German firms invest €5.6 billion in China as U.S. investment falls to €4.3 billion
A German Economic Institute study of Bundesbank data, seen by Reuters on Sunday, September 13, 2026, found first-half China outlays of €5.6 billion, up one-third, as U.S. investment fell to about €4.3 billion.
German companies invested €5.6 billion ($6.50 billion) in China in the first half of 2026, one-third more than a year earlier, according to a German Economic Institute analysis of Bundesbank figures seen by Reuters on Sunday. The amount matched the average half-year level from 2020 through 2025. Direct investment in the United States fell by nearly two-thirds, to around €4.3 billion, the lowest first-half reading since 2023.
The measurement window closed on June 30. The EU-U.S. trade framework that caps U.S. tariffs at 15% on most EU exports, including cars, semiconductors, pharmaceuticals and lumber, entered into force the next day, July 1, the European Commission says. Steel and aluminum derivative tariffs, still as high as 50%, are supposed to come into line with that ceiling by the end of 2026, or Brussels can suspend its own concessions. First-half 2026 does not test the deal. It tests the months of uncertainty that preceded it.
Jürgen Matthes of IW, the Cologne institute behind the study, said German companies “have little choice but to continue investing in China,” describing the country as both a sales market and a “gym” where firms build competitive muscle. State subsidies and an undervalued yuan, he argued, make production there artificially cheap. “For Germany, this means production and jobs are shifting to China.” He said the EU should impose countervailing tariffs on Chinese imports.
The two legs are not one rotation with a single cause. The U.S. drop is a freeze on new equity under tariff uncertainty. The China rise is companies localizing production to sell into, and compete inside, that market. An earlier IW analysis, reported in January, had already found German investment in China running hot in 2025, at more than €7 billion from January through November, up 55.5% from €4.5 billion in each of the two prior years. Sunday’s first-half print sits on that sequence.
The U.S. drop is a freeze on new capital
IW had already published the U.S. figure on August 16. Sunday’s study restates it and sets it against China. Compared with the first half of 2024, the 2026 U.S. figure is down nearly 80%. In the five years before Covid-19, first-half German investment in the United States averaged €15.8 billion, almost four times this year’s pace.
Samina Sultan, the IW researcher who discussed those August figures, did not describe a fire sale of American plants. Companies already operating in the United States, she said, were still reinvesting the profits they earn there, “which suggests that the U.S. remains an attractive market overall.” They were hesitant to commit new capital. When the researchers inspected 2025 flows, direct-investment loans and reinvested earnings were exceptionally high; equity capital in the narrower sense, the balance of new investments and liquidations, stayed below average.
BASF, Volkswagen and Mercedes-Benz
IW did not break the China total down by company or sector. The public capex at BASF, Volkswagen and Mercedes-Benz is the pattern Matthes described: production moving to China to serve China.
BASF inaugurated its Zhanjiang Verbund site in Guangdong on March 26, a project of about €8.7 billion and the group’s third-largest complex after Ludwigshafen and Antwerp. Chief executive Markus Kamieth called it a show of “confidence in the world’s largest chemical market in the long run.” Most of the output is meant for Chinese customers, the company’s local-for-local model.
Volkswagen Group, at Auto China in April, said more than 20 electrified vehicles would reach the Chinese market in 2026, expanding to 50 models by 2030, under an “in China, for China” plan that Ralf Brandstätter, its China chief, said was “now taking to the roads.” Mercedes-Benz chief executive Ola Källenius told the same show the company would “further deepen our localisation in China: by developing and building more vehicles there.”
The U.S. book is not empty. Mercedes-Benz in late March pledged $4 billion by 2030 at its Tuscaloosa County, Alabama, SUV plant, part of a total U.S. investment the company has put at more than $7 billion. A multi-year plant commitment is not a first-half flow, and it does not reverse IW’s €4.3 billion print. It is the distinction Sultan drew: capital already on the ground still gets funded; new bets wait.
Trade still runs through both markets
Investment and trade moved together in direction, not in size. Germany’s Federal Statistical Office reported on August 20 that China was the country’s largest trading partner in the first half, with a goods volume of €125.5 billion, just ahead of the United States at €123.7 billion. German exports to the United States fell 6.1%; imports from China rose 8.8%. Total German exports were €817.8 billion, up 3.9%, and the goods surplus was €105.7 billion, 0.7% below the first half of 2025.
The United States remained a huge sales market even as German firms stopped writing large new investment checks there. China was both the larger bilateral trading partner and, on IW’s figures, the larger first-half investment destination.
A Germany-stock fund, EWG, is built around Siemens, SAP and Allianz; the auto and chemical names most associated with China localization are a thin slice of the fund. A China-stock fund, MCHI, holds Chinese companies, not German factories in China.
The first test of whether July’s 15% ceiling thaws the U.S. freeze is the next run of Bundesbank direct-investment transactions. The Commission’s own calendar puts another marker at year-end, when U.S. steel and aluminum derivative tariffs are supposed to meet the same ceiling.
Frequently asked
Are German firms selling off their U.S. operations?
No: IW's researcher found companies still reinvesting profits earned in the United States, describing it as an attractive market, but hesitant to commit new capital.
Why is investment in China rising?
IW's Matthes says firms have little choice but to keep investing to sell into and compete inside the market, helped by state subsidies and an undervalued yuan.
Does the new EU-U.S. tariff framework explain the U.S. drop?
No: the measurement window closed the day before the framework took effect, so the figures capture the months of uncertainty that preceded it.
Did trade shift the same way as investment?
In direction but not in size: China edged past the United States as Germany's largest trading partner, with German exports to the U.S. down and imports from China up.