‘Phantom limb’: report blames China shock for Germany’s industrial malaise

A report by the Centre for European Reform identifies a "China shock" to Germany's trade economy as the primary cause of its industrial slump. The think tank urges Germany to support stronger EU measures against Beijing, noting that this is the most significant factor in the country's economic difficulties, yet Berlin is least willing to address it. This assessment comes amid ongoing discussions in Berlin about how to revitalize the economy, with the German government previously focusing on deregulation. The report's findings suggest that the impact of China's trade practices is a more critical issue than previously acknowledged by German policymakers.

European industry faces a potential "China shock" due to increasing reliance on imported components, raising fears of job losses and the displacement of local manufacturing. Trade analysts warn that a combination of China's plunging exchange rate and state support for its firms makes Chinese products significantly cheaper, even for components. This trend is leading to a growing trade surplus for China with the EU and Germany, with significant job losses reported in the German machinery and automotive sectors. The EU is considering measures, such as requiring companies to diversify suppliers, to address this growing dependence, as the volume of imported components, particularly in sectors like amino acids and polyhydric alcohols, is alarmingly high.