Germany’s China trade shift defies ‘shock’ narrative

BEIJING, 22 SEPTEMBER 2026 —

German imports from China show no uniform price collapse, with unit values rising 9–10% overall between the first half of 2023 and 2026, contrary to warnings of a deflationary "China shock," according to Global Trade Alert analysis of customs data.

While electric vehicles saw prices drop 25%—coinciding with EU anti-subsidy tariffs—other sectors like machine tools and chemicals recorded modest declines or stability, and 15% of product lines saw unit-value gains of 50% or more.

The data reveal four distinct competitive patterns rather than a single trend. Eleven product lines—including plug-in hybrids, battery EVs, and electric hand tools—combined rising import volumes with falling prices, suggesting price-driven displacement. Six others, such as electric-motor parts and vacuum cleaners, saw volume growth despite unit-value increases of at least 10%, pointing to product upgrading or niche expansion.

In all 17 cases, Chinese imports grew faster than those from other suppliers, with median volume gains of 54.5% versus 6.8% for non-Chinese sources.

The findings directly challenge EU leaders’ claims of a uniform "China shock" driving deindustrialisation. Ursula von der Leyen’s call for "managed trade" to curb Chinese hybrid car imports—now targeted at 15% of the EU market—focuses on one segment where prices fell sharply. Yet the broader data show German manufacturers face a mix of price competition in EVs, value-chain ascent in electronics, and displacement in specific niches like metal furniture and chemical preparations.

For Malaysian exporters and policymakers, the German experience highlights the risks of assuming a single trade strategy will address China’s varied competitive pressures. While Malaysia’s electronics and electrical sector—including EV components—could face price-sensitive competition from China, the data suggest targeted responses may be more effective than broad restrictions.

Bank Negara Malaysia has previously warned of rising import competition in high-tech goods, and local firms in sectors like machinery and chemicals may need to monitor Chinese price trends closely.

The analysis also underscores the limits of aggregate trade data. Germany’s €1 billion daily deficit with China—cited by von der Leyen as evidence of a "tipping point"—obscures the divergent trajectories across product lines. In Malaysia, where exports to China surged 12% year-on-year in 2025, similar granular scrutiny could reveal whether specific sectors are gaining share through price or quality differentiation.

The four competitive patterns identified—price-led penetration, volume growth with higher prices, shared market expansion, and supplier displacement—offer a framework for assessing China’s trade impact. For German policymakers, the challenge lies in distinguishing between sectors where Chinese firms are undercutting rivals and those where they are simply meeting rising demand with upgraded products. In Malaysia, where bumiputera-linked firms dominate certain export sectors, this distinction could inform strategies to mitigate competition while leveraging complementary strengths.

The data do not support blanket trade barriers, but they do signal that China’s export strategy is evolving beyond low-cost manufacturing. The 17 product lines analysed—accounting for $6.09 billion of German imports in 2023—show Chinese firms capturing market share through both aggressive pricing and product differentiation. For Malaysian exporters, this suggests that success may require either niche specialisation or cost advantages in areas where Chinese firms are less dominant.

The EU’s push for "voluntary export restraints" on Chinese hybrids reflects a recognition that price-based competition in EVs cannot be addressed through tariffs alone. In Malaysia, where EV battery production is still nascent, local firms may need to focus on components where China’s cost advantage is less pronounced. The German experience suggests that a one-size-fits-all approach to China trade risks missing the sector-specific dynamics at play.