Competitiveness: German industry loses ground in competition with China

In competition with its strengthened competition from China, German industry loses ground. According to the Federal Statistical Office, German exports dropped by 1.7 percent to around 1.65 trillion euros last year. According to Beijinger, the Chinese exports increased by 7.1 percent to over three trillion euros (25.4 trillion Yuan), as a comparison of the trade balance sheets shows. According to economists and experts, the price fights of Chinese companies on their home market and their overcapacity are dangerous for German industry.

The figures sobering from the German perspective are not a one -time outlier. The Chinese government reported export growth in the eighth year in a row, in Germany there was already a significant decline in 2023.

China becomes a risk factor for German industry from success to the success

How much the world has changed for German industry can be seen at many indicators. Two examples: 500 Chinese exhibitors were represented at the Hanover Messe in 2014, 1,145 last year. The VW Group still delivered 10.1 million cars worldwide in 2018. Last year it was 8.6 million – a decline of almost 15 percent.

The main cause was the failure in China: there the Wolfsburg group delivered almost 1.3 million cars less than six years earlier, although the Chinese car market has become larger and not smaller in the meantime. The e -car manufacturers there have – not only Volkswagen – left far behind.

“Until the hundredth anniversary of the People’s Republic in 2049, China wants to be a technology leader, perhaps even the global technology leader,” says Philipp Böing, economist and professor of empirical innovation research with a focus on China at the Goethe University Frankfurt and Zew Mannheim. “The political measures were not always efficient, but they were mostly effective.”

The goal: self -strengthening

After the first economic reforms at the end of the 1970s, China’s Communist Party promoted the settlement of foreign industrial companies for decades, which in return had to enter into forced partnerships with Chinese companies. It was a stroke of luck for German industry, because many years of sales, sales and profits rose.

But the Beijing industrial policy had never created it to make foreign corporations big and strong. The goal from the start was “Ziqiang”, the “self -strengthening”. Foreign managers were usually not aware that their presence in the People’s Republic was only a means to an end for the Chinese leadership. A similar strategy of self -strengthening with the help of foreign technology existed as early as the 19th century – unsuccessful at the time. In the second attempt, the catch -up was successful.

Apprentice trumped master

“The Chinese competitors have always caught up and are increasingly active in product areas and industrial segments in which German industry was traditionally very well positioned,” says Böing. In areas of digitization and generative artificial intelligence in particular, Chinese companies have “already climbed beyond the technological performance of German competitors”.

In Germany, industrial production has been declining for ten years, says Jens Burchardt, industrial specialist and partner at the international management consultancy BCG. The main cause is the energy expensive in international comparison. “The problem of higher energy prices will not be foreseeable because it levels off at a level in this country that is significantly higher than that of other countries.”

Burchardt sees the danger to German industry primarily for energy -intensive industries such as the basic material chemistry, in second place for the automotive sector. “Electromobility will make up more than half of the global market as early as the early 2030s. German manufacturers will only be able to get their current role if they play a similar role in electrical drives as traditionally with burners.” Only behind it, “but still material”, does the BCG see a danger from growing Chinese competition for German companies in sectors such as mechanical engineering and electrical industry.

But Chinese success has a high price. Many companies have built up great overcapacity on credit. The debt of the Chinese private sector – these are households and companies without financial sectors – has reached astronomical dimensions and, according to numbers from the International Monetary Fund, is now increasing to over 300 percent of Chinese gross domestic product. Some economists have been warning for over a decade that a large financial crisis is slumbering in China.

“Typically, the strategy has prevailed to do without profits for a relatively long time, to scale very much and try to keep competitors in chess for a few years and to be one of the few surviving companies,” says Economist Böing. “For a few years, this is a pure loss and it’s all about scaling.” This means that a company produces the more cost -effective the more quantities it produces. “Production can often not be absorbed in the Chinese internal market and then goes into export.”

Overcapacity for German companies “extremely dangerous”

The huge home market alone is an advantage for Chinese companies. “For wind turbines, for example, Chinese competitors can build a lot of know-how and technical skills due to the extreme addition in their own market,” says BCG consultant Burchardt. “In China, large new production capacities are created in many technologies, which the Chinese manufacturers force into extreme price struggles, so that they have to find new sales markets outside of China.” This is “extremely dangerous” for German companies.

In width, Germany still has technologically leading industry in many areas, says Burchardt. “But now she is facing a competitor who also has a significantly larger home market for many modern technologies, can produce overall lower level of production and apparently seems to be exposed to lesser capital market and yield pressure.”

Technology competition decides system competition

Last but not least, the further development depends on the further course of the trade conflicts institution of the commodity of Donald Trump. “To make forecasts is relatively difficult due to the sudden change of policy in the United States,” says Economist Böing.

He does not expect permanent relaxation: “In my view, the system competition between China and the West, especially the USA, is behind it.” The technology competition will decide on the success of this system competition. “The tariffs are now almost a magnifying glass with which we look at it. I think that there will always be different confrontations in the area of ​​trade, in the area of ​​the innovation competition.”

Stat. Federal Office of German Foreign Trade 1950 – 2024 Commerce Balance China 2024 Volkswagen Delivery 2018 Volkswagen Delivery 2024 IMF – Numbers on the Chinese economy and debt