China has been one of Germany’s most important trading partners for years. Exports to the People’s Republic are considered a fundamental pillar of the German economic model, which is why the increasing political tensions are a cause for concern. At the same time, China is increasingly competing with German companies on the EU home market, as a study by the employer-related Institute of German Business (IW Köln) shows.
The analysis of EU imports makes it clear to what extent the German economy has lost its dominant position here in recent years, even in traditionally strong key sectors. While the share of industrial products from Germany in the EU continued to shrink, the Chinese share has increased significantly. “Regardless of whether it’s mechanical engineering, the electrical industry or the chemical industry: the share advantages in the most important German export sectors are falling more and more,” says study author and foreign trade expert Jürgen Matthes. “The German export model seems to be increasingly unstable.”
The IW report has looked at the importance of German and Chinese products in the EU since 2000. According to this, Germany has been losing shares in EU imports since 2005 overall and also in numerous demanding product groups. This decline has recently accelerated again in many areas. China, on the other hand, was able to increase its shares – and at an increasing pace. According to the study, between 2020 and 2022 alone, China was able to expand its position in many areas as much as in the entire previous ten-year period.
In numbers, this means: At the turn of the millennium, German products still made up 14 percent of all EU imports and Chinese goods only 2.6 percent. Last year, however, the German share was only 12.5 percent, the Chinese 8.8 percent. The shift in the balance of power is even clearer when looking at sophisticated industrial goods such as machines, chemical products, metal products or automobiles. With these German export hits, the lead over China has fallen from more than 15 percentage points to just 2.5 percent since the year 2000.
According to the study, Chinese share gains and German share losses often went hand in hand. A causality is not examined. Nevertheless, “this finding strongly suggests that China is increasingly competing with the German economy on its EU home market and in its traditional areas,” writes IW economist Matthes. The problem is that China’s export successes are also based on massive state subsidies, which raises the question of trade policy reactions.
Things have changed completely for computers and other electronic and optical devices. 20 years ago, Europeans bought these far more often from Germany than from China. Today it is the other way around (see table). In the case of metal products, the German share of EU imports was still many times that of China 20 years ago, today both are almost equal. The Chinese were also able to catch up a lot in chemical products and machines.
And even Chinese cars – practically non-existent in the EU until a few years ago – have conquered market shares in recent years. Although the German car manufacturers are still clearly ahead, they are struggling with the trend towards e-cars. The advancing energy transition is also putting additional pressure on other German companies, writes the IW. Rising energy costs are becoming an increasing problem, especially for energy-intensive sectors such as the chemical industry.
product groups
from China 2022 (2000)
from Germany 2022 (2000)
Chemicals
8.2% (0.9%)
15.3% (17.3%)
Pharma etc. products
2.8% (1.1%)
12.3% (11.4%)
metal products
15.4% (4.4%)
17.8% (21.9%)
Computing equipment, electronic and optical products
27.4% (4.5%)
9.3% (10.7%)
electrical equipments
23.7% (6.3%)
15.5% (18.7%)
machinery
11.4% (1.6%)
20.5% (23.2%)
motor vehicles and parts
3.5% (0.1%)
22.0% (25.8%)
other vehicles
7.6% (1.1%)
9.9% (13.7%)
Source: IW Cologne; own representation
