How Fast Is the Boat to China?

Earlier analysis of trade within the EU-27 found that newer member states gained a larger share of intra-European exports as market access expanded and trade barriers declined. This follow-up turns outward, examining exports from the EU to China.

Defining the comparison

In 2011, the EU-15 accounted for approximately 95% of EU-27 exports to China. For that reason, the historical analysis focused on the established member countries. Luxembourg, Greece, Portugal and Ireland were omitted from the detailed comparison because their exports to China were relatively small in 1999. The Netherlands was also excluded because its position as a major logistics hub can make recorded trade flows difficult to compare directly with production-based exports elsewhere.

Across the EU-15, the nominal value of exports to China increased by a factor of 6.7 from 1999 to 2011. China’s rapid economic expansion and rising share of world output made this direction of travel unsurprising. The EU nevertheless continued to record a substantial goods trade deficit with China, while exports to China in 2011 remained around half the nominal value of EU-15 exports to the United States.

A widening performance gap

Export growth varied considerably among the ten countries in the detailed comparison. Germany was the clear leader, while Belgium and Spain also recorded growth above the EU-15 average. France, Finland and Sweden expanded their exports to China more slowly than the group average.

Germany’s position was even more pronounced in absolute terms. Its share of EU-15 exports to China rose from 36% in 1999 to 50% in 2011. Over the same period, the nominal value of German exports to China increased from about €7 billion to €64.6 billion. In 2011, German goods exports to China represented 2.5% of German GDP, the highest proportion among the EU-15 countries examined.

Machinery led the expansion

The largest broad category in EU-15 exports to China was machinery and transport equipment under the Standard International Trade Classification. Germany’s share of this category increased from 39% in 1999 to 61% in 2011. Its nominal exports in the category rose from approximately €4.9 billion to €47.7 billion.

This composition matters. Germany was particularly well positioned to supply capital goods during China’s investment-led expansion. Its strength reflected not simply higher export totals, but a close match between its industrial specialisation and the type of demand generated by rapid construction, manufacturing and infrastructure investment.

Conclusion

On the evidence available through 2011, Germany was substantially ahead of most other EU countries in reaching the Chinese market. Its machinery and transport industries benefited strongly from China’s investment boom, while the same concentration left producers of capital goods more vulnerable to a sharp slowdown.

Contemporary observers disagreed over how long China could sustain exceptionally rapid growth. Some institutional analyses argued that continued expansion would become harder without significant economic and political changes. Regardless of that debate, the historical data illustrated a durable principle: market diversification can reduce dependence on one region while creating concentrated exposure to another country, sector or growth model.