Key facts
- German industry is urging Chancellor Merz to adopt a tougher policy on China due to unfair competition.
- An OECD report indicated Chinese manufacturers receive substantial state support, contributing to global market share gains.
- Germany's trade deficit with China increased to €89.3 billion in the past year.
- Automakers like Volkswagen are experiencing intensified competition from Chinese brands in Europe.
- Industry groups advocate for faster application of existing EU trade defense instruments and potential new measures.
German industry leaders are intensifying their calls for Chancellor Friedrich Merz to adopt a more assertive trade policy towards China, citing concerns over unfair competition and widening trade deficits. This represents a notable shift for German businesses, which have historically been hesitant to implement trade barriers due to fears of retaliatory measures from Beijing.
An OECD report highlighted that Chinese manufacturers receive significantly more state support than their OECD counterparts, with subsidies contributing substantially to their global market share gains. Germany's trade deficit with China, its largest trading partner, grew to €89.3 billion last year as imports rose and exports fell. Industry representatives, such as Volker Treier of the German Chamber of Commerce and Industry (DIHK), have stated that subsidies and unfair competition are serious issues that need to be addressed.
German automakers, including Volkswagen, are particularly affected, having been surpassed by local Chinese brands within China and now facing increased competition from these same brands in the European market. While the German government's messaging on China has become firmer, it remains mixed, balancing the need to reduce economic dependencies with the acknowledgment of China's importance as an economic partner. Chancellor Merz has acknowledged the industry's changing stance and has requested proposals to tackle trade imbalances.
Industry associations like the BDI are advocating for the swifter application of existing trade policy tools, such as safeguards and anti-dumping measures, to counter the price pressure from Chinese suppliers. They estimate that state subsidies and a potentially undervalued yuan allow Chinese companies to undercut German prices significantly. Volkswagen's CEO, Oliver Blume, has called for a 'level playing field' and 'Made in Europe' rules, though the company later moderated these comments amid concerns about protectionism and potential trade conflicts.
Analysts note that the long-standing beneficial relationship between German automakers and China is evolving, with companies facing intense competition both within China and in global markets. Despite these challenges, some European countries, including France, Italy, and Spain, are pushing the EU to strengthen its trade defense mechanisms. Chancellor Merz has indicated support for Brussels to develop a package of measures if upcoming EU-China talks in October do not yield satisfactory results.