Elisa Hörhager: 'Now is the time to act confidently and united'

How do you rate the Chinese economic stimulus package?

The assumption that there would be a reaction to the election result in the US did not come to pass. The Chinese government sticks to its tightly controlled narrative of continuity and stability and is following through with the measures announced weeks ago. Beijing only wants to make the gradual adjustments that are necessary for the transition from infrastructure and property-driven growth to industry-led growth. The "new productive forces," that is, rapid scientific and technological innovation and the modernization of traditional industries, continue to be crucial.

How do German companies in China feel about the stimulus?

German companies have been massively suffering from price competition in China for some time now, for example in the mechanical engineering and automotive sectors. Many companies had hoped that the government would stimulate domestic consumption. Some had even expected a "Chinese bazooka," which the recently announced measures are not. On the contrary, the expectation is that consumption will not increase significantly.

How do companies deal with this?

They continue to prepare for difficult years ahead, especially with growing trade tensions between the US and China following the outcome of the US election. However, China remains an important market, especially for companies that have invested in China. Over the next few years, the real estate crisis must be resolved and structural reforms tackled. Important reforms have already been announced in the Third Plenum, including the real estate tax. This will be painful for consumers. What is certain is that China is facing urgent structural challenges that necessitate transforming the economy.

How has the business environment in China developed?

Competition is getting tougher. Some products from Chinese competitors are much cheaper, yet the quality is adequate. This is nothing new, but it is a trend that is becoming increasingly apparent. This means that companies will increasingly consider localizing and producing in China for China, meaning manufacturing products specifically for the Chinese market at lower prices that differ in quality from their German counterparts. Subsidies play a central role here, as does the question of the framework conditions for foreign companies. The Chinese government still has much to do to ensure fair competition and equal market access.

How important is In China for China for German companies?

Due to the size of the market and the fierce competition, China is the gym for German companies. If you can survive here, you can survive anywhere. I would even dare to say that China is a greenhouse. Innovations are created here, and there is so much technological lead in certain areas that we can use for ourselves in Germany, for example, in autonomous driving or the development of electromobility.

Are all German companies ready for this gym?

That is the key question. I hear from Chinese companies that buy from German suppliers that they still value the German quality advantage. Such Chinese companies can convincingly explain to their customers why their end product is more expensive but also lasts longer. Made in Germany still carries weight in China. The only question is how much longer it will last. We compete with China's state-dominated economic system. How and in which areas do we strategically secure our leading positions? Defensive instruments to safeguard against market distortion are certainly part of the solution. However, to counter Chinese advantages in costs and technology and create incentives for Europe as a production base, we need to improve our competitiveness.

How is that supposed to work?

The key to this is to fully utilize the strength of the European market. This includes using trade policy instruments and creating incentives for welcome Chinese investments in the EU. The anti-subsidy tariffs on EVs from China mean both sides are back at the negotiating table. In light of the US election result, China is listening even closer. Now is the time to act confidently and united, and pursue our European interests just as strategically as the Chinese do. Then, we will have the chance to push through important demands for fair competitive conditions vis-à-vis China.

Elisa Hörhager has worked in Beijing, Berlin and Brussels for the Federal Foreign Office on economic and China-related matters. Since August 1, 2024, she has headed the representation of the Federation of German Industries (BDI) in Beijing.