The dramatic decline in German exports to China has shaken Europe’s largest economy, sparking fears about the EU’s economic strength, causing a decline in the huge manufacturing sector for competitors benefiting from a rebound in Chinese demand. The Financial Times reported.
The 11.3% fall in German exports to China, in the first four months of 2023, compared to the same period in 2022, highlights a set of deep challenges ahead Europe’s industrial power. Economists said.
Automakers lose market share in China, while chemical producers and other companies, which have high energy use, suffer from higher cost prices. The euro’s rise against the US dollar also made German goods less competitive.
German exporters now feel victimized by security and trade tensions between China and The US. According to Carsten Brzeski, Global Head of Macroeconomic Research at the Dutch Bank.
Germany is now an ally of the United States, which has led to more discouraging – explicit or implicit – purchases of German products. Brzeski added.
Falling exports to China is one of many indications that Germany’s manufacturing sector is experiencing a sharp decline early this year.
Including lower factory production, lower demand and shrinking demand, which could slow growth in the EU, especially as German exporters account for more than a quarter of all EU exports abroad.
Several major German companies, which have large subsidiaries in China, reported a significant decline in sales in the country’s first quarter, including the chemicals group BASF, the leading Volkswagen, and the auto parts producer Bosch.
Germany has recorded its highest annual inflation rate in more than 70 years, reaching 7.9% over the course of 2022, and families with middle and low incomes in Germany are struggling to cope with inflation and high energy prices, amid accusations of inaction by the government.