Germany, once a leader in the production of high-end, complex goods, has seen a steady decline in industrial output over the past five years.
This downturn is compounded by China’s rapid advancement in high-tech industries, fueled by government subsidies, which is beginning to challenge Germany’s key economic sectors.
This is particularly noticeable in the automotive industry. German car manufacturers have come under fire for lacking innovation, failing to pivot to electric vehicles, and underestimating the competition from Chinese brands like BYD. These missteps have already resulted in the loss of tens of thousands of jobs and the closure of factories within Germany.
In other sectors, the threat from China is less apparent but still growing. For example, Chinese chemical giants have significantly ramped up production, particularly of polyethylene and polypropylene, flooding the global market and lowering profits for German companies like BASF. Within the EU, China’s share of chemical product imports has surged by 60% over the past decade, while Germany’s share has dropped by over 14%.
The Center for European Reform is urging the German government to reevaluate its trade, industrial, and tax policies. Among the recommendations is the introduction of import duties on heavily subsidized Chinese products, such as electric vehicles and wind turbines. Economists also suggest Germany should focus on finding alternative markets for its high-tech products, with Europe being a key target.
Serden Özcan, a professor of innovation and business transformation at the WHU-Otto Beisheim School of Management in Düsseldorf, emphasizes that German political leaders and business executives need to adopt a new approach and overcome “the fear of aggressive competition.”
