Thanks to stagnant wages and cheap energy
One explanation is macroeconomics. German firms’ investment at home has waned, because of high labour costs and the dim prospects for the euro zone, says Michael Heise, an economist at Allianz, an insurer. Partly because of its strong exports, Germany runs a current-account surplus of about $250 billion-$300 billion a year that must be recycled abroad. Emerging markets have slowed and China is being less hospitable to foreign firms. America is growing fast, and has relatively cheap labour thanks to stagnant wages and cheap energy because of its fracking boom.
German firms’ FDI is still dwarfed by the huge chunk of savings by Germany’s thrifty households that its banks and insurers invest on foreign financial markets. Earnings from these indirect investments provide a large proportion of Germany’s current-account surplus. However, German industry’s contribution to the surplus should grow as a result of its purchases of profitable American firms with a global reach. The seven American firms worth more than $1 billion bought by German ones this year make 65% of their sales outside America in aggregate.
Thus, Infineon is buying International Rectifier, which is based in California but makes half of its sales in Asia. ZF Friedrichshafen, a car-parts firm, is buying a Michigan-based rival, TRW, which makes two third-of its sales outside America (and its biggest customer is highly globalised Volkswagen). Siemens is snapping up Dresser-Rand, which makes equipment for the oil and gas industry: it has Russian, Chinese and Saudi Arabian clients, factories in Europe, Brazil and India and makes just a third of its sales in America.
