Thousands of specialized medium-sized enterprises, the backbone of German industry, are losing market position amid growing competition from China.
According to The Wall Street Journal, Chinese products are rapidly improving in quality and cost about half as much as German ones.
For the first time in decades, Germany imports more high-tech industrial goods from China than it exports. The EY report states that German industry loses over 10,000 jobs monthly, and industrial output has fallen by about 10% from February 2022 to early 2026.
Patrick Burkhart, director of Aura, a heating systems manufacturer, said competition from China has intensified sharply in the last six months, with orders almost stopping. Currently, 20% of Aura's production is in China; if the situation continues, it could reach 70%.
China is deliberately developing specialized medium-sized enterprises under its "10,000 Little Giants" program to squeeze out Germany's "hidden champions." This year, China's exports to Germany rose by 17%.
German companies, long advocates of free trade, now demand protective measures against state-backed Chinese firms. While the EU discusses new trade measures against China, they won't take effect for at least a year.
