The rise of outward direct investments by Chinese multinationals in the German automotive sector, a Global Production Network analysis

In a period of doubt and the rise of mercantile ideals, after the partial devolution of some industrial clusters in the West, it is essential to theorize economic development in a globalized world. To understand the underlying force that interacts in today's global trade, this article analyses the impact of Chinese multinational companies' foreign direct investment on the German automotive market and infers the risks to the German economy. While Chinese investments in Europe have increased over the past decade, their long-term impact has been less developed in the literature and is relatively recent. Indeed, it is an investment from an emerging market with a highly centralized political and economic system, while outward direct investment literature has been more focus on developed capitalist markets. Forty years ago, Porter developed the design of the value chain, the subdivision on value activities of production systems. Thirty years ago, Dunning built the eclectic paradigm on why multinationals become transnational, while Gerrefi improved the global commodity chain and its principle of governance. Twenty years ago, different authors considered the need to use a network of all kinds of actors to understand global production, and its development, they called it global production networks. Finally, ten years ago, with the arrival of new data sets, the Global Trade Network's literature was improved. In this paper, we have first reviewed the trends and preferences of Chinese investors in Europe and Germany, with a focus on acquisitions, joint ventures, and greenfield investments. We then developed the four dimensions of the global automotive production network from the perspective of Sino-German relations: companies, sector, institution, and networks. We have mapped, visualized, and calculated the eigenvalue centrality of intermediate and finished products in German industries with a python tool we have developed. We used this analysis to identify six regional assets acting in transnational partnership and a change in the coupling of regional industrial organization and Chinese and German influence. Finally, we calculated the Pearson correlation with a maximum three-year lag between Chinese FDI, and more particularly between Germany and central Germany, to understand the risk for this country.