Lead briefing

China Shock 2.0: German Industry's Phantom Limb Pain and the Price of Complacency

China Shock 2.0 is sweeping across global commodity markets, with Germany emerging as the most vulnerable victim. Core industries such as automobiles, machinery, and chemicals are simultaneously losing ground in China's domestic market, third-country markets, and Germany's own domestic market. Through an in-depth analysis of three major mechanisms driving China's export surge—high savings with weak domestic demand, systematic industrial subsidies, and an undervalued exchange rate—this article reveals that Germany's industrial output decline is not a cyclical fluctuation but a structural demand shock. Germany has long regarded itself as an export-surplus economy and refused to confront the root causes of this imbalance, with political debates focusing on bureaucracy and energy prices while overlooking that nearly 40% of the GDP gap stems from losses in export markets. The EU's fragmented trade defenses cannot prevent China's trade surplus with Europe from expanding at an annual rate of 30%. If Germany and Brussels fail to rapidly build a stronger trade shield and industrial policy, "Made in Germany" may become a victim of deindustrialization, and the global competitive landscape for advanced manufacturing will be rewritten accordingly.