MOOSBURG, Germany (AP) — The heart of Germany’s economy is manufacturing and exporting the high-value, complex goods that power global business. car and locomotive From factory machinery to aircraft to construction machinery.
This growth model is under severe pressure from a new competitor, China, whose exports match or approach Germany’s quality and can be sold at much cheaper prices.
The China Shock, as economists call it, has emerged as the main reason for Germany’s chronic economic stagnation since the coronavirus pandemic. The economic downturn has made the coalition government led by Chancellor Friedrich Merz increasingly unpopular. election The far-right Alternative for Germany party has its best chance of winning its first governorship in the eastern region of Saxony-Anhalt on Sunday.
German companies used to make huge profits selling to China. But the tide has changed as the Chinese government supports companies in targeted sectors, often in areas where German companies make competing products. With China’s economy currently in a slump, Chinese products cannot find enough buyers, so they are shipped to overseas markets, including Europe.
Economic stagnation worsens mood ahead of local elections
Germany’s economy, Europe’s largest, has stagnated for several years and is expected to shrink in 2023 and 2024. Shows only 0.2% Last year’s growth. Although the unemployment rate is 4%, lower than the EU average, Germans are seeing disturbing headlines about job cuts at companies that have defined the German economy for decades. Media reports say Volkswagen plans to hire 50,000 jobs or more, BMW will buy 8,000 jobs by the end of next year, and automotive technology company Bosch will cut 13,000 jobs by 2030. And since the pandemic, inflation has outpaced wage increases. Real wages last year barely caught up with 2019 levels.
“We need to reduce costs in an environment where the overall Chinese market has declined by 20% and our Chinese competitors have increased exports, thereby increasing competitive pressure in Europe,” said Arno Antlitz, Volkswagen’s finance chief.
Of the world’s major economies, Germany has been the hardest hit.
Germany’s economy relies on exports similar to the kind of manufactured goods that the Chinese government is currently targeting for support. Other major economies such as the UK, Italy and France have smaller manufacturing industries; us tariffs Block many Chinese products, especially cars.
Germany currently buys more from China than it sells in areas once dominated by German companies, such as cars, trucks, buses, trains, aircraft, factory machinery, and medical equipment. “China has already eaten much of German industry’s lunch and is preparing for its dinner,” said economists Brad Setzer and Sander Trudoir.
There is only one answer. If you can’t beat them, join them.
German forklift and warehouse vehicle manufacturer Jungheinrich AG has partnered with Chinese manufacturer EP Equipment to produce AntOn, an entry-level forklift that rivals its competitors in price. The partnership leverages EP’s large scale and lower production costs in China, and combines Jungheinrich’s global sales strength and reputation as one of the world’s three largest manufacturers of warehouse vehicles.
AntOn’s lineup may not quite match the features available on fully German-made cars, but it’s good enough and half the price. So the AntOn, painted bright purple to distinguish it from Jungheinrich’s higher-end yellow machines, has a simple, robust design with a basic lever instead of a joystick, no compartments for a phone or wallet, and an uncushioned seat. It is sold at a much lower price than regular Jungheinrich machines, but is targeted at customers who do not need to run it 24/7.
“The challenge is that there is a huge wave of Chinese products and Chinese products hitting not only European but also international markets. And the key question is how to react,” said Nadine Despineau, chief sales officer at the company’s factory in Moosburg, near Munich.
She sees the demand for entry-level or “mid-technology” vehicles as a business opportunity to reach new customers and markets. AntOn “brings the best combination of German engineering, market access and customer proximity we have, with the high-efficiency production sites we use in China.”
volkswagen Adopting a “in China, for China” approach, Vehicle development center in Hefei Design vehicles for local markets.
German policymakers are trying to avoid a repeat of what happened with the country’s solar power industry. Germany pioneered the adoption of solar panels in the early part of this century, but low-cost Chinese products forced several German manufacturers out of business. Currently, most of the domestic solar panels are imported from China.
Chinese companies receive support but must survive fierce domestic competition
China’s industrial policy allows key sectors to receive various types of support, including easy credit, cheap raw materials, cheap land, and in some cases “Made in China” requirements. Chinese workers earn less than their European counterparts, and economists say China is trying to keep its currency artificially low to make its products more competitive abroad.
But China’s export power is based on more than government support. Chinese companies are facing fierce price competition amid the domestic economic downturn, forcing them to cut costs while rushing to introduce new technology.
China reject criticism of business partners. A recent Commerce Department report titled “China’s Position on the So-called Overcapacity Issue” says that the debate over the China Shock “incorrectly” describes China’s industrial development as a threat to Western economies.
The German government has sought to improve growth by creating a 500 billion euro ($579 billion) fund to pay for new infrastructure such as roads, bridges and railways. package proposed in july This includes income tax cuts and red tape cuts for low- and middle-income taxpayers.
The solution for German companies may lie in Brussels
But Setzer, an economist and senior fellow at the Council on Foreign Relations, said trade figures showed the China shock was the main reason for Germany’s economic downturn. And the answer for Germany may be out of the hands of German industry, which also has ultimate responsibility for EU trade policy run by the European Commission in Brussels. The European Commission has imposed tightly calibrated customs duties or import taxes on some Chinese products, such as electric cars and construction site worker lifting platforms.
“We think Europe needs tougher trade policies and needs to protect its own market from some of the spillover effects from China’s own industrial policies,” Setzer said. “We need to have a little more symmetry. We need to make sure that if China itself doesn’t accept new imports, the rest of the world doesn’t continue to accept them either.”
