German industry is losing the race against Chinese competition, and its biggest obstacle is high energy costs, warn economists and industry experts.
German exports fell last year, according to statistical data, by 1.7 percent, to approximately 1.65 trillion euros.
The value of Chinese exports, on the other hand, rose last year by 7.1 percent, to 25.4 trillion yuan (3.04 trillion euros).
Chinese companies are waging fierce price wars in the domestic market, and their excessive capacities represent a significant threat to German industry, warn economists and experts.
“Chinese competitors are closing the gap and are increasingly active in product segments and industrial sectors in which German industry has traditionally been very strong,” says economist and professor of empirical innovation research at Goethe University in Frankfurt and ZEW Mannheim, Philipp Boing.
In areas such as digitalization and generative artificial intelligence(AI), Chinese companies have in some cases already surpassed the technological capabilities of their German competitors, Boing added.
“German industrial production has been declining for ten years,” warns industry expert and partner at the international consulting company BCG, Jens Burchardt.
The most at risk, according to Burchardt, are sectors that consume large amounts of energy, such as the production of basic chemicals.
“High energy costs also threaten the automotive sector and are the main reason for the weakened competitiveness of German companies,” he emphasizes.
“German car manufacturers will maintain their current position if they build a position in the segment of electric drive systems that can measure up to their traditional position in the segment of internal combustion engines,” he said.
In addition to the chemical and automotive sectors, increasingly sharp Chinese competition is ‘breathing down the neck‘ of German companies in sectors such as mechanical engineering and the electrical industry as well, according to BCG.
