Germany's KfW bank will no longer grant promotional loans to China from 2026

FRANKFURT/BERLIN (Reuters) - Germany will no longer grant promotional loans to China from 2026, the Federal Development Ministry (BMZ) confirmed on Tuesday, in the latest measure to reduce Germany's strategic dependence on China.

The German ministry informed the Chinese Ministry of Finance in mid-September of the federal government's decision to permanently stop granting promotional loans to China.

"We are no longer treating China as a developing country," German Development Minister Svenja Schulze said.

"China is and remains an important partner, without whom we cannot successfully overcome global crises," she added.

Contracts for promotional loan projects between German state-owned KfW Bank and the Chinese Ministry of Finance can only be signed up to and including 2025. "These promotional loan projects must have ambitious impacts in the areas of climate and environment," the ministry said.

The federal government assumes liability for promotional loans, but does not provide any budget funds itself. As a highly developed economy, China has access to international capital markets and can refinance itself there on favourable terms, the ministry said.

From 2013 to 2022, promotional loans with a total volume of 3.451 billion euros were agreed with China. No promotional loans were granted in 2023.

Last month, Reuters reported that the volume of investment guarantees provided by the German government to companies investing in China collapsed this year, highlighting the impact of Berlin's efforts to end over-reliance on the country.

(Reporting by Andreas Rinke; writing by Emma-Victoria Farr; Editing by Leslie Adler)