Germany has a welcoming attitude towards foreign direct investment (FDI). The German market is open for investment in practically all industry sectors. German law makes no distinction between Germans and foreign nationals regarding investments or the establishment of companies. The legal framework for FDI in Germany favors the principle of freedom of foreign trade and payment. Germany has secured its reputation as a leading investment location worldwide. Moving up to fifth place overall and first in Europe, Germany’s attractiveness as a business location was recognized in a survey of top managers worldwide. Germany has stable its economic policy and has strong management of the economic crisis, foreign investors rated Germany five spots higher. Germany’s strong position was in large part due to its ranking amongst European companies. Along with its relative economic stability, Germany is also the largest domestic market within Europe, creating a large and stable customer base for investors. As a buffer against risk, companies are also currently favoring near-shore investments, according to the study. Germany’s economy relies on a stable industrial base and diverse industrial composition. One reason for Germany’s rise in this year’s rankings is its lack of dependence on the financial sector, which caused other countries to drop significantly. Despite several reduced or postponed investment projects, Germany remains attractive to investors. Every year more and more companies discover Germany as a secure and rewarding investment location. In the last five years, Germany's FDI stocks increased by a total of 47% to reach approximately EUR 503 billion in 2009. More than 45,000 foreign companies are already operating in Germany, employing around three million people.
Since the beginning of the 1990s, the German economy’s international capital links have increased sharply. While German outward FDI stocks have risen sharply, inward FDI has also gone up markedly in this period. Against the backdrop of comparatively subdued investment activity in recent years and employment problems in Germany, this raises the question of what impact outward FDI by German firms will have on Germany. The empirical studies presented here come to the conclusion that outward FDI by German enterprises will not have a detrimental effect on investment in Germany over the long term. In macroeconomic terms, the increase in employment at foreign subsidiaries does not mean a loss of jobs in Germany, either. It would appear that the increased foreign presence has made the German economy more competitive overall. Finally, it is evident that the high level of German FDI in the new EU member states has resulted in changes in trade relations with the old EU member states.
According to official Bundesbank (German Central Bank) statistics, 77% of all FDI stocks in Germany originate from within the EU-27, with a further 9% stemming from the remaining European non-EU countries. Investments from outside the EU continue to grow. North America accounts for 8% of FDI stock, while Asia holds a five percent share. Especially Asian countries increased their FDI stocks in Germany in recent years. Both China and India have recorded growth rates of around 100 percent since 2006. The American Chamber of Commerce highlights the positive regard in which the German business environment is held by US companies. Invited to indicate their main medium-term investment focus within the EU, 60% of participating American companies named Germany as their first choice – followed by Eastern Europe (28%), and the UK (18%) respectively.
The dominance of the industrial countries which account for 90% of German FDI even more discernible if one looks at FD stocks held by foreigners in Germany: a total 97% of investment in Germany come from this group of countries, with the partner countries of the EU-15 (70%) and North America...