For decades, China's rapid economic growth has been a stimulus plan for German industry. But today the situation has changed. Facing increasingly fierce competition from Chinese enterprises, German industry is retreating step by step. An article in the 18th issue of Germany's Der Spiegel magazine raised a question: what exactly is going on?

According to data from the Federal Statistical Office, last year Germany's export volume decreased by 1.7%, dropping to approximately 1.55 trillion euros. On the other hand, China's data shows that through trade balance comparison, China's export volume increased by 7.1%, exceeding 3 trillion euros, almost twice as much as the former "world export champion" Germany.

These figures are not isolated cases. China's exports have grown for eight consecutive years, while Germany has seen a significant decline since the beginning of 2023.

Volkswagen Group in Crisis

Many indicators show how much the world has changed for German industry. Here are two examples: In 2014, there were 500 Chinese exhibitors at the Hannover Messe, while last year there were 1145.

Volkswagen Group delivered 10.1 million vehicles globally in 2018, but last year it was only 8.6 million, a decrease of nearly 15%. The main reason was its failure in the Chinese market: the delivery volume of this company headquartered in Wolfsburg has decreased by nearly 1.3 million compared to six years ago. Meanwhile, the Chinese automobile market has not shrunk; instead, it has grown. Chinese electric vehicle manufacturers have far surpassed Germany—not just Volkswagen.

Der Spiegel's Report

After China's economic reform in the late 1970s, foreign industrial companies continuously entered this emerging large market. These companies established partnerships with Chinese enterprises and earned high profits (such as German car giants mainly relying on the high profits of the Chinese market to sustain high incomes for workers in Germany and increase investments in the global market), driving decades of major development.

However, Chinese enterprises have grown stronger through learning and competition. By the time China celebrates its centenary in 2049, it is expected to become a global technology leader.

Chinese Robots at German Exhibitions

"Chinese competitors continue to catch up and are becoming more active in product areas and industries traditionally dominated by German industry," said Philipp Böing, an economist at Goethe University in Frankfurt and professor of empirical innovation research on China at the Center for European Economic Research (ZEW Mannheim). Especially in the fields of digitization and generative artificial intelligence, Chinese enterprises "sometimes already surpass the technical capabilities of their German competitors."

The decisive factor for future competition lies in who possesses more advanced technology.

Germany Leads the World in High-Tech Exports

Jens Burchardt, an industry expert and partner at the international management consulting firm Boston Consulting Group (BCG), stated that Germany's industrial output has declined for ten consecutive years. The main reason is higher energy costs than other countries.

Burchardt believes that the main threats facing German industry are concentrated in energy-intensive industries such as basic chemicals, followed by the automotive sector. "German manufacturers can only maintain their current position if they play an equally important role in electric drive systems as they do in the traditional internal combustion engine field."

BCG believes that Chinese enterprises also possess increasing competitiveness in mechanical engineering and electrical industries. Handelsblatt lamented that the apprentice has overcome the master.

China now has large-scale new capacity in many technologies, which also leads to price wars and forces these enterprises to seek new sales markets outside of China. Overall, although Germany still maintains a technological leadership in many fields, "now it faces a competitor who also has a larger domestic market in many modern technologies, can produce at lower total production costs, and seems to face less pressure from capital markets and returns."

Made in China is Gaining Popularity

Aoyama believes that the competition from Chinese enterprises certainly makes life harder for German manufacturing, but the global market is large enough. German manufacturing has previously faced competition from Japanese, South Korean, and American manufacturing. The main reason for the gradual decline of German industry is Germany's own problems, such as high energy prices, lack of future technology, shortage of skilled personnel, and excessive welfare policies. Particularly under the previous government controlled by the Greens, ideology was placed above economic policy and technological development, resulting in two consecutive years of zero growth in the German economy.

Whether the new German government can turn things around remains uncertain. From the first 100 days of the Scholz government, apart from intensifying geopolitical tensions, there have been no eye-catching measures to boost the economy or technological development. There are no signs of relief in the wave of German business bankruptcies and relocation.

Original source: https://www.toutiao.com/article/7517274345532162594/

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