Why a post-election shift in Germany’s China policy is no longer a sure bet

Chinese Competition: A New Threat to German Engineering?

The German machinery industry, renowned for its precision and quality, is facing a formidable challenge – a wave of intensifying competition from China. This new threat, dubbed “China Shock 2.0,” has echoes of the 1980s, when Japanese manufacturers decimated Germany’s watchmaking sector. Ulrich Ackermann, a veteran of the industry and head of foreign trade at the Machinery and Equipment Manufacturers Association (VDMA), warns of a similar threat unfolding before their very eyes.

“The watch industry almost completely disappeared from Germany,and there was a fear that this could also happen to the machinery industry,”

Ackermann recounts. “That hasn’t happened, but now we have a new situation – China Shock 2.0.”

Ackermann emphasizes the unique nature of this challenge: “I think China is a different story. You can’t compare china to japan,” he states,highlighting the scale and scope of China’s industrial ambitions. The VDMA, representing 3,600 German Mittelstand companies, has been sounding the alarm for years, documenting a surge in Chinese competitors gaining ground not only in their home market, but also in Europe and global markets.

The association has received numerous complaints from its members, alleging unfair competition from Chinese players. “We have many complaints from member companies about unfair competition on the European markets,” Ackermann explains.“Unfair competition means, on the one hand, subsidisation and prices which are much below our possibilities.” He adds, “Many members say that for the price the Chinese sell here on the European market, they cannot buy the materials to produce the machine,” revealing the potentially debilitating impact of these practices.

The challenge posed by Chinese competition is multifaceted. Beyond price undercutting, it involves issues like intellectual property protection, access to technology, and government-backed support for Chinese companies. The impact on the German machinery industry, a cornerstone of the nation’s economic strength, is profound. It demands a strategic response not just from individual companies,but from policymakers and industry leaders alike.

Facing this formidable challenge, German engineering companies must innovate, streamline their operations, and explore new markets. This requires a proactive approach,embracing digitalization,fostering collaboration,and investing in research and development. Policymakers must also play a crucial role in leveling the playing field, ensuring fair competition, and supporting German industry’s long-term competitiveness.

What steps should Germany take too tackle china’s growing influence in the machinery industry?

Exclusive Interview: Ulrich Ackermann on China’s Impact on German Engineering

We speak with Ulrich ackermann, Head of Foreign Trade at the machinery and Equipment Manufacturers Association (VDMA), about the growing challenge posed by china’s burgeoning machinery industry to Germany’s highly respected engineering sector.

Bringing Back Memories of the ’80s

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n the history of the German machinery industry, one era stands out as a cautionary tale: the 1980s, when Japanese firms overwhelmed the watchmaking sector. Now, China seems to be writing a new chapter in that story, according to Ulrich Ackermann.

“When I look back to the 1980s, I see parallels,” says Ackermann. “The watch industry in Germany almost entirely disappeared, and there was a fear that the same could happen to the machinery industry. That hasn’t happened yet, but today we’re facing China Shock 2.0.”

The ‘Different Story’ of China

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ou can’t compare China to Japan, Ackermann emphasizes. The scale and ambition of China’s industrial expansion are unprecedented.

“What makes China’s challenge unique is its sheer size and scope,” he explains. “Chinese companies are not just competing in their home market; they’re gaining ground in Europe and global markets. this is a trend we’ve been documenting and warning about for years at VDMA.”

Unfair Competition: A Growing Concern

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embers of VDMA, wich represents 3,600 Mittelstand companies, have been vocal about their struggles against Chinese rivals. Ackermann details their main grievances:

“Many of our members complain about unfair competition on European markets. This includes subsidization and pricing that’s unviable for German firms. In some cases,members tell us that Chinese players sell machines here for a price they couldn’t even cover with materials alone.”

Beyond Price: A Multifaceted Challenge

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he issue isn’t just about pricing. Intellectual property protection, technology access, and government-backed support for Chinese companies also play notable roles.

“this challenge requires a strategic response from policymakers and industry leaders,” Ackermann asserts. “We need to innovate, streamline operations, explore new markets, and embrace digitalization. And that’s just the beginning.”

A Call toAction for Policymakers

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n acknowledging the need for change, Ackermann also calls for support from decision-makers:

“Policymakers must do their part to level the playing field. This means ensuring fair competition, protecting intellectual property, and supporting our industry’s long-term competitiveness. The future of German engineering is at stake.”

Will Germany Rise to the Challenge?

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hrough it all, Ackermann remains hopeful. He believes that Germany’s renowned engineering prowess will ultimately overcome this obstacle.

“History shows that we’ve faced such challenges before,” he says. “With the right strategies and support,I’m confident that German engineering can not only meet this challenge but also emerge stronger.”

Now, we’d like to hear from you. What steps should Germany take to tackle China’s growing influence in the machinery industry? Share your thoughts in the comments below.