BERLIN — German companies are facing a rapidly intensifying challenge from Chinese competitors, with a new survey showing that Chinese firms are no longer competing mainly on low prices but increasingly on technology, quality and innovation.
The findings from the German Chamber of Commerce and Industry (DIHK) offer a fresh warning for Europe’s biggest economy as German manufacturers confront rising costs at home and increasingly aggressive competitors abroad.
The DIHK surveyed around 1,300 German companies from industry, trade and services during July and August 2026.
About two-thirds of the companies said they are experiencing growing competitive pressure from Chinese rivals. The figure rises sharply in industry, where 83% of companies reported increasing competition from China.
The message from German businesses is increasingly clear: China is no longer simply a massive market for German products.
Chinese companies are becoming direct competitors — including in markets where German businesses once held a technological and quality advantage.
Chinese competitors are moving up the value chain
For decades, German industry built its global reputation around engineering, precision manufacturing, automobiles, machinery and industrial technology.
Chinese manufacturers were often associated with cheaper production.
That distinction is becoming harder to maintain.
DIHK foreign-trade chief Volker Treier said competition with China has reached a “new dimension”, with Chinese companies increasingly competing through technology, innovation and international expansion rather than relying solely on price.
The change is particularly important for Germany’s industrial sector.
According to the survey, 83% of industrial companies reported increasing competitive pressure from Chinese rivals, while half described the pressure as strong or very strong.
And the competition is not confined to the Chinese market.
German companies reported encountering Chinese competitors in the European Union, Germany itself and third-country markets.
That means the challenge is increasingly following German companies home.
Even companies with no China business are feeling the pressure
One of the more striking findings is that German businesses do not necessarily need to operate in China to feel the impact.
Among companies with direct investments or operations in China, 88% reported increasing competitive pressure.
But even among companies with no direct business relationship with China, 38% said they were experiencing greater competition from Chinese companies.
The figures suggest that China’s manufacturing strength is increasingly influencing global prices, supply chains and market competition regardless of whether a German company actually sells in China.
The pressure is particularly visible in industries exposed to Chinese manufacturing capacity.
And that could become a growing problem for Germany, whose economic model has historically depended heavily on industrial exports.
Germany’s trade deficit with China is widening
The competitive pressure is also reflected in Germany’s trade relationship with China.
Germany’s trade deficit with China widened by roughly €22 billion last year to €89.3 billion, according to the Reuters report based on the DIHK findings.
Chinese imports into Germany increased 8.8%, while German exports to China fell 9.7%.
That combination is particularly uncomfortable for German policymakers.
Germany continues to rely heavily on China as a source of products, components and industrial inputs, while German companies are finding it increasingly difficult to maintain their previous export strength in the Chinese market.
China therefore occupies a complicated position in Germany’s economy:
customer, supplier, production base, business partner — and increasingly, competitor.
German companies aren’t giving up
Despite the pressure, the survey does not show German companies abandoning their industries.
In fact, 88% said withdrawing from their business field was not an option.
Instead, businesses are looking for ways to become more competitive.
The most common response is product innovation, cited by 60% of companies.
Another 50% are focusing on cutting costs, while 39% are looking for new markets.
Meanwhile, almost one-third — 31% — said they were pursuing greater cooperation with Chinese partners.
That last figure highlights the complexity of the relationship.
German businesses may fear Chinese competition while simultaneously depending on Chinese suppliers, technology, manufacturing capacity or customers.
Some companies are choosing cooperation instead of confrontation
The survey indicates that German companies are not uniformly calling for economic separation from China.
Many are attempting to compete by adapting to China’s strengths.
Some businesses are forming partnerships with Chinese companies or moving portions of their operations to remain competitive.
The Associated Press recently highlighted examples of German manufacturers responding to China’s rise by working with Chinese producers to develop lower-cost machinery rather than attempting to compete exclusively through traditional German manufacturing models.
This reflects a broader reality facing European companies.
China is not simply producing more goods.
Chinese manufacturers have become increasingly capable of producing sophisticated products quickly and at competitive prices.
For German companies, that makes the challenge much harder to solve through branding alone.
German businesses want Europe to fight back
The survey also reveals growing support for stronger European action.
Fifty-five percent of companies surveyed supported stronger EU measures against market distortions, even if those measures could bring higher prices, additional bureaucracy, tariffs or possible retaliation against European businesses.
Thirty-seven percent opposed stronger measures.
German companies also identified several priorities for European policymakers.
About:
- 67% want a coordinated European position toward China.
- 60% want Europe to reduce strategic dependencies.
- 49% support stronger protection for critical infrastructure.
- 36% favour restrictions on Chinese access to the EU market.
The numbers reveal an important nuance.
German companies are asking for a tougher European response, but most are not calling for a complete economic break with China.
They want Europe to become less vulnerable while maintaining access to an important trading relationship.
The problem isn’t only China
DIHK itself cautioned against blaming every German economic weakness on Chinese competition.
German companies also identified high energy costs, labour costs and excessive bureaucracy as major disadvantages.
Treier stressed that not every Chinese competitive advantage represents unfair competition and not every German disadvantage originates in China.
That distinction could become increasingly important as Germany debates how aggressively to respond.
If Berlin and Brussels impose stronger trade barriers without addressing domestic costs, German manufacturers could remain vulnerable even with greater protection from Chinese rivals.
The challenge is therefore two-sided:
Germany must compete more effectively while Europe decides where legitimate competition ends and market distortion begins.
Volkswagen and Germany’s auto industry illustrate the bigger problem
The automotive sector is one of the clearest examples of the changing competitive landscape.
German automakers have suffered significant pressure in China as local manufacturers have rapidly expanded their electric-vehicle technology and product offerings.
Volkswagen, one of Germany’s most important industrial companies, is simultaneously undertaking major restructuring efforts as it tries to reduce costs and respond to increasingly competitive Chinese automakers.
The problem extends beyond cars.
German companies in machinery, industrial equipment and other manufacturing sectors are increasingly encountering Chinese products that can compete on quality while maintaining a significant cost advantage.
The transformation is forcing companies that once relied heavily on engineering superiority to rethink their business models.
Europe faces a difficult choice
Germany has traditionally benefited enormously from international trade.
China became one of its most important economic partners, while German companies built factories, supply chains and sales networks across the Chinese market.
Now that relationship is becoming more complicated.
Chinese companies are moving into higher-value industries, expanding internationally and competing directly with European manufacturers.
At the same time, German businesses remain dependent on China for important supplies and commercial opportunities.
That leaves Berlin and Brussels with a difficult balancing act.
A complete economic decoupling would be costly.
But doing nothing could leave European manufacturers increasingly exposed to competitors with lower costs, massive production capacity and rapidly improving technology.
The warning for Germany is getting louder
The latest DIHK survey does not show German industry collapsing under Chinese competition.
It shows something potentially more consequential:
German companies are being forced to change how they compete.
They are investing in new products, cutting costs, searching for new markets and, in some cases, partnering with the very Chinese companies they fear as competitors.
The fact that two-thirds of German businesses now report growing pressure from Chinese rivals — including 83% of industrial companies — suggests the shift is no longer confined to a handful of industries.
For Germany, the question is no longer whether Chinese competition is coming.
It is how much of the country’s traditional industrial advantage can survive as Chinese companies increasingly compete on the same technological battlefield.
WWC ONE MEDIA J.M.D
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