'Made in China' falsely blamed for 'Made in Germany' problems

When the German Economic Institute unveiled its latest analysis of Bundesbank data, it came as a surprise to some that in the first half of 2026, German corporate investment in China rose by one-third year-on-year, to €5.6 billion ($6.47 billion), while investment in the United States collapsed by nearly two-thirds, to around €4.3 billion.

The institute's researcher, Juergen Matthes, groundlessly claimed the surge was due to "state subsidies and an undervalued yuan" that make production in China "artificially cheap", warning that production and jobs are shifting to China, and urging the European Union to put a stop to this "unfair game" with countervailing restrictive measures.

However, in what can be called a masterpiece in self-contradiction, Matthes describes China as an important sales market and a "gym" where German companies build competitive muscle, implying that what attracts German investment is market opportunity, R&D and business environment. The problem with this contradictory argument is that it treats Chinese advantage as a result of internal "distortion" and German weakness as a result of an external "threat".

A gym is a demanding environment in which companies must improve, innovate and compete — or lose ground. If German companies are expanding in China, they are not simply chasing cheap labor, which is cheaper in many countries other than China. They are seeking a large and sophisticated market, rapid production cycles, capable suppliers and formidable competitors. A 2026 survey by the German Chamber of Commerce in China found that 61 percent of German companies in China plan to increase their investment in the country over the next two years, the highest share since 2023.

German companies invest because customers exist, the application of technologies is advancing and commercial opportunities are real.

Matthes' concession that China is a vital sales market also undermines another false Western narrative: that China's trade surplus is an "unfair" advantage extracted from developed economies. If China were simply a source of economic "plunder", German companies would be retreating rather than doubling down. They compete there and reinvest there. That is a complex win-win commercial relationship.

What really unsettles some Germans is difficult to say aloud. The pride of Germany's postwar industrial model rested on a comfortable hierarchy: we invent, they learn. Those fat years are gone — the years when an auto model already obsolete in global markets could be sold to China for decades and still rake in a fortune.

Researchers in the West who are addicted to shifting blame outward should be reminded that everyone must first do their own homework. Scapegoating China for the structural challenges facing Western economies simply does not work. Some politicians do that but it does not behoove researchers, who are obliged to study the root causes of their countries' difficulties.

In Germany, energy costs remain structurally high. Industrial electricity prices for medium-sized enterprises stood at roughly 22.64 euro cents per kilowatt hour in the second half of 2025 — more than twice the rate in the US. Wholesale gas prices remain roughly twice their pre-Ukraine crisis level. Berlin's "forget it" attitude toward the destruction of the Nord Stream pipelines has only reinforced doubts about its energy strategy.

Regulation is another brake. The German Chamber of Commerce and Industry estimates that direct bureaucratic practices in the country cost €64 billion annually, rising to roughly €146 billion, including wider economic losses. Meanwhile, skilled-worker shortages, demographic pressures and green-transition compliance costs are weighing on investment.

Against this backdrop, should the wave of layoffs at many of Germany's largest companies really be blamed on China "stealing" German jobs?

Back from China in February, the German leader said what needed saying: "With a four-day week and work-life balance, we will not be able to maintain the prosperity of this country." It is a pity such sober realism has so short a shelf life.

German capital is going where it can grow, compete and stay relevant. If Berlin wants to reverse that trend, it should stop drafting tariff proposals and start doing its challenging homework. Germany's problem is not "Made in China", it is "Made in Germany".