Germany is leading the race to harness Chinese growth and is now beginning to export more to China than the United States. China could become the largest export market by 2015. The theme for this decade is that millions of people in China want to live like Europeans. The “Made in Germany” brand is going to be very strong in China.
The German government will elevate dealing with China to merit full cabinet-level consultations – a status it has given to only seven other countries.
The risk for Germany is that it becomes overly reliant on growth in China, which is trying to cool its economy by raising interest rates. Exploding prices and an uneven distribution of wealth in the country make for a dangerous cocktail. China is also increasingly able to produce its own industrial machinery, raising the possibility that German firms could lose market share. The segments of production where China is making a lot of progress are precisely the segments where German performance has been very strong.