Industrial firms in Germany experience mounting competitive challenges from China.
German firms dealing in manufacturing are frequently facing pressure from China which has led to numerous layoffs. As per a recent report by the pro-business Institute of the German Economy (IW) situated in Cologne, 65.7 percent of industrial entities consider the competition from China to be either "fairly immense" or "immense." As a result, most of these companies are considering protectionist trade measures like imposing taxes on Chinese electric cars.
The IW interviewed approximately 900 German corporations operating in the industrial and related sectors in March and April. Out of these, 356 companies reported having competitors from China in their markets. These companies also expressed their own apprehensions concerning Chinese competition.
The primary worry for these firms is the pressure on pricing as they said Chinese rivals undercut their prices by more than 20% in half of the instances. A significant majority (approximately 60%) suspect that the Chinese government intervenes unfairly in the market by providing subsidies.
The survey revealed that one-third of the companies (35%) respond to Chinese competition by decreasing their production levels, while nearly 30% witness a consequence in layoffs and shifts to other countries. Out of the companies perceiving Chinese competition as a significant challenge, almost every second company reacts by cutting back on production and shifting operations overseas. In these cases, about seven out of ten companies are compelled to let go of employees.
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Despite the German Industrial companies' attempts to counteract the competitive pressure from China by considering protective trade measures, many are still struggling to maintain their profit margins due to price undercutting by Chinese rivals. Consequently, a significant number of German industrial firms are forced to implement layoffs and shift operations to other countries to stay afloat, as suggested by the IW study.
