KfW Research: Rivalry between China and Germany is intensifying

• Competition for exports to EU countries is increasing
• Germany is losing shares to China
• Automotive and mechanical engineering as well as chemical products are becoming increasingly similar
• US-China conflict will further heat up rivalry for trade in EU markets

The competition between Germany and China in the markets of the European Union is becoming increasingly intense. While Germany is losing export shares, China is making gains. In addition, the export profiles of both countries have been converging for years. They are competing in more and more product categories, both in automotive and mechanical engineering and in the chemical products sector. Although Germany still has higher shares in the imports of other EU countries than China in most of these product groups, its lead is shrinking.

These are the findings of a study by KfW Research on the competitive situation between China and Germany in the markets of the European Union.

“China is working to export its own excess capacity. In this effort, Europe is now moving more into the focus of the People’s Republic because the conditions for selling in the US are rapidly deteriorating”,

said Dr Dirk Schumacher, Chief Economist of KfW.

“It is critical for Germany to create a favourable business environment and make the economy competitive in order to respond to growing competitive pressure from China as well as from other countries.”

In most segments, Germany still has higher shares of the EU’s imports than China, but its lead is shrinking. In the year 2012, the total value of imports from Germany to the other EU member states still stood at around 33 per cent, but in 2024 that figure dropped to 29 per cent. The share of imports from China rose from around 1 to 4 per cent over the same period. Germany’s share of engineering products was 30 per cent in 2012 and 28 per cent in 2024. China, on the other hand, expanded its share from 7 to 10 per cent. Germany’s share of chemical products in the imports of other EU countries fell from 22 per cent to 18 per cent while China’s rose from 2 to around 6 per cent.

Overall, goods exported from Germany to other EU countries amounted to around 54 per cent of its total exports while China exported 11 per cent there in 2024. Various surveys among German enterprises have revealed that most of them expect the rivalry to further intensify with Chinese businesses. China has constantly diversified its exports over the past years. The share of labour-intensive goods in particular is on the decline. At the same time, China has reduced its trade in goods that are merely assembled in the country from a share of 55 per cent of the total export value in 2001 to 20 per cent in the year 2024.

The study can be downloaded from Focus on Economics | KfW

Where does the German economy stand today? What does the country need to become future-proof? KfW Research explores these questions in the position paper “Managing the transition, strengthening growth”, with analyses of the current situation and recommendations for action in five policy areas. The paper is available for download at Papers and Proceedings on Economics | KfW