Drop in German exports to China causes alarm for EU economic powerhouses

Germany’s exports to China have fallen by double digits, which has caused concern about the country’s manufacturing sector. The decline has had a year-over-year impact on Germany’s industrial powerhouses, with economists citing challenges such as automakers losing market share in China, energy-intensive companies reeling from high electricity prices and the euro’s strength against the dollar making German products less competitive. Rising security and trade tensions between China and the United States have also impacted German exporters.
The decline in exports to China has affected German manufacturing, which has also suffered from falling production, plummeting demand and shrinking order backlogs. This could potentially slow growth in the EU’s largest economy. The situation has not been the same for other European countries, which have seen increased shipments to China. The decline in exports has resulted in China’s share of total German exports being just 6%, its lowest share since 2016, and down from more than 7% in each of the previous four years.
Germany’s manufacturing sector has not benefited from the increased Chinese demand after the Chinese government lifted its zero-corona policy and eased supply chain bottlenecks. Manufacturing has not recovered as services have, resulting in automakers being hit by a shortage of small electric vehicles, while energy-intensive companies continue to be at a disadvantage.
German exporters, accounting for more than a quarter of all exports outside the EU, also saw the euro hovering between $1.07 and $1.10 in recent weeks, which hindered the appreciation of the euro. The decline in exports to China and the manufacturing sector’s decline could lead to a technological recession if GDP falls for two consecutive quarters.