Chart of the Week: Germany export growth to China

On the top of that, Germany is also facing a structural challenge linked to misallocation of investment that will hurt growth in coming years. Looking at the global level, the country is very well-ranked in terms of R&D investment. The problem is that a big chunk of it is attributable to the struggling automotive sector (which represents roughly more than 50% of total R&D investment over the recent years vs 6% in the United States). As a result, the ICT sector suffers from chronic underinvestment which negatively impacts potential growth and leadership in key technological innovation. In our view, the massive imbalance in R&D investment along with the high economic dependence on the automotive sector (around 15% of the country’s GDP) certainly constitute the most important economic challenge for Germany. So far, it has been barely addressed by policymakers.