German exporters face rising pressure from China in home market

Chinese exports to the region contain more and more sophisticated industrial goods -- such as machinery, pharmaceutical and automotive products -- which have long been considered the domain of German manufacturers. - Bloomberg

BERLIN (Bloomberg): German exporters are facing increasing pressure in their home market from Chinese exports to the EU, according to a study by the Cologne Institute for Economic Research.

Chinese exports to the region contain more and more sophisticated industrial goods -- such as machinery, pharmaceutical and automotive products -- which have long been considered the domain of German manufacturers.

According to the study, which was reported by Germany’s Welt am Sonntag newspaper, the share of such products within all EU imports from China rose from 50.7% in 2000 to 68.2% in 2019.

The figures serve as a warning for German politicians and companies, who are already facing mounting questions about the country’s future economic success.

The fabled German car industry is wrestling with the end of combustion engines and competition from the likes of Tesla, its tech industry lags behind European rivals, and manufacturers are fretting about the cost of the energy transition.

"With China, Germany is seeing strong export competition not only globally, but also in its own European home market,” Welt am Sonntag quoted IW economist Juergen Matthes as saying.

At the same time, China is turning more and more toward Germany’s economic model as a guide for its future success, according to some analysts. Beijing’s "Made in China 2025” programme, with its focus on increasing manufacturing in tech sectors, was inspired by Germany’s Industry 4.0 blueprint.

China’s recent regulatory crackdown has also drawn some comparisons with Europe’s largest economy.

Still, others say China’s success in mimicking Germany’s economic model will likely be held back by its uncertain policy environment.

"You create structures by making sure that economic policy is predictable and clear, so that companies can invest,” Achim Wambach, president of Germany’s ZEW Institute, told Bloomberg last week.

"What we see in China at the moment is the opposite -- there’s a lot of uncertainty and guessing and abrupt changes of policy. That’s the opposite of Germany’s concept of consistent economic policy.”