China: Bundesbank warns of growing competition for German companies

The Chinese economy has recently slowed down, but it could soon become dangerous for German companies. The "shift to higher value products" could put the German exporters under competitive pressure, the Bundesbank warns in its latest monthly report.In particular in the field of electric cars, the authors expect strong competition for German builders In addition, higher wages in China could make products in Germany more expensive

The average income in China still represents only a quarter of what is earned in the United States. However, the average monthly salary in the manufacturing sector has increased from $ 160 in 2005 to $ 800 in 2017. As a result, many textile companies have migrated to other low-wage Asian countries such as Vietnam or Canada. Bangladesh How long would these countries still have enough cheap labor to sell T-shirts in Germany as cheaply as before?

Typical German Domains such s that the car industry since 2015, Chinese leaders with the strategy "Made in China 2025" targeted in the focus. In the big Chinese market for electric vehicles, the German manufacturers play no role. The Bundesbank expects China to export its e-cars on a large scale in the medium term. But China's competitive pressure on Germany is also steadily increasing in many other sectors.

Chinese imports increase only moderately

However, the risks to the Chinese financial markets are perceived by the Bundesbank as a danger only under certain conditions. "In the case of a financial crisis in China, the German financial system would probably be the most affected by indirect contagion," the report said. The direct demands of the German financial institutions against the Chinese made at the end of 2017 with 42 billion euros only a very small part of the total foreign claims.

However, Germany imports more from China than from China, and vice versa, the country is the third largest market for German products. In total, China's foreign trade grew by 16% in the first half of 2018 compared with the previous year, with imports up 19.9%.

According to the Bundesbank, German exporters have managed to maintain their market shares in China. It would be more and more difficult. For example, German manufacturers sell fewer machines in China because their industry does not invest as much. However, the importance of semiconductors increases dramatically – China can not yet produce this itself.

The rise in consumption with Chinese wages also offers a good sales opportunity. Beijing is trying to meet the growing demand for its own production, but German products such as cars are still in high demand because of their quality. Car manufacturers have also benefited from tariff reductions since July.