Business
Germany's Deindustrialization Risk: The 'China Shock 2.0' Warning
AI Summary
A leading Brussels thinktank warns Germany that its complacency towards China’s economic dominance risks a repeat of the deindustrialization seen in the US in 2001, citing a $94bn trade deficit and aggressive export policies.
The 'China Shock 2.0' Warning from Brussels
Germany is facing a critical warning from the Centre for European Reform (CER) regarding its economic reliance on China, which could lead to a repeat of the 'China Shock 1.0' experienced by the United States.
The $94bn Trade Imbalance and Currency Manipulation
- China's surplus with Germany doubled between 2024 and 2025 from $12bn to $25bn.
- The total trade imbalance has reached $94bn.
- China reported a record $1.2tn trade surplus in 2025.
- The yuan is potentially undervalued against the euro by 40%.
Hollowing Out the Mittelstand
The report warns that Beijing’s '10,000 little giants' policy is specifically targeting Germany’s Mittelstand, the ecosystem of middle-sized industrial suppliers. The CER describes Germany's failure to diagnose the root cause as 'phantom pain' caused by the loss of export demand.
Berlin's Offensive Strategy
The CER concludes that Berlin must stop admiring the problem and instead go on the offensive. The thinktank recommends supporting Paris in pushing the IMF and G7 to confront China’s currency undervaluation and one-sided trade model.