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For German Exporters, Way Out of the Crisis is via Asia

27/08/09August 27, 2009

Asian economies have not escaped the global crisis, and those countries which export a lot to the United States have in fact been severely hit. But now, with major economies such as China and India returning to high growth rates, they are playing an important role in reviving global trade. According to the latest figures, Germany’s exports were up by seven percent in June from May, the biggest rise in three years. It wouldn’t have happened but for Asia, experts say.

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German exporters rely more and more on Asia's booming markets
German exporters rely more and more on Asia's booming marketsImage: picture-alliance/dpa

So far, Asia accounts for only seven to nine percent of Germany’s foreign trade. But, "Asia plays a crucial role," says Prof. Henning Klodt, of the renowned Kiel Institute for the World Economy. "Not necessarily because of the absolute figures, but mainly because of the dynamics. After seeing dramatic losses on all of Germany’s export markets of late, now first signs of hope are emerging particularly from the Asian markets. So apparently, the way out of the crisis will be via Asia this time."

China compensates for losses in US

Because of their global presence, German exporters have the advantage of not being dependent on one market alone. And so right now, Asian demand is providing a big relief for German industry. Jens Nagel from the Federation of German Wholesale and Foreign Trade in Berlin explains, "for instance, trans-atlantic trade is suffering from the high exchange rate of the euro against the dollar these days. But these losses are being more than compensated by the growth in trade with China."

China is by far the biggest customer for German products in Asia-Pacific. It buys 40 percent of Germany’s exports to the region. And whilst at present, China alone cannot revive German industry, its importance is growing rapidly.

"At present China still accounts for a relatively small share of German foreign trade with little more than 3 percent of our exports, " says Nagel. "But it’s a key market of the future with enormous, two-digit growth rates – which will continue for many more years, we are absolutely convinced. And with this China is set to become the growth engine for Germany’s foreign trade."

No longer export champion?

Germany might also lose the title of the world’s largest exporter, which it has held since 2003, to China this year. According to the latest WTO figures, China’s exports exceeded Germany’s in the first half of 2009. Economist Klodt says Germany should not be too concerned about this largely symbolic change.

"China is growing rapidly, and Germany rather moderately. So there is no question that at some point China will become more important than Germany on world markets," he argues. "But this is not a race with a trophy for the winner, leaving the runner-up empty-handed. It simply is a shift of power towards Asia, from the old industrialized countries to the new emerging markets."

Whoever ends up as global export champion at the end of the year, German industry will still be very grateful to China.

Author: Thomas Bärthlein
Editor: Grahame Lucas