What effects would a decoupling from China have on the German economy?

What effects would a decoupling from China have on the German economy?

According to a report by www.faz.net,

A study by the Kiel Institute for the World Economy shows that a decoupling from China would mean a serious blow to the German economy. If trade with China were abruptly stopped, the German economy would collapse by around 5 percent. This shows how strong China's economic influence is for Germany and how difficult it could be to compensate for it. In the medium to long term, this loss would level off at around 1.5 percent annually, while high initial costs could be avoided if trade relations were gradually reduced.

It is clear that a decoupling from China would have a negative impact on the German economy. The existing trade connections with China could not be compensated immediately, which would lead to high costs in the short term. This highlights Germany's dependence on China and the difficulties in finding alternative trading partners who could compensate for the loss.

The political tensions between China and the EU also have an impact on economic cooperation. The EU does not want to accept unfair competition and criticizes China's threats and its close partnership with Russia. This shows that the relationship between the EU and China is complex and could pose further economic challenges.

The federal government has presented a strategy that aims at de-risking, i.e. greater independence of the economy instead of decoupling. German companies are being asked to reduce their risks in their China business and not to focus too much on one large market. This shows that Germany is trying to protect itself from the geopolitical risks that come with a strong dependence on China.

Overall, the study shows that dependence on China poses both economic and political challenges for Germany. Gradually diversifying trade relations and reducing dependence on China could help minimize the impact of a possible decoupling in the long term.