German companies under pressure to adapt as China challenges them at
their own game
[September 02, 2026] By
DAVID McHUGH A
MOOSBURG, Germany (AP) — The heart of the German economy is making and
exporting the big-ticket, complex goods that make global business run:
everything from cars and locomotives to factory machinery, aircraft and
construction equipment.
That model for growth is under serious pressure from a new competitor
whose exports can often match or approach Germany's in quality and sell
for far less: China.
The China shock — as economists call it — is emerging as a key reason
for Germany’s chronic economic stagnation since the COVID-19 pandemic.
The sluggish economy has helped make Chancellor Friedrich Merz’s
governing coalition unpopular ahead of an election Sunday in the eastern
region of Saxony-Anhalt in which the far-right Alternative for Germany
has its best chance yet of getting its first state governor.
German companies once reaped fat profits selling to China. But the
tables have turned as Beijing supports companies in targeted sectors —
often where German companies make competing goods. China's goods cannot
find enough buyers in China’s currently tepid economy, so they are
shipped to foreign markets, including Europe.
Economic stagnation sours the mood ahead of regional elections
The German economy — Europe’s biggest — has stagnated for several years,
shrinking in 2023 and 2024 and showing only 0.2% growth last year.
Although unemployment rate of 4% is lower than the EU average, Germans
can see the unsettling headlines about job reductions at companies that
have defined the German economy for decades: 50,000 at Volkswagen, with
media reports of plans for more, 8,000 buyouts at BMW by the end of next
year, a reduction of 13,000 at auto technology firm Bosch by 2030. And
inflation has run ahead of wage increases after the pandemic, with last
year's real wages only just catching up to where they were in 2019.
Costs must come down “in an environment where the Chinese total market
is down by 20%, and Chinese competitors are increasing exports and
thereby competitive pressure in Europe,” said Volkswagen’s finance
chief, Arno Antlitz.
Of the world's major economies, Germany has been hit the hardest
Germany's economy relies on exports that are similar to the kind of
manufactured goods that Beijing is now targeting for support. Other
major economies such as Britain, Italy and France have smaller
manufacturing sectors, while U.S. tariffs block many Chinese goods,
above all autos.
Germany now buys more from China than it sells in precisely the
categories where German companies once dominated: cars, trucks, buses
and trains, aircraft, factory machinery and medical devices. “China has
already eaten much of German industry’s lunch and is preparing to start
on dinner,” wrote economists Brad Setser and Sander Tordoir.
One answer: If you can’t beat them, join them.
Jungheinrich AG, a German maker of forklifts and warehouse vehicles, is
partnering with Chinese manufacturer EP Equipment to make AntOn, an
entry-level forklift that can match competitors on price. The
partnership is taking advantage of EP’s large scale and lower production
costs in China, and pairing it with Jungheinrich’s global sales force
and reputation as one of the world’s three leading makers of warehouse
vehicles.
AntOn's lineup may not quite match the features available in strictly
German-made vehicles — but they're good enough and half the price. So
AntOn, painted a bright purple color to differentiate it from
Jungheinrich's high-end yellow machines, has a simple, robust design
with basic levers instead of a joystick, no compartment for a phone or
wallet and an uncushioned seat. They sell for much less than typical
Jungheinrich machinery, but it's aimed at customers who may not need to
run them 24/7.
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Employees at forklift and warehouse manufacturer Jungheinrich work
on the assembly line in Moosburg, Germany, Tuesday, Aug. 25, 2026.
(AP Photo/Matthias Schrader)
 “The challenge is, there comes a
massive wave with Chinese products and Chinese offerings into
Europe, but also into the international markets. And the key
question is, how do you react?” said Chief Sales Officer Nadine
Despineaux at the company's plant in Moosburg near Munich.
She views the demand for entry-level or “mid-tech” vehicles as a
business opportunity to reach new customers and markets. AntOn “is a
good combination of German engineering, market access and customer
proximity, which we bring to the table, and highly efficient
production sites, which we use in China.”
Volkswagen has adopted an “in China, for China” approach, setting up
a vehicle development center in Hefei to design vehicles to the
local market.
German policymakers are attempting to avoid a repeat of what
happened with the country's solar industry. Germany pioneered solar
panel adoption in the early part of this century, but lower-priced
Chinese products drove several German manufacturers into bankruptcy.
Now, most solar panels in the country are imported from China.
Chinese companies do get help, but must survive ferocious
competition at home
Chinese industrial policy means key sectors get many different kinds
of support, including easy credit, inexpensive raw materials, cheap
land and, in some cases, “made in China” requirements. Chinese
workers earn less than those in Europe and economists say China
works to keep its currency artificially low, making its goods more
competitive overseas.
But China’s export prowess is based on more than government help.
Chinese companies face brutal competition on price in a sluggish
economy at home, forcing companies to keep costs down while racing
to adopt new technology.
China rejects the criticism of its trading partners. A recent
Ministry of Commerce report titled “China's Position on the
So-Called Excess Capacity Issue” says discussions surrounding a
China shock “falsely” describe China's industrial development as a
threat to Western economies.
From its end, the German government has sought to improve growth by
enacting a 500 billion euro ($579 billion) fund to pay for new
infrastructure such as roads, bridges and rail lines. A package
proposed in July includes income tax cuts for mid- and lower-income
taxpayers and reductions in red tape.
The solution for German companies may be in Brussels
But Setser, the economist and a senior fellow at the Council on
Foreign Relations, says the trade statistics show that the China
shock is a dominant reason for Germany’s economic malaise. And the
answer for Germany may be out of the hands of German industry — and
the ultimate responsibility of EU trade policy run by the European
Commission in Brussels. The Commission has imposed narrowly tailored
tariffs, or import taxes, on some Chinese goods such as electric
autos and platforms that lift workers at construction sites.
“We do think that Europe needs a tougher trade policy, that it needs
to insulate its market from some of the spillovers from China’s own
industrial policies,” said Setser. “There has to be a bit more
symmetry … that the rest of the world will not remain open to a
China that itself is not open to new imports.”
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