German companies increased investment in China by a third in the first half of 2026, while investment in the US fell by nearly two-thirds, a German Economic Institute study based on Bundesbank data shows.
German companies sharply increased their investment in China during the first half of 2026 even as spending in the United States plunged, highlighting a growing shift in corporate investment amid intensifying trade tensions and US tariffs.
Investment by German firms in China rose by a third in the January-June period compared with the same period last year, according to a study by the German Economic Institute (IW), based on data from the German central bank, the Bundesbank.
German companies invested about €5.6 billion ($6.50 billion) more in China during the first half of the year. The level was broadly in line with the average half-year investment recorded between 2020 and 2025.
By contrast, German investment in the United States fell by nearly two-thirds to around €4.3 billion, the study found, as companies faced heightened trade tensions and tariffs imposed by US President Donald Trump.
IW economist Juergen Matthes said German companies had limited room to reduce their presence in China because the country remains both a major sales market and an important production base.
“German companies have little choice but to continue investing in China,” Matthes said, describing China as a “gym” where companies can strengthen their competitive capabilities.
More from BusinessHe argued that Chinese state subsidies and an undervalued yuan were making production in the country artificially cheap, encouraging German companies to expand their local operations in order to compete with Chinese rivals in international markets.
“For Germany, this means production and jobs are shifting to China,” Matthes said.
Matthes called on the European Union to respond to what he described as an unfair competitive environment, including through countervailing tariffs on Chinese imports.
The contrasting investment trends come as German companies navigate a more uncertain global trade environment, with China remaining a crucial market while US trade policy has become more protectionist.
The data suggest that, despite growing concerns in Germany and across Europe about economic dependence on China, German companies continue to see significant commercial and competitive incentives for maintaining and expanding their operations there.
At the same time, the sharp decline in US investment underscores the impact that tariffs and trade uncertainty can have on corporate investment decisions.
