German and European Industrial Policy and the Rise of China

Tasks

China has undergone rapid economic development in recent decades and can keep up with global competition in many markets. Chinese companies are becoming increasingly present in Germany and on the world markets. In a globalized world with a market economy, this is perfectly normal for an emerging country. However, it may be problematic if Chinese companies enjoy advantages over domestic companies or competitors from third countries in foreign markets through preferential access to resources in their home country. This raises a justified concern that European and German companies will (irreversibly) fall behind in competition with state-supported Chinese companies. The question therefore arises which answers German and European economic policy can and should provide here.

This article gives an overview of the development of German-Chinese trade and investment relations and describes the institutional conditions under which they take place. In particular, it shows under which institutional conditions German companies operate in China and how these have developed recently. In addition, the article deals with the impact this has on German companies in their home market and on global markets. Finally, it discusses what measures German and European policymakers should take to ensure fair competition between German, European and Chinese companies.