Why Germany’s Exports to China Are Shrinking

The Macro Implication for Germany: External Demand Is No Longer a Given

Torsten Sløk, Apollo Global presents a striking chart: 

Germany’s exports to China have declined relative to GDP, while China’s exports to Germany have remained stable relative to GDP.

This is a highly informative asymmetry, and it tells us much more about Germany’s growth model and China’s industrial trajectory than about short-term trade cycles.

It is a one-sided erosion: Germany is losing China as a growth outlet; China is not losing Germany.

This is not primarily about geopolitics or tariffs. The deeper drivers are structural.

Germany’s exports to China have declined relative to GDP (below 2%), while China’s exports to Germany have remained stable relative to GDP, Graph: Torsten Sløk, Apollo Global, Dec 24, 2025.

(a) China no longer needs German capital goods at the margin

China has:

Internalized much of the value chain

Built domestic alternatives in machinery, autos, chemicals, and electronics

Shifted from importing equipment to exporting finished goods

Germany’s traditional export strengths—machine tools, industrial components, premium autos—are exactly where Chinese substitution is strongest.

(b) China’s Demand Model Has Changed

China is:

Investing less in property and heavy industry

Running excess capacity in manufacturing

Facing weak household consumption

That reduces demand for German exports even if political relations were perfect.

The observation that China’s exports to Germany remain stable reflects:

Persistent price competitiveness

Strong presence in consumer goods, electronics, intermediates

Increasing penetration in green tech, EVs, batteries, and machinery

China is no longer just a supplier of low-end goods. It competes directly with German industry in third markets and at home.

It’s an open secret that Germany’s model relied on:

Suppressed domestic demand

Strong foreign absorption

Especially from China after 2008

 

That model is now broken, when:

Exports to China shrink

Domestic demand remains weak

Fiscal policy stays restrictive

 

The result is secular stagnation, not a cyclical slowdown.

This is why Berlin’s “competitiveness” rhetoric misses the point, because 

German policymakers often respond with:

Wage restraint

Cost cutting

Calls for “competitiveness”

 

But Germany is not losing market share because of costs alone. 

It is losing because:

Its trading partner moved up the value chain

The global investment cycle shifted

Germany failed to build domestic demand as a buffer

You cannot export your way out if the importer has become your competitor.

The Strategic Conclusion

Torsten Sløk’s data imply:

Germany’s exposure to China is no longer a growth upside

But China’s exposure to Germany remains commercially important

The adjustment burden lies disproportionately on Germany

 

This reinforces what your earlier observations already suggested:

Germany must rebalance toward domestic demand

Fiscal restraint in this context is economically irrational

The export-led model has hit a structural wall

Bottom Line

This is not “decoupling.” It is asymmetric adjustment. Germany is losing China as a customer; China is not losing Germany as a market.

That asymmetry explains:

Germany’s stagnation

Rising political anxiety

And why continued austerity is so damaging.