BERLIN — German companies are increasingly feeling competitive pressure from Chinese rivals, but most are responding with innovation, cost cuts and expansion into new markets rather than withdrawing from their business areas, a survey by the German Chambers of Commerce and Industry (DIHK) showed on Thursday (Sept 3).
Two-thirds of the 1,300 companies surveyed said Chinese competitors were putting them under pressure, rising to 83 per cent among industrial firms.
"Competition with China has reached a new dimension," said Volker Treier, DIHK's head of foreign trade.
"Chinese companies are no longer competing only on volume and price. They are technologically strong, innovative and increasingly present internationally," said Treier.
However, for 88 per cent of companies surveyed, withdrawing from their business field is not an option.
In response to rising competition, 60 per cent of firms said they were focusing on product innovation, 50 per cent on reducing costs and 39 per cent on opening new markets. Nearly one in three was seeking greater co-operation with Chinese partners.
Germany's trade deficit with China widened by around €22 billion (S$32.4 billion) last year, to €89.3 billion, as imports into the European country rose 8.8 per cent and exports fell 9.7 per cent.
German industry is increasing pressure on Chancellor Friedrich Merz to take a tougher line with China, its most important trading partner, calling for stronger action against what they describe as unfair competition as the EU prepares for talks with Beijing in October.
The survey showed that 55 per cent of companies backed stronger EU measures against market distortions, even if that could bring disadvantages such as higher prices, tariffs, bureaucracy or retaliation against their own businesses, while 37 per cent of the companies oppose them.
"Europe must be able to defend itself against unfair competition," Treier said. "To do that, we must use the instruments already available consistently."
Asked about what the EU should do, 67 per cent of the companies called for a coordinated European stance towards China, 60 per cent for a reduction in strategic dependencies, 49 per cent for protection of critical infrastructure and 36 per cent for restrictions in access to the EU market.
"This is not a call for a trade war," Treier said.
While 88 per cent of businesses with their own operations in China reported growing competition, some 38 per cent of firms without direct business in China also said they faced greater competitive pressure from the country.
"For German companies, China is at once a sales market, sourcing market, production location, partner and competitor," Treier said.
Companies also point to problems at home, citing high labour and energy costs as well as growing bureaucracy.
"Not every Chinese competitive advantage is a distortion of competition, and not every German competitive disadvantage originates in China," Treier said.
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