German industry urges tougher stance against Chinese competition

German companies are increasing pressure on Chancellor Friedrich Merz to adopt a tougher stance toward China and implement stronger protections for European industry against Chinese competition.

Germany’s trade deficit with China reached 89.3 billion euros last year, an increase of 22.4 billion euros compared to the previous year. While imports from China rose by 8.8 percent, German exports to the Chinese market fell by 9.7 percent. This shift marks a departure from Germany’s historical position of resisting trade barriers to avoid retaliatory measures from Beijing.

Concerns are mounting regarding unfair competition. OECD data indicates that between 2005 and 2024, Chinese industrial companies received between three and eight times more state support on average than companies in OECD countries. This state subsidization is linked to nearly 60 percent of the growth in the global market share of expanding Chinese firms.

The automotive sector is particularly vulnerable. German manufacturers, including Volkswagen, have lost market share in China to domestic competitors like BYD, while Chinese automotive companies are increasingly entering the European market. Within the EU, discussions are ongoing regarding potential quotas to limit the share of Chinese components in European products to reduce dependency, particularly for electric vehicle batteries.