OddsFrontGerman companies raise China investment by a third as US outlays fall sharply
New Bundesbank-based research shows German capital moving in opposite directions across the world’s two largest economies, complicating Europe’s effort to reduce strategic dependence on Beijing.
Capital flows diverge
German companies increased investment in China by one-third during the first half of 2026 while cutting investment in the United States by nearly two-thirds, according to German Economic Institute research based on Bundesbank data and reported by Reuters on September 13. The study put the additional investment directed to China at €5.6 billion compared with the same period in 2025. Investment in the United States fell to about €4.3 billion.
The China figure was broadly consistent with German companies’ average half-year investment between 2020 and 2025. That matters because it suggests corporate exposure has not materially retreated despite years of debate about reducing dependence on China. The institute assessed that China remains both a large sales market and an essential competitive base for German manufacturers trying to match rapidly advancing Chinese rivals.
Europe’s de-risking dilemma
The investment pattern sits uneasily beside the European Union’s official policy. The European Commission said in May that its approach remained de-risking rather than economic separation, but also judged the existing trade and investment relationship with China unsustainable. Brussels increasingly treats commercial dependence, industrial capacity and security as connected questions, while still arguing that engagement with Beijing must continue.
The institute linked the attraction of Chinese production to state support and an undervalued currency, which it said allow companies operating there to produce more cheaply. Its concern is that German groups may shift production and employment to China in order to compete globally. The researchers consequently advocated European countervailing measures against subsidised Chinese imports, moving the debate from corporate strategy toward trade enforcement.
Why US investment weakened
Reuters attributed the drop in American outlays to trade friction and tariffs imposed by President Donald Trump. A six-month comparison cannot by itself establish a permanent reallocation of German capital, and investment data can be affected by a small number of large transactions. Even so, simultaneous movement toward China and away from the United States gives policymakers a concrete measure of how geopolitical pressure is influencing boardroom decisions.
The next test is whether the divergence persists in the second half of 2026. European officials will be watching for evidence that German companies are building new Chinese capacity rather than merely maintaining existing operations, and whether US policy changes restore confidence. Brussels must meanwhile decide how to discourage risky concentration without forcing companies out of a market they consider indispensable.