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Can Western Economies Actually Decouple from China? In Your Dreams!

Aug. 21, 2022 (EIRNS)—Despite all the kamikaze rhetoric emanating from London and Washington, the ability of the Western economies to actually decouple from China—and survive—is close to zero. The case of Germany is exemplary as was begrudgingly admitted in a new study issued by the private German Economic Institute (IW), which reported that the German economy became more dependent on China in the first half of 2022 than it had been in the past.

“The German economy is much more dependent on China than the other way round,” said Jürgen Matthes, who authored the study, which also called to reverse that trend. “Yet despite these dangers and problems, economic interdependencies with China have been moving in the wrong direction at a tremendous pace in the first half of 2022.”

German investment in China hit about €10 billion in the first half of 2022, far exceeding the previous high of €6.2 billion. “The Chinese sales market and the profits beckoning there in the short term simply seem too attractive,” Matthes said.

On the trade front, China accounted for 12.4% of all German imports in the first half of 2022, up from 3.4% in 2000. The year-on-year rise in value terms was a dramatic 45.7%, according to the IW.

And how is Germany faring onboard the trans-Atlantic financial Titanic? Bundesbank President Joachim Nagel told the Rheinische Post on Aug. 20 that Germany is about to see its highest inflation in decades, and that “a recession appears likely next winter,” and warned, “An inflation rate of even 10% is possible in the autumn months. Double-digit inflation rates were last measured in Germany more than 70 years ago,” he said darkly. Every German knows what followed the 1921-23 Weimar hyperinflation.

But 10% may be a low forecast, the way things are going. The Financial Times reported that Germany’s producer price index (the prices charged by industrial producers) rose by 37.2% in 2022, compared to the same month a year earlier. The German Federal Statistical Office called it the highest increase ever.

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