In May, Sander Tordoir and Brad Setser published a widely discussed paper, China Shock 2.0: The Cost of Germany’s Complacency, arguing that Germany has become “ground zero” of a second China shock. Their case is powerful: rapidly expanding Chinese exports are squeezing German producers of cars, machinery, chemicals and aircraft not only in China, but increasingly in third markets and Europe itself. They estimate that the drag from falling net exports since 2023 amounts to roughly 3 per cent of German GDP, while Chinese car exports have already reached an annualised pace of 10mn vehicles — a level previously expected only by the end of the decade. But there is a danger in turning this diagnosis into a convenient monocausal explanation of Germany’s industrial malaise. Before concluding that Chinese industrial policy is killing German industry, we should ask a more uncomfortable question: how much of Germany’s present predicament was created by Germany itself?
Anyone presenting Germany’s industrial decline as primarily a China problem should first explain how Germany got here. The story did not begin with Chinese overcapacity or subsidised EVs. It began at home.
You must be logged in to post a comment.