For some companies still relying on China today, Beijing is offering warnings of just how painful it might be if and when those longer-term concerns become a reality.
Last month, German automakers saw how a sudden halt in chip supplies from Nexperia, a Chinese-owned firm based in the Netherlands, could disrupt production within days — a crisis not yet fully resolved.
More broadly, German exports to China are declining just as reliance on low-cost Chinese inputs are rising, the result of production shifting to China.
The trend may create “a creeping hollowing out of Germany’s industrial base.”
Business groups now want government intervention.
The VDMA trade association, which represents medium-sized companies in the mechanical and plant engineering field, said a survey showed more than three-quarters of its members still felt competitive against China in the European market. That figure dropped to fewer than half when asked about the outlook five years from now.
Berlin first pledged to “de-risk” from China in 2023 under the previous government but offered more signals than action. Since entering office in May, Chancellor Friedrich Merz has created a national security council and asked it to help address the issue.
At the panel’s first meeting last week, officials agreed to develop an action plan by year end to diversify Germany’s raw material supply sources.
Berlin is also working on an economic security strategy, due next year.
Still, Merz is cautioning companies that he won’t rescue them. Chinese authorities have the power to shut off supplies or lock German companies out of their markets.
“It can happen very quickly.”
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