GERMANY
The Bundesbank reports some shifting trends in outgoing and incoming German direct investment in their September monthly report. Specifically, they note higher direct investment into the US, slower new direct investment into China (some capital has even been withdrawn form the country), and limited recent success of Germany attracting foreign investment itself.
- Subdued incoming foreign direct investment into Germany i.e. lower fixed capital formation in the country would contribute to the ongoing unfavourable labour productivity developments in the country.
- Lower direct investment into China does not come as a surprise amid ongoing geopolitical tensions (for example, German bilateral trade with China is also on a broader downtrend since 2022). "The fact that there are fewer Chinese subsidiaries [of German companies] since 2017 is an indication that China may have lost some of its attractiveness as a destination for greenfield investment by German enterprises.", Bundesbank adds.
- Some of this investment appears to have shifted to the US, instead - in particular, this applies for energy-intensive economic sectors, which have also seen a pronounced drop in production levels in Germany starting 2022.
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