German Companies Respond to Intensifying Competition from Chinese Rivals
By Maria Martinez
German Industry Faces Rising Pressure from China
BERLIN, Sept 3 (Reuters) - 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.
Two-thirds of the 1,300 companies surveyed said Chinese competitors were putting them under pressure, rising to 83% among industrial firms.
Changing Nature of Competition
"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.
German Companies' Strategic Responses
However, for 88% of companies surveyed, withdrawing from their business field is not an option.
In response to rising competition, 60% of firms said they were focusing on product innovation, 50% on reducing costs and 39% on opening new markets. Nearly one in three was seeking greater cooperation with Chinese partners.
Trade Imbalance and Economic Impact
Germany's trade deficit with China widened by around €22 billion last year, to €89.3 billion ($103.61 billion), as imports into the European country rose 8.8% and exports fell 9.7%.
Companies Favour EU Protective Measures
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% 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% of the companies oppose them.
Calls for Coordinated European Action
"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% of the companies called for a coordinated European stance towards China, 60% for a reduction in strategic dependencies, 49% for protection of critical infrastructure and 36% for restrictions in access to the EU market.
"This is not a call for a trade war," Treier said.
Complex Links Between German and Chinese Businesses
While 88% of businesses with their own operations in China reported growing competition, some 38% of firms without direct business in China also said they faced greater competitive pressure from the country.
China as Both Partner and Competitor
"For German companies, China is at once a sales market, sourcing market, production location, partner and competitor," Treier said.
Domestic Challenges for German Companies
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.
($1 = 0.8619 euros)
(Reporting by Maria Martinez, Editing by Miranda Murray, Aidan Lewis)