2012 will see the 40th anniversary since Sino-German established diplomatic relations. At this historic moment, it is mean- ingful to analyze the status of German foreign trade and Sino-German economic and trade relationship, to further improve bilateral trade, and then boost the communication and cooperation in politics, culture, science and technology, etc. Germany’s a highly developed country in Europe, with top-ranked economic strength and important role in the European Union. Therefore, it has very important strategic significance for China to strengthen the economic and trade contacts with Germany.
I. Status quo of German foreign trade
Germany is one the seven western countries who are highly dependent on foreign trade, with nearly one third of the employees in this country rely on exports. Since 1952 when Germany got rid of a three-year trade deficit, it has had trade surpluses for long, with surplus up from 706 million Deutschmarks in 1952 to 112.619 billion Deutschmarks in 1986. Since then, Germany has had an economy dependent on trade, and been one of the most powerful trade countries and regions in the world.
1. General situation of German trade
As shown in table 1 and figure 1, from 1990 to 2010, Germany had a continuously increasing foreign trade volume, which can be divided into three periods: (1) From 1990 to 1994, the slow growing period. Gross trade value increased from 756.3 billion USD in 1990 to 807.7 billion USD in 1994. (2) From 1995 to 2001, halt- ing period. During this period, the total trade value maintained at about 1 trillion USD, including 550 billion USD of exports and about 470 billion USD of imports. In 1998, foreign trade value topped 1 trillion USD for the first time. (3) From 2002 to 2008, high-speed developing period. During this period, Germany had a gross trade value jumping from 1100.9 billion USD in 2002 to 2620.6 billion USD in 2008, up by 1.5 times or so in 8 years. However, it took almost 15 years for Germany to double the gross trade value last time. During this period, German foreign trade value exceeded 2 trillion USD for the first time in 2006. In the same year, export value of Germany exceeded 1 trillion USD for the first time. (4) Influenced by the global economic crisis, 2009 witnessed downturn in German foreign trade,

which bottomed up in 2010. According to Eurostat, in 2009 Germany had an import and export trade value totaled 2067.34 billion USD, down by 21.6% from 2008. In 2010, Germany had an import and export value totaled 2317.810 billion USD, up by 13.2% from a year ago, including exports of 1261.047 billion USD, up by 12.5%; and imports of 1056.763 billion USD, up by 14.1%. Trade surplus in 2010 was 204.284 billion USD, up by 5.0%.
2. German foreign trade balance
In the past 20 years, Germany not only maintained a continuously growing gross foreign trade value, but also surpluses in trade balance. As shown in Table 2, from 1991 to 2009, the trade surplus of Germany ranged from 12.9 billion USD in 1991 to 265.9 billion USD in 2007. It is worth noting that, entering 21st Century, German trade surplus topped 100 billion USD for the first time in 2002, and also 200 billion USD in 2006.
3. Merchandise structure of German foreign trade
Industry is the major backbone for German economy, and plays a vital role to German economic development. Industrial output value takes 35% of the GDP, and industry involves about 40% of the labor force. Iron and steel, mining, precision instrument and optical instrument, aerospace, textiles and clothing, food, shipbuilding industry and so on are important industrial sectors. Automobile, machinery manufacturing, electrical and electronic, chemical are the four pillar industries in Germany. In recent years, three industries including renewable resources, nanotechnology and environmental protection have had fast development, and become new competitive industries.
Mechanical and electronic products, transportation equipments and chemical products are important exports for Germany, and the export value in 2009 were 416.53 billion USD(28.0%), 278.75 billion USD (18.0%) and 154.37 billion USD (12.7%) respectively. Mechanical and electrical products, minerals and transportation equipments are the main imports, and the import value in 2009 were 220.62 billion USD, 116.89 billion USD and 111.12 billion USD respectively. The

above three kinds of merchandises took an accumulated share of 47.8% in gross imports for Germany in 2009.
