BERLIN – Germany and the European Union should address their own structural economic challenges rather than rely primarily on protectionism in response to growing competition from China, a German business leader has said.
As debate over China policy intensifies in Europe, Michael Schumann, chairman of the Board of the German Federal Association for Economic Development and Foreign Trade, stressed the need to distinguish between competitive pressures and the underlying causes of Europe’s industrial difficulties. “Chinese competition is real; it is not, however, the principal explanation for Europe’s and Germany’s structural difficulties,” he said in an interview with Xinhua. Germany and other European economies face long-standing structural problems, including underinvestment in infrastructure, excessive bureaucracy, high energy and labour costs, and an overreliance on technological advantages that were once taken for granted, he said, noting that competition from China has exposed some of these weaknesses and accelerated the need for change, but it did not create them.
Europe would make a serious strategic mistake if it responded to its competitiveness challenges primarily through protectionism, Schumann said. The aim should be to rebalance economic ties with China, not sever them, he said, adding that concerns over reciprocity, market access and trade imbalances need to be addressed through dialogue and consultation. Schumann deems it a priority for Germany to restore industrial competitiveness while remaining open to one of the world’s most important markets and innovation centres. Trade policy may give industries some breathing space, but it cannot replace the structural transformation needed to strengthen their long-term competitiveness, he said. “China has become a formidable industrial competitor, but competition should not be confused with hostility,” Schumann said, describing competition as a potential driver of innovation and renewal. He argued that Europe’s competitiveness ultimately depends on its own efforts to lower energy costs, accelerate planning procedures, improve infrastructure and invest more in education and research. “China cannot do that work for us, and tariffs cannot do it for us either,” he said.
Despite increasingly prominent calls for “de-risking” in European political discourse, German companies have continued to invest in China, highlighting a gap between political rhetoric and business decisions, Schumann said. According to the German Economic Institute, German companies invested more than 7 billion euros (US$7.8 billion) in China in 2025, the highest annual figure in four years. A recent survey by the German Chamber of Commerce in China found that 61% of German companies planned to increase their investment in China over the following two years, the highest proportion since 2023, Schumann said.
The investment pattern is also changing. German companies already established in China are reinvesting locally, expanding research and development capabilities and localizing supply chains under an “in China, for China” strategy. German headquarters are increasingly learning from their Chinese operations, reflecting a more reciprocal flow of knowledge and innovation, Schumann said. Having made several trips to China in a year, Schumann said he has witnessed firsthand the dynamism of the Chinese economy.
A visit to Chinese technology company Xiaomi’s electric-vehicle factory in Beijing left a deep impression on him. “The level of automation and production efficiency was truly impressive,” he said, adding that the experience offered a glimpse into the pace and scale of China’s industrial innovation. “China’s dynamic innovation environment is like a ‘fitness room’ for foreign companies, allowing them to test their capabilities, adapt to new developments and strengthen their competitiveness,” Schumann said. He added that German companies are expanding their presence in China not only to access its market but also to remain connected to global manufacturing networks and emerging technologies.
Rather than viewing China solely as a competitor, German companies should seek opportunities to build on their complementary strengths, Schumann said. The future of Germany’s automotive industry will depend not only on its ability to compete with Chinese manufacturers, but also on how effectively it adapts to the technological changes reshaping the global market. “Maintaining an open and pragmatic economic relationship with China is essential to safeguarding Germany’s industrial base and securing its future growth,” Schumann said, adding that cooperation between the two countries could help their companies strengthen competitiveness and navigate the transformation of the global automotive industry.
– Xinhua
The post German leader urges pragmatic approach to China-EU economic ties appeared first on New Era.