A360
Key Takeaways✦ Atlas AI
01
Germany faces deindustrialization risk.
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China's surplus with Germany doubled.
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Yuan undervaluation cited as factor.
Atlas AI
Germany Warned of Industrial Deindustrialization Risk from China
A Brussels-based think tank, the Centre for European Reform (CER), issued a warning to Germany regarding a potential "China Shock 2.0" that could lead to deindustrialization, mirroring the U.S. experience 25 years ago. The report, titled "China Shock 2.0: the cost of Germany's complacency," was released recently, highlighting a growing trade imbalance and China's targeted industrial policies.
The CER report indicates that China's trade surplus with Germany doubled from $12 billion to $25 billion between 2024 and 2025, contributing to a $94 billion overall trade imbalance. This imbalance is driven by factors including dampened domestic demand in China, a potentially undervalued yuan (by 40% against the euro), and Beijing's policy project, "10,000 little giants," which targets Germany's Mittelstand. S. job losses and social impact observed after 2001.
The CER recommends that Germany actively address the issue by supporting efforts within the IMF and G7 to confront China's currency undervaluation and one-sided trade model. The report emphasizes that Germany's current focus on domestic economic issues, such as energy prices and bureaucracy, distracts from the more significant threat posed by China's industrial policies and export growth, which contributed to China's record $1.2 trillion surplus in 2025.
