German debt spat threatens China trade strategy, UniCredit says

Germany’s fiscal turmoil is jeopardizing efforts to curb reliance on China as a supplier of high-tech components, according to UniCredit economist Andreas Rees.

The Constitutional Court limiting use of off-budget funds may hurt support for the semiconductor industry, Rees — who covers Germany — said Tuesday. The government had earmarked about €12 billion for such aid by 2027, he said. 

“Substantially reducing Germany’s dependence on Chinese and Taiwanese high-tech goods would probably need even more, and not less, money,” he said in an emailed report. “Hence, the debt brake could not only become an obstacle to the hoped-for recovery in 2024 but could also endanger Germany’s longer-term strategic goals.”

Excessive reliance on China for parts is a key longer-term issue for German companies. Rees cited “tentative signs” of progress, with the share of high-tech imports from the nation declining recently as that of European Union countries rose. 

“Nevertheless, substantial geopolitical risks still remain, especially in regard to the rising importance of Taiwan as supplier of semiconductors,” he said. “More efforts by companies and greater support from policymakers are likely to be needed in order to further ‘de-risk’ supply chains.”