German firms raise China investment by a third and cut US spending 65 percent

German companies increased direct investment in China by about a third in the first half of 2026 and cut investment in the United States by 65 percent, the German Economic Institute (IW) said on 14 September, citing Bundesbank data.

The China figure was about 5.6 billion euros, or $6.5 billion, in the first six months, a third higher than the same period a year earlier. The U.S. figure was not published as a raw total in the Xinhua summary of the IW note, only as a 65 percent drop. The direction is the story: German capital that had been pointed at the United States after several years of de-risking talk moved, in this half, toward China and away from America.

IW is a Cologne institute funded by German business associations. It is not a ministry. The underlying series is the Bundesbank's direct-investment account. That account records equity and other capital that German firms put into affiliates abroad, not portfolio flows into stocks.

What the half-year does not prove

A six-month print can be dominated by one or two large deals. A carmaker topping up a Chinese plant, or a chemicals firm delaying a U.S. project, can swing the percentage. The 65 percent drop in U.S. investment is large enough that it is unlikely to be a rounding error, but it may still be a timing effect if a big 2025 transaction has no 2026 counterpart.

The China rise of 5.6 billion euros is easier to place. German manufacturers have spent a decade building capacity inside China to serve the Chinese market and to stay close to suppliers. Political language in Berlin has favoured diversification. The chequebook in the first half of 2026 did not follow that language.

The United States remains a larger stock of German FDI than China. A single weak half does not reverse that stock. It does change the flow. Flows are what boards approve this year. Stocks are what previous boards approved.

Why the timing matters

German firms have faced higher energy costs at home, tariffs and subsidy races in the United States, and a Chinese market that still buys machines, cars and chemicals in volume. The IW comparison puts those pressures on one page. If U.S. projects are being postponed because of tariff risk or because subsidy rules are harder to claim, the capital has to go somewhere. In this half it went to China.

That is awkward for a government that has told voters it is reducing dependence on the Chinese market. It is consistent with the behaviour of firms that already earn a large share of profit in China and that treat a U.S. plant as a hedge rather than a replacement.

Sector mix is the missing column in the first-day summaries. German FDI into China in recent years has been heavy in autos, chemicals and electrical equipment. Those are the same industries that have complained loudest about U.S. tariff risk and about Chinese overcapacity. If the 5.6 billion euros is concentrated in existing affiliates rather than in new plants, it is sustaining a footprint, not opening a new one. The Bundesbank tables that IW used will show that split when the full-year figures are published. The half-year flash does not.

A 65 percent drop on the U.S. side can reflect a paused battery plant, a delayed semiconductor module or a simple base effect after a large 2025 recapitalisation. Without the deal list, readers should not treat the percentage as a boycott. They should treat it as a pause large enough to need an explanation from the firms that usually file those projects.

The next Bundesbank release will show whether the 65 percent drop was a trough or a new slope. The next IW note will show whether the 5.6 billion euros into China repeats in the second half. Until those prints arrive, the documented fact is the first-half split: up a third in China, down 65 percent in the United States, according to the institute that read the central bank's numbers on 14 September.

For German works councils the relevant question is which of those two destinations is hiring. For Berlin the relevant question is whether de-risking describes policy or describes capital. The IW table, as carried on Monday, says the capital did not de-risk in the first six months of 2026.