German firms boost China investment by a third as US outlays slump
German companies raised investment in China by a third in the first half of 2026 while cutting US investment by nearly two-thirds, an IW study shows.
German companies increased their investment in China by a third in the first half of 2026, even as their spending in the United States fell sharply, according to a study by the German Economic Institute (IW).
The analysis of Bundesbank data shows that German firms invested €5.6 billion ($6.50 billion) more in China than in the same period a year earlier. That level was in line with the average half-year investment between 2020 and 2025.
By contrast, investment in the United States dropped by nearly two-thirds to around €4.3 billion. The decline comes amid trade tensions and US tariffs imposed by President Donald Trump.
IW economist Juergen Matthes said German companies had little choice but to keep investing in China, describing the country as both an important sales market and a "gym" where firms can build up their competitive muscle.
Matthes said state subsidies and an undervalued yuan made production in China artificially cheap, encouraging German companies to expand locally to compete with Chinese rivals globally.
"For Germany, this means production and jobs are shifting to China," Matthes said. "The EU should put a stop to this unfair game and impose countervailing tariffs on Chinese imports."