According to the data from German Federal Statistics Bureau, machinery equipment exports ranked first in 2009, with automobile came second. In 2010, Germany exported 159.04 billion Euros (16.6% of the gross exports) of automobiles and parts, having a year-on-year growth of 29.7%. With an export value of 138.7 billion Euros (14.5%), machinery equipment exports ranked second, up by 11.3% from a year ago. Exports of chemical products came third, with an export value of 96.0 million Euros (9.4%), up by 20.5% from 2009. Meanwhile, 90.2 billion Euros(accounting for 11.2% of the total imports for Germany in 2010) of electrical and optical products, 69.2 billion Euros (8.6%) of automobile and parts, and 63.3 billion Euros (7.8%) of oil and gas products, arrived Germany that year.
4. German foreign trade by regions
While economic globalization progresses quickly, economic collectivization or regionalization develops quickly, and the European Union now is one of the most integrated regional economic entities. Among the EU countries, Germany has the strongest economic power, and also a great influence. To some extent, Germany is the leader in EU. So, like the other EU members, Germany places EU as the major market for foreign trade. By regions, 78.3% of the exports from Germany in 2009 were delivered to OECD members, including 62.4% to the European Union; 73.3% of imports to Germany were from OECD members, including 59.6% from the European Union. This trend continued in 2010, as shown in table 3. During the first nine months of 2010, 76.6% of German exports were to OECD members, including 59.9% to the European Union. Meanwhile, Germany had 71.6% of the imports from the OECD, including 55.6% from the European Union.
The statistics for Jan to Sept 2010 shows that, among the 15 main export markets of Germany, only the United States, China and Russia are not EU members, which accounted for a total share of only 15% of German exports; of the 15 major import sources, only China, the United States, Russia, and Japan are not EU member, and the four countries took a total share of 20.7% in German imports.
II. Sino-German bilateral Trade Analyses
1. General Situation
Since 2000, Sino-German bilateral trade has kept high growth rate. And especially since 2003, the trade value almost renewed the record every year. As shown in table 5, in absolute amount, the value of exports from China to German increased from 9.3 billion USD 77.5 billion USD in 2009, and that of imports from Germany to China up from 10.4 billion USD in 2000 to 51.1 billion USD in 2009, while import and export value grew from 19.7 billion USD in 2000 to 128.6 billion USD in 2009. In 2000, the exports from China to Germany took a share of 4.62% of the gross exports from China, and the ratio increased to 5.90% in 2003, then continuously dropped to 4.34% in 2008, and rose again in 2009 to 5.08%. According to Germany Federal Statistics Bureau, in 2010 Sino-German bilateral trade value reached 130.2 billion Euros (181.6 billion USD), up by 38.5% from a year ago, and China became the largest imports supplier for Germany, and Germany the fifth source for China.
2. Import and Export Merchandise Structure
Germany has great advantages in manufacturing technology-intensive products and technical advantages, while China has advantages in labor force and

processing, so the two countries have foreign trade structures complementary to each other. In recent years, exports from China to Germany mainly are hardware products, textile, home appliances, toys, food, leather, agricultural and animal products and chemical raw materials, while China imports mechanical equipments, precision instruments, automobiles and parts, ships, special steel, petrochemical and related advanced technologies, etc. from Germany. In addition, as German-funded enterprises in China focus on the implementation of global strategies, they manufacture spare parts, or do process and assembly here, therefore intraindustry and intra-product trade plays an important role in Sino-German bilateral trade.
As shown in table 6, mechanical and electrical products, transportation equipments and base metal products are main merchandises from Germany to China, which took an accumulated share of 75.1% of the gross exports from German to China in 2009. The value of the three kinds of products were 22.77 billion USD, 11.52 billion USD and 4.07 billion respectively. Meanwhile, exports from China to Germany mainly consist of mechanical and electrical products, textiles and raw materials, furniture and toys, which accounted for 70.9% of the gross exports from China to Germany. The export value for the three kinds of merchandises was 34.73 billion USD, 11.18 billion USD and 9.06 billion USD respectively in 2009, and the three occupied a share of 15.7%, 24.7% and 34.5% in German import market. According to Chinese Customs, 53.59 billion USD of techintensive mechanical and chemical products with high value-added were imported by China from Germany in 2010, up by 62.0% from a year ago, and accounted for 72.1% of gross imports from Germany to China.
