Competition with China: German Economy Under Increasing Pressure

German companies are facing ever-increasing competition from Chinese suppliers, who have long since moved beyond competing solely on price and have made enormous strides in terms of quality and technology. This was the finding of a special survey published in September by the German Chamber of Industry and Commerce (DIHK), which includes 150 foreign chambers of commerce in more than 90 countries worldwide and 79 Chambers of Industry and Commerce (IHK) in Germany.

Two-thirds of the companies reported growing competition from Chinese rivals. In the industrial sector in particular, 83% of companies reported increasing competitive pressure—50% felt the competition strongly or very strongly. In the retail sector, 73% reported being affected by competitive pressure, while other service providers, transportation, and logistics companies—each accounting for about one-third—were significantly less affected.

Self-Inflicted Competitive Problems

The companies’ open-ended responses indicate that the cause of competitive problems is often not seen as lying solely with China, but also in European location disadvantages such as bureaucracy and energy costs. “Where German companies have a quality advantage, this is often not enough to offset the cost disadvantage,” according to the DIHK survey. Companies cited their significantly higher energy and labor costs compared to Chinese competitors, as well as a multitude of regulations affecting German and European companies, as the biggest disadvantages.

German companies also cite the Chinese government’s “China First” policy—which makes it more difficult for German firms to access the Chinese market—as well as the undervalued renminbi and Chinese subsidies that give Chinese exporters unfair competitive advantages. German companies also criticized the fact that China gives its own companies preferential treatment when it comes to access to critical raw materials.

Furthermore, German companies are frequently exposed to illegal product counterfeiting and intellectual property theft, according to the DIHK. However, the feedback also showed that many companies rely on inexpensive intermediate goods from China or favorable production conditions at Chinese locations in order to remain competitive.

Solution Through Innovation

As measures to strengthen their own competitiveness, 60% of German companies stated that they are focusing on product innovation. Fifty percent are trying to cut costs, and 39% are increasingly seeking new markets. Thirty-one percent of companies are collaborating with Chinese partners; among firms that source goods and intermediate inputs from China, this figure rises to 49%, according to the DIHK survey. Due to growing Chinese competition, 19% of German companies are planning to shift their investments; among companies already operating in China, this figure is twice as high at 38%. In contrast, only 12% of companies are considering withdrawing from their current business sector.

Europe’s Ability to Act Is Needed

The majority of companies want Europe to be able to take decisive action in dealing with growing competition from China and to adopt a strategy that makes Europe more resilient: 67% of respondents support a unified EU approach to foreign trade. Sixty percent state that the EU should reduce strategic dependencies, while 49% call for greater protection of critical infrastructure.

By contrast, more restrictive trade policy instruments receive less support: Overall, only 36% of companies favor more restricted access to the EU single market—though among companies feeling pressure in the single market, 42% advocate for greater isolation. The preferred measures depend on the company’s business focus. Companies without business in China are more likely than average to advocate for reducing strategic dependencies (64%) and excluding Chinese companies from critical infrastructure projects (54%). In contrast, companies with export business or investments in China are more likely to support the removal of trade and investment barriers (32% and 38%, respectively).

However, 55% of companies agreed or somewhat agreed that stronger trade policy measures against China should be taken in the event of distortions of competition—even if they themselves would be affected by negative consequences. 37% somewhat or completely reject this.

Source: DIHK

Source: German-Russian Chamber of Foreign Trade, Competition with China: German Economy Under Increasing Pressure, October 23, 2026.

This article was prepared for the German-Russian Chamber of Foreign Trade.