Germany Overtakes Japan as Top Global Creditor
Germany has officially become the world’s largest creditor nation, surpassing Japan for the first time in over three decades. As of the end of 2024, Germany’s net foreign assets reached approximately €3.51 trillion, or $3.6 trillion. Japan, which held the top position since 1991, now follows closely with €3.3 trillion. China ranks third, having been overtaken by Germany in 2019.
Germany’s new position reflects a strong and sustained surplus in its current account. The country consistently exports more than it imports, and much of the resulting capital surplus is invested abroad. These investments include foreign securities, company shares, direct factory investments, cross-border bank loans, and other financial instruments held by German entities.
The value of Germany’s net foreign assets equals about 81 percent of its annual economic output. While this may seem like an economic strength, many economists see the figures as more nuanced, even problematic.
High Foreign Assets, Low Domestic Investment
Leading economists have warned that Germany’s rise as the largest creditor nation also highlights its weakness as an investment location. Clemens Fuest, head of the Munich-based Ifo Institute, noted that many German firms prefer to invest their capital abroad rather than expand operations domestically. This trend, he said, might benefit companies but is less favorable for job creation, wage growth, and tax revenue within Germany.
Direct investments in Germany continue to decline, while outbound capital flows are rising. Cross-border portfolio investments, especially in foreign bonds and equity, have increased significantly. As of late 2024, German claims on foreign entities stood at €13.9 trillion, while foreign claims on German assets totaled only €10.4 trillion.
This imbalance is not only economic—it is also geopolitical. Investments in countries like China are viewed as increasingly risky. Jörg Krämer, chief economist at Commerzbank, warned that if geopolitical tensions, particularly over Taiwan, escalate, German companies could face substantial losses on their Chinese holdings.
Poor Investment Returns Despite Global Reach
Despite Germany’s large foreign asset portfolio, the country has failed to generate competitive returns from these holdings. Moritz Schularick, president of the Kiel Institute for the World Economy, criticized Germany’s performance, stating that while it is the biggest creditor, it is also among the least effective global investors.
According to a recent study co-authored by Schularick, German foreign investments returned an average of 4.8% over recent decades. This is two percentage points lower than France and significantly below the returns achieved by the U.S. and Canada. The study estimates that Germany could have earned an additional €4.5 trillion in returns if its international investments had matched the performance of those in North America.
A contributing factor is Germany’s conservative investment strategy, which often favors low-yield government bonds over higher-risk, higher-return assets. Additionally, recent currency fluctuations have distorted comparative performance metrics. While the euro remained stable against the dollar, the Japanese yen depreciated by more than 8% in 2024, inflating Germany’s apparent lead in euro terms.
Global Debt Climbs to Unprecedented Levels
Germany’s new role as the world’s top creditor comes at a time when total global debt has reached a historic high. The Institute of International Finance (IIF) reports that in the first quarter of 2025, global debt increased by $7.5 trillion, reaching a total of more than $324 trillion. This figure is nearly three times the size of the world’s annual economic output, which stood at approximately $111 trillion in 2024.
Both advanced and emerging economies are contributing to the surge. However, while rich countries generally have more tools to manage or restructure their debt, poorer nations are facing mounting risks of default and economic instability. In emerging markets, the debt-to-GDP ratio reached a new record in early 2025.
The United States, in particular, stands at the opposite end of the spectrum from Germany. According to the International Monetary Fund, the U.S. has accumulated net foreign liabilities of about $26.2 trillion. This vast negative position reflects decades of current account deficits and heavy reliance on foreign capital.
Germany’s Surplus Draws Political Scrutiny
Germany’s large net investment position is already drawing attention in global political debates. U.S. President Donald Trump has frequently cited trade and capital imbalances as evidence of unfair economic practices. He has accused Germany and other European countries of “exploiting” the U.S. through persistent trade surpluses, particularly in automotive and industrial exports.
In the context of ongoing trade disputes, Germany’s status as the world’s top creditor may add friction. Trump and other critics view large current account surpluses as a threat to U.S. industry and economic sovereignty, even though American consumers and institutions benefit from the capital inflows that fund their borrowing.
Trump’s administration has repeatedly floated tariff increases and other trade barriers aimed at countries with large surpluses. While some of these measures were later reversed or suspended, the underlying sentiment remains: Germany’s economic strength abroad may make it a target in future negotiations.
Internal Debate Over the Merits of Global Creditor Status
Back in Germany, the debate continues over whether being the world’s largest creditor is truly beneficial. Some experts argue that the country should focus more on boosting domestic demand and making itself a more attractive destination for investment.
Germany’s low public investment in infrastructure, digitalization, and education has been a source of concern for years. Critics say that encouraging German companies to reinvest profits at home could help address long-standing issues, including demographic challenges, low productivity growth, and rising inequality.
Others warn that Germany’s net foreign asset position could become a liability in a world of growing geopolitical instability and financial fragmentation. As countries reassess global supply chains and nationalize strategic industries, Germany’s extensive foreign holdings may become harder to defend.