The industrial locations Germany and Europe are currently under immense pressure. The international competitiveness of German businesses has been declining for quite some time, leading to sometimes existential consequences for companies and jobs. While many causes lie within local site conditions, there is growing debate among business and political circles about the implications of China’s rapidly increasing market power on our economy. To contribute to the ongoing discussion about possible trade protection and diversification measures, the German Chambers of Commerce and Industry (DIHK) has now published a special survey on competition with China, aimed at presenting a cross-sector perspective of the entire German economy.

Fierce Competition Felt

Two-thirds of the responding businesses report growing competition from Chinese rivals. The industrial sector feels the brunt, with 83 percent of companies noticing increasing competition pressure. Half of these businesses describe the pressure as strong or very strong. In the trade sector, 73 percent note rising competition, while other service providers, transport, and logistics firms report noticeably lower rates of around one-third. The extent of competition also depends on the type of relationship a business has with China. Notably, 38 percent of businesses with no direct trade relationship with China also feel the competition pressure.

Innovation Instead of Retreat

Many businesses are responding with specific measures: 60 percent focus on product innovation, 50 percent aim to reduce costs, and 39 percent are increasingly looking for new sales markets. Additionally, 31 percent collaborate with Chinese partners, a figure that rises to 49 percent among companies sourcing goods and pre-products from China. This demonstrates that businesses are embracing the challenge, as 88 percent state they do not consider retreating from their existing business areas an option.

Business Seeks a United Europe

Most businesses demand enhanced European coherence when dealing with the rising competition from China. A strategy to boost Europe’s resilience is also seen as vital: 67 percent of businesses advocate for a unified external economic strategy across the EU. Sixty percent call for reduced strategic dependencies, while 49 percent demand that Chinese companies be excluded from critical infrastructure projects. Thirty-six percent support limiting access to the EU internal market, and 31 percent favour stronger trade protection measures. Conversely, 25 percent call for reduced trade and investment barriers, and 18 percent support easier innovation partnerships.

Strengthening Resilience

EU institutions and Germany’s federal government are urged to align their trade policy with corporate needs. Europe must gear up for an increasingly power-driven global trade environment by reducing strategic dependencies while maintaining constructive relationships with trade partners and avoiding the damaging of international trade norms.