III. Suggestions on further developing of Sino-German bilateral trade
In recent years, both the two countries have rapid growing foreign trade, and Sino-German bilateral trade value also makes new records year by year. However, there is still great poten- tial and both governments should pay attentions to following aspects, for the further development of Sino-German bilateral trade:
1. Complementary Foreign Trade
China is the largest developing country in the world, with rich labor resources and vast domestic market, but lack of funds, technology and managerial experiences. Germany is one of the most developed countries, with abundant capital and advanced technologies, but high wage costs that place Germany a relative weak position to other western countries. If we combine advanced technologies and lower wage costs, we would not only reduce the production costs, but also be possible to give play to the advantages in labor resources and lower production costs. In fact, Germany is moving some industries to China during its industrial upgrade, which boosts the industrialization of China, brings more positions and wins fat profits and a new emerging market for themselves. So, we see a new cooperation mode between developing and developed countries pioneered by Sino-German economic and trade cooperation, meaning mutually beneficial and win-win cooperation. Judging from this, the two countries should strengthen investments in the other, integrate the competitive resources, and promote foreign trade through investments, in order to drive the economic development of both countries.
2. Strengthen International Exchanges
Political cooperation is the foundation for economic cooperation. Otherwise, different opinions on political problems will affect the economic and trade relations between two countries or regions, causing temporary reduction or even discontinuity of bilateral trade contacts. Since 1972 when China and Germany established diplomatic relations, the two countries has had stable economic and trade relations for nearly 40 years, though there are differences in social and political values. The only way to eliminate these differences is by focusing on common interests and cooperative fields, such as climate change, international security, and effective use of resources, etc. Media, think-tanks

and other aspects of both countries should improve communication and promote understanding, to cease misunderstanding, misjudgment, stereotype and prejudice. Good political cooperation is the guarantee for acceleration of economic cooperation.
3. Further Increase Bilateral Investments
At present, the international division of labor has changed, with traditional inter-industrial and intra-industrial mode being replaced by intra-product and value chain mode, and transnational companies, especially those large ones, can embody international economy. Those multinational companies carry out global strategies, and optimize the allocation of resources in the world. A country or a region who wants to get a better position in world’s economic structure has to adapt to global economic developing trend. As to the fact that EU members attract most attentions, Germany should increase investments in China, in particular those large transnational corporations should invest in China, to further improve Sino-German bilateral trade. A survey of thousands of German-funded companies shows that more than 90% respondents intend to expand investments in mainland China.
Meanwhile, Chinese enterprises should go out and invest in Germany, to deepen and smooth the cooperation between the two countries. In history, trade, transportation, banking services and so on usually attract more Chinese investors, but machinery manufacturing industry witnessed more M&A deals (focusing on machine tool manufacturing) from Chinese, and fields like communication services, new energy and environmental protection are attracting more and more attentions. Now Chinese enterprises are urgent to enter mechanical manufacturing, chemical pharmacy, information technology and other dynamic industries in Germany, as an increasing number of Chinese enterprises have realize the content of high quality and high technology behind “Made in German” label. They wants to integrate the advantages in talents, technology and infrastructure resources in Germany, to get rid of the old business mode of low cost and low value-added, improve management and technical levels, establish brands in Europe, and have greater commercial successes.
Wei Hao:
Doctor of economics, International Economics and Trade, School of Economics and Business Administration, Beijing Normal University
Cheng Cheng:
Postgraduate, International Economics and Trade, School of Economics and Business Administration, Beijing Normal University