China increasingly pushing German industry out of top spot in exports to EU neighbours

China is increasingly pushing Germany out of the top spot in exports to other EU countries, with the share of products from the Asian industrial heavyweight beginning to ascend in key German industry categories – such as cars – an analysis by the industry-financed Institute for Economic Research (IW Köln) has found. “For decades, German products have dominated the European market, but Chinese competitors are catching up fast,” the institute said. Especially in regard to industrial products, Germany’s share is shrinking while China’s is growing, the institute found. It said that China was especially strong due to its extensive expertise regarding e-mobility. While high energy costs generally added to the challenges for industrial companies, energy-intensive sectors like the chemicals industry would be especially under pressure. Empirical analysis would therefore be “concerning regarding the challenges associated with the energy transition and fundamental problems regarding competitiveness.” Key German industries such as chemicals production and the automotive sector could be hit especially hard by this development, IW Köln’s trade expert Jürgen Matthes argued. “In the most important German export branches, their edge in trade is falling more and more,” Matthes said, adding that the country’s export model “increasingly appears to be tumbling.”

In 2000, German products accounted for about 14 percent of all EU imports, with Chinese goods at 2.6 percent. By 2022, Germany’s share had fallen to 12.5 percent, while China increased its foothold 8.8 percent. Regarding industrial goods, Germany’s edge in trade fell from 15 percentage points in 2000 to 2.5 percent 22 years later. China replaced Germany as a top exporter in computers and other electronic devices, where the country could increase its share from 4.5 to 27.4 percent in the period analysed. “With a share of 22 percent, Germany still leads on car imports [to the EU], but developments in recent years also show that China is catching up fast and keeps getting faster,” the institute said. China already possesses significant capacity in electric car production and was able to greatly increase its presence on the European market in the past few years. While the share of Chinese cars stood at only 3.5 percent in 2022, it was twice as high as it was in 2020. “A problem is that China’s export success is likely partly based on extensive subsidisation, which raises questions regarding trade policy responses.”

Germany's economy and climate ministry (BMWK) earlier this week announced a forecast stating that growth prospects for Europe's biggest economy would remain sluggish despite falling energy prices. In its recently published China strategy, Germany said China’s dominance in green technologies, such as solar PV, has “created unilateral dependencies,” and vows to seek “further market liberalisation” in China in order to export “advanced climate technologies produced by German companies.” Relations between the EU and China remain key in global efforts to cut emissions. Economic rivalry could rapidly force down the price of "silver bullet" green hydrogen technologies and other innovations that underpin global decarbonisation efforts.