A new report by the Financial Times (FT) highlighted that German exports to China had dropped by a double-digit reaching 11.3% and discussed the causes and concerns of this drop. 

The FT report assessed the drop in German exports to China in the first four months of 2023, vis-a-vis numbers from exports of the first four months of 2022. 

Several companies such as Volkswagen, Bosch, and BASF have reported losing market shares in China, chemical producers and other energy-intensive companies are reeling from high power prices, and the euro’s appreciation against the dollar has made German goods less competitive.

The report cited Carsten Brzeski, global head of macro research at Dutch bank ING, who said “Germany is now considered to be allied with the US, which has led to more — explicit or implicit — discouraging of purchases of German products.”

Significantly, the drop in exports has been among several economic indicators pointing toward Germany's manufacturing sector's sharp decline in 2023, the report claimed. FT explained that the decline included "lower factory output, plummeting demand, and a shrinking backlog of orders, which could slow growth in the EU’s largest economy."

While Germany is faced with declining exports to Beijing, a number of European countries have witnessed an increase in shipments toward China in 2023. According to Eurostat, exports from the 27 EU countries to China increased 2.9% year over year in the first quarter.

Some experts anticipated that as a result of the decline, the federal statistics office will lower its initial estimate of first-quarter gross domestic product from zero growth to a contraction later on Thursday.

German retail sector to contract amid growing economic challenges

Earlier in May, Handlesverband Deutschland, the national retail association of Germany, announced that Germany's retail sector will contract as approximately 9,000 shops and small businesses are expected to shut down throughout 2023.

It is worth noting that figures from 2021 underscore that Germany's retail sector accounts for 17% of its Gross Domestic Product (GDP).

In a statement, the head of Handlesverband Deutschland, Alexander von Preen, said "In view of the figures from recent years, all the alarm bells must be ringing in all inner cities and in politics. Because without successful retail, the city centers have hardly any prospects for the future."

Moreover, the expert noted that “If trade dies, the city dies. Trade is not only the supplier of the population, but is also characterized by its diverse social commitment on site and is also the caretaker of the cultural area of the inner city. These achievements are in danger."

The situation has been described as being far worse in Berlin by the head of the Handlesverband Berlin, Nils Busch-Petersen, who said, "The situation is complicated because the retail industry is still suffering, beginning with the (February 2022) war in Ukraine. Even all the other branches have problems because the behavior of the customer changed totally."

Busch-Petersen noted that about 2,500 - 3,000 businesses have closed before he explained that the government has a misconception regarding customer behavior.

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