German industry is increasing pressure on Chancellor Friedrich Merz to take a tougher stance against what companies describe as unfair competition from China.

Germany’s trade deficit with China widened by around €22bn ($26bn) last year to €89.3bn ($104bn), while German manufacturers face growing price pressure from Chinese rivals. The shift marks a change in a country whose businesses have traditionally been wary of trade barriers for fear of retaliation from Beijing.

An OECD report found that Chinese manufacturers receive three to eight times more state support relative to revenue than rivals in OECD countries. Deutsche Bank analysts estimate that the yuan is around 15% undervalued against the euro, while the Federation of German Industries (BDI) says these factors allow Chinese companies to undercut German prices by 30%–40%. China denies unfairly subsidizing its industries or using its currency to gain an export advantage.

The pressure is particularly acute for automakers such as Volkswagen, which face growing competition from Chinese manufacturers not only in China but increasingly in Europe.

The BDI is calling for faster use of existing trade-defense instruments, including anti-dumping and anti-subsidy measures, while the German Chamber of Commerce and Industry wants decision-making procedures streamlined. German business leaders have also called for measures such as local-content requirements within the EU.

Merz has asked his cabinet to draw up proposals to address trade imbalances between the EU and China. He has also signaled support for Brussels preparing protective measures should planned talks with Beijing in October fail.

(Reuters, max)