For years, Germany has been steadily losing industrial jobs. Between 2019 and 2025 alone, approximately 520,000 industrial jobs disappeared. In his study *”China’s Contribution to De-industrialization \u2013 A Rough Estimate,”* J\u00fcrgen Matthes, Head of the International Economic Policy, Financial and Real Estate Markets Cluster at the German Economic Institute (Institut der Deutschen Wirtschaft), examines the extent to which China’s economic policies have contributed to this dramatic decline and continue to do so. In his lecture, *”Partner, Competitor, and Systemic Rival: How Should We Deal with China?”* delivered at the Institute of Economics at TU Braunschweig, Matthes concludes with the following proposal: countervailing duties as an instrument of competition policy and, by extension, of regulatory policy.<\/p>\n
Is Europe Ready to Step into the Ring with China?<\/strong> The conclusion? Better to do nothing and lose jobs than to risk one’s own office? It seems political Berlin may possess even less backbone than previously assumed.<\/p>\n How Much of the Loss Is China’s Responsibility? \u2013 A Bold Claim<\/strong> But what evidence supports this conclusion?<\/strong> In this context, Matthes refers to the American economist Brad Setser, who shares these views, as outlined in the study *”China Shock 2.0: The Cost of Germany’s Complacency.”*<\/p>\n Why Are Countervailing Duties Not Protectionism?<\/strong> This leaves one final question: What will German policymakers do?<\/p>\n <\/p>","protected":false},"excerpt":{"rendered":" For years, Germany has been steadily losing industrial jobs. Between 2019 and 2025 alone, approximately 520,000 industrial jobs disappeared. In his study *”China’s Contribution to De-industrialization \u2013 A Rough Estimate,”* J\u00fcrgen Matthes, Head of the International Economic Policy, Financial and Real Estate Markets Cluster at the German Economic Institute (Institut der Deutschen Wirtschaft), examines the extent to which China’s economic<\/p>\n
\nMatthes opens his lecture on this warm summer evening by mentioning that he has just returned from a political meeting in Berlin. There, he tells his audience, he presented his arguments and urged policymakers to take action against what he sees as unfair competition from the Chinese government. The politicians’ response, however, was rather restrained. While they acknowledged the validity of his findings, they were simultaneously concerned about China’s reaction. Even more than China’s response, however, they feared the consequences such measures might have for their own political careers. After all, if tariff policies introduced by the German or European governments were to backfire, they could easily lose their positions.<\/p>\n
\nMatthes begins his presentation with a striking statement. According to a study by the American investment bank Goldman Sachs, Germany’s gross domestic product (GDP) suffered a loss of 1.35 percent between 2019 and 2025. Then comes the bombshell: without losses in export market share, the speaker argues, Germany’s GDP would have been more than 4 percent higher during that period. That’s a powerful claim. Matthes continues his calculation: his assumption is that a 5 percent decline in industrial value added would translate into the loss of up to 400,000 industrial jobs between 2019 and 2025. In reality, however, as mentioned earlier, 520,000 jobs disappeared. From this, Matthes concludes that Germany’s de-industrialization is to a significant extent attributable to unfair competition from China.<\/p>\n
\nAccording to Matthes, two factors are primarily responsible for Germany’s predicament. First, there are the substantial subsidies provided by the Chinese government to its domestic industries. Second, there is the undervaluation of the Chinese currency, the yuan. Between 2005 and 2023, roughly 60 percent of China’s global gains in market share can be attributed to subsidies recorded by the OECD. Unrecorded subsidies, together with an undervaluation of the yuan of up to 30 percent, should also be taken into account, the speaker argues.<\/p>\n
\nWe all remember Donald Trump’s rather theatrical television appearances announcing import tariffs\u2014even on places inhabited only by penguins and seals\u2014accompanied by his famous declaration: “I love tariffs!” At the time, many accused him of embracing excessive protectionism.
\nAnd now we want to do the same? Not exactly, Matthes argues. Countervailing duties would only be imposed under two conditions: (a) there is evidence of market distortion, and (b) domestic products are under threat. Countervailing duties, he contends, are an instrument of competition policy and therefore of regulatory policy rather than protectionism. As long as there is no global competition authority capable of prohibiting unfair subsidies, countervailing duties remain the second-best solution.<\/p>\n