeoning demand for German cars, machines and engineering tools has been a steady engine of growth for Europe’s largest economy, gratefully championed by successive governments in Berlin. But the engine is starting to splutter.

The global slowdown is not helping at a challenging time for Germany. Its economy contracted 0.1 per cent 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.

China’s economy is slowing, Donald Trump’s “America First” policies are hurting global trade and China’s factories are becoming rivals to the German giants that once supplied them.

While German trade with China is only a small part of the country’s 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 China’s slowdown and Sino-US 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.

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 Industry’s (BDI) Stefan Mair, a leading advocate for a more pragmatic German policy towards China.

When the Berlin Wall fell in 1989, Sino-German trade was tiny. As Beijing embraced globalisation, China’s share of German exports soared from 0.6 per cent in 1990 to 7.1 per cent last year. In 2016, China overtook the United States to become Germany’s 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 Germany’s “Mittelstand”, the smaller companies that form the backbone of the economy, have all benefited.

Reuters