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18. October 2018

VDMA: China and USA are heading in the wrong direction

The trade dispute between the world's two largest economic powers is increasingly affecting mechanical engineering industry in Germany. A new study by the VDMA shows that China remains an economic system characterised by political intervention.


The effects of the trade dispute between the USA and China are increasingly being felt by mechanical engineering companies in Germany. Companies that produce for the American market in China are particularly affected by the punitive tariffs on a broad front.

"But the trade dispute is also causing growing uncertainty in world trade overall," said VDMA President Carl Martin Welcker in a press meeting at the 10th German Mechanical Engineering Summit in Berlin. "We still have the goal to increase production in mechanical engineering by 5 percent in real terms this year, but it will be difficult," he added.

From January to August inclusive, German machine and plant manufacturers increased their production by 3.2 percent in real terms. For 2019, the VDMA economists anticipate a slowdown in momentum and production growth of 2 percent in real terms.

China moves back to 1st place in export ranking list
China and the United States are the most important individual markets for mechanical engineering companies in Germany. After seven months of the current year, the People's Republic has regained its top position in the export ranking by a narrow margin ahead of the USA. Between January and July, machinery and equipment worth 10.94 billion euros were exported from Germany to China and 10.92 billion euros to the USA. Together, the two countries account for 21.5 percent of all machine exports from Germany. This makes it all the more important for the medium-sized mechanical engineering industry that market access to both countries remains open.

"Unfortunately, developments in both China and the USA are going in the wrong direction," the VDMA president said.

While the USA is hampering free trade with punitive tariffs and the threat of extraterritorial application of the law, China remains an economy characterised by state intervention and refuses to open up to the market economy. The VDMA therefore expects the EU to make an effort: both the negotiations with China on an investment agreement and with the USA on a free trade agreement must be pushed forward with all their might, the association demands.

Study "China business of the future“
In a new study entitled "China business of the future", the VDMA shows that German mechanical engineering companies still have great market opportunities in the People's Republic. The technological leadership in key fields such as automation and environmental technology is particularly helpful here. However, competitors from China are increasingly penetrating the high-end segment of mechanical engineering and are thus becoming direct competitors of German small and midsize companies. In many cases, Chinese companies can count on state support - for example through subsidies or in the restrictive awarding of contracts on the domestic market.

"The financing of Chinese companies in particular must become more transparent in order to reduce distortions of competition," Welcker demanded. "The fight against plagiarism and know-how theft must also be conducted much more seriously by the Chinese government," he added.

The "Product Piracy 2018"  study presented by the VDMA at the Hanover Fair showed that most counterfeits in mechanical engineering still come from China.

A summary of the VDMA study "China business of the future" can be found here
                    
                                                 

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