Can China bring down the German economy?

A few weeks ago, while having tea in a Berlin cafe, a German sinologist was telling me with concern about the decline of her country's economy. Germany's industry, which years ago it was one of the most powerful in the world, now it's in deep water to withstand Chinese competition. The strongest shock is in the automotive sector, the main economic engine of Germany – and also Europe. China has emerged as the world leader in electric vehicles, while the German combustion engine is increasingly a museum piece. Volkswagen has announced it will cut 100,000 jobs worldwide. Every month are lost 10,000 industrial jobs in Germany, a good part of them in the Mittelstand, the fabric of medium and small exporting companies in the country. In part, this industrial decline of Germany is caused by China. Chinese industrial companies now manufacture the complex, expensive, and advanced products that were previously only manufactured by Western industry. The Chinese government has provided subsidies, devalued the yuan, and extracted technological transfers from European companies investing in China. But it has also been strongly innovative and forward-thinking technologically. In view of this, the German government wants the European Union to impose more restrictions and conditions on Chinese products and companies arriving in the EU, in order to protect its industrial fabric.Stopping China, however, will not make the German economy flourish again. The main problem with Berlin's economic model is internal. Germany does not have a Google, an Nvidia, or a Huawei: the vast majority of its current large companies were created in the late 19th and early 20th centuries. For decades, there has been a complacent attitude among the German political class and population, believing that these large companies would eternally drive the economy and innovation. But the result has been the opposite: more focused on paying dividends to shareholders than on investing in R&D, German large companies have lost key races such as the electric car race. The German economy is poorly digitized and highly bureaucratized, an environment where new technology companies have difficulty finding a place. Berlin calls for restrictions

Germany should have reacted sooner. Until recently, German companies lobbied to keep the Chinese market open for their exports; now, a good part of them are calling for restrictions on Beijing. Berlin is now calling for measures to be taken against Chinese industrial power, but when in the 2000s it affected the economies of Southern Europe, the German response was that they had to adapt to globalization.The German position may seem opportunistic to us. But the consequences of the European Union's leading economy entering a crisis would be very real and detrimental to all of Europe. The German-dominated automotive sector continues to be the continent's main industrial engine. 10% of Spanish exports go to the German market. An economic downturn would have political consequences. Germany's far-right has grown in the country's most depressed areas, and a process of deindustrialization would give it even more strength. If the AfD were to gain power, this would generate a wave that would radiate to the rest of the European Union states. Like it or not, our future is closely tied to that of Germany.