Operating in an economy where the foreign trade sector accounts for 88% of the GDP, Germany’s business community is firmly determined to defend its growing export and investment market shares in China and in the rest of a rapidly developing east Asia.

That vitally important part of Germany’s national interest has been recently overshadowed by disagreements within the governing coalition and by Washington’s urging to curtail trade with China – a strange request from an ally doing a soaring half-a-trillion-dollar of American merchandise trades with Beijing in the first eight months of this year.

An apparently taciturn but steely German Chancellor Olaf Scholz will put an end to that next week. He is taking a planeload of German businesspeople to Beijing on November 3-4, 2022.

China remains by far Germany’s largest trade partner. Last year, bilateral trade transactions came in at €246.1 billion, marking an annual increase of 15%, and amounting to one half of Berlin’s total goods trade on Asian markets.

But that’s only part of Germany’s China story: The country’s sharply rising direct investments in China reflect Berlin’s strong commitment to its Beijing ties.

The German Economic Institute (a Cologne-based IW) reports that German companies invested a record-high €10 billion in China during the first half of this year, exceeding the previous half-yearly record of €6.2 billion.

The E.U. complains while Germany books the sales

The Chinese, with their more updated numbers, are also reporting that German direct investments in China rose at an annual rate of 30.3% in the first eight months of this year.

Here are a few examples of the most recent investments in China by some of the largest German companies.

The BASF, Germany’s biggest chemical company in the world, inaugurated last September its first plant in South China's Guangdong Province. The investment outlay is estimated at €10 billion by the time the project is completed over the next 8 years. Beijing exceptionally allowed the BASF to operate the venture as a wholly owned subsidiary.

Volkswagen announced last week that it will invest about €2 billion in a joint venture with China’s Horizon Robotics in automated driving technologies.

Auto parts and high-tech companies Hella and Robert Bosch are investing in China’s electric vehicles production, smart manufacturing, artificial intelligence and semiconductors.

Germany’s state-owned investment and development bank KfW (Kreditanstalt fuer Wiederaufbau) announced earlier this month that it was lending money for the railway project connecting North China’s Tianjin and Beijing’s Daxing International Airport.

Those investment deals show that Scholz has the powerful business community on his side as the corporate sector seeks to limit the damage of E.U.’s sharply rising energy costs and the area’s unstoppable slide toward a long and deep economic recession.

Scholz apparently agrees because he knows that German economy now needs strong exports to offset the weakening domestic demand, and to moderate the country’s unfolding cyclical downturn. That’s where China can offer a way out since German direct investments serve as vectors for export flows of technology, goods and services to huge, and growing, Chinese and east Asian markets.

Don’t forget the COSCO shares

Should investors worry about Germany’s increasing trade and investments in China being at odds with E.U.’s calls for restraint in economic and political dealings with Beijing?

Trade and investment numbers show that Germany’s strong commitment to China’s economy is nothing new. What we see now is a continuation of long-established trends, accelerated by Germany’s pressing energy and labor shortages, and by China’s promising outlook of a steady and sound economic development.

Apart from that, the E.U. calls to virtually “decouple” with China, enthusiastically supported by the Green Party, are extremely unreasonable. That would seriously damage German economy, and it would most probably lead to huge political and economic problems in a country whose social contract rests on the concept of stability.

Scholz will, therefore, politely ignore such policy recommendations and will seek to open more business opportunities for German companies during his forthcoming visit to China.

That, however, does not mean, as irate French commentators keep screaming, that Germany wants to destroy the E.U. That’s an absurd claim. The E.U. takes more than half of German exports and accounts for about two-thirds of Berlin’s net foreign trade income. Germany, in fact, is the main beneficiary of the European single market.

Berlin, therefore, will very much want to keep, and enhance, the E.U.’s format of a perfect customs union, but it will resist precipitous and unrealistic integration measures without further, and very difficult, sovereignty transfers to institutions of a European superstate.

That’s a safe bet because the Germans know that there are not many takers for such root-and-branch administrative and constitutional changes. And that’s why Scholz can continue to smile when E.U. countries from central and eastern Europe insist that Germany should keep down its China business so that they can all “speak to China with one voice.”

For now, Germany’s will be the only E.U. voice heard in China, but Scholz will have to bring to Beijing next week the shares that COSCO Shipping wants in the Port of Hamburg.