China Economy: Could Slowdown Impact Germany, Europe In 2019?

As China's economy stalls due to its aging population, rising wages and trade war with the Trump administration, Germany and Europe as a whole could be negatively affected.

The European Commission on Tuesday cut its growth forecast for Germany to 0.5 percent for this year, making it the European Union's (EU) second slowest growing economy, behind Italy. As the E.U.'s economic powerhouse, a slower German economy could cause negative reverberations across the European economic landscape.

The German economy, which heavily relies on its exports of vehicles, machinery, chemical goods and other products, is known in particular abroad for its famous car brands Audi, BMW and Porsche. Yet the German Federal Statistic Office revealed last month that seasonally adjusted exports had dropped by 1.3 percent.

One major cause of Germany's dimmer economic prospects could be China.

Germany's high-quality cars and well-made machinery have been a major export to China, yet China's economy is beginning to struggle due to the tariffs placed on it by the U.S. under President Trump and also due to its high amount of debt.

In addition, wages are rising in China, which means that foreign companies are less likely to manufacture goods there as the cost of labor rises. The World Bank reported that in 2018 the Chinese economy only grew 6.5 percent, the lowest rate since 1990. China's economic slowdown could mean less demand for German goods.

But news is not all bad for Germany and the Eurozone, as the European Commission said on Tuesday that "more Europeans are now in work more than ever and employment growth is expected to continue, albeit at a slower pace."

The Commission forecasts that the E.U. economies altogether will grow 1.4 percent this year and 1.6 percent next year. Europe will have to rely more on "domestic activity," which means that E.U. countries such as Germany and Italy will have to continue to have strong trade relations between each other while concerns mount over a slower global economy as a whole.