all projects

The effects of Chinese subsidies on Germany


Bavarian Industry Association (vbw—Vereinigung der Bayerischen Wirtschaft e. V.)



Available data suggest that Chinese companies enjoy an unfair competitive advantage abroad due to its government’s subsidies. The Vereinigung der Bayerischen Wirtschaft (Bavarian Business Association, vbw) asked Prognos to find out how Chinese companies are currently doing on the world market, how they will do so in the future, and how Chinese subsidies affect German companies.

Global competition in the field of German core technologies is distorted

The Chinese government has been supporting domestic companies for years with subsidies such as direct financial aid, tax breaks, favorable loans or state funds. The amount of these subsidies distort global competition. As a result, Chinese companies enjoy a competitive advantage on the world market.

This is particularly problematic for German companies who rely to a great extent on exports. Their products become less competitive, Germany as a business location is weakened.

To illustrate this, we examined three sectors: medical equipment, transformation and transmission equipment and integrated circuits . For each sector, we examined the potential effects of China’s so-called Made in China 2025 strategy (MIC 2025) on Germany.

Our calculation shows:

  • China’s ambitious MIC 2025 strategy has significant economic effects on Germany and Bavaria
  • although global market growth could slightly dampen the negative effects of Chinese subsidies, the MIC 2025 strategy is likely to lead to a shift on the global market in favor of Chinese companies
  • these effects could become substantial for Germany and Bavaria due to the size and dynamism of the Chinese economy
  • the potential positive effects of Chinese subsidies on German companies are small

Policy options on a European level

Our data show that China subsidizes its companies significantly more than its international competitors – especially in comparison to Germany and Europe. As a result, the companies do not compete on a level playing field. We see the following policy options on a European level:

  • further development of WTO rules and regulations, such as an expansion of the list of prohibited subsidies
  • taking WTO-compliant unilateral measures, such as to discriminate against subsidized companies on the EU market
  • forming international alliances and a common strategy for dealing with market-distorting practices
  • reducing economic dependence on China: countries in Asia, Latin America and Africa could be alternative trading partners

Links and downloads

On the website of the vbw you will find:

Download study (PDF, in German)

More information

Project team: Jakob Ambros, Dr Michael Böhmer, Philipp Kreuzer, Hannah Staab, Johann Weiß, Eva Willer

Last update: 12.1.2023

Do you have questions?

Your contact at Prognos

Dr Michael Böhmer

Chief Economist, Head of Corporate Services

View profile

Johann Weiß

Senior Project Manager

View profile

Mehr Studien & Projekte zu diesem Thema

More studies & projects on this topic

Five challenges: How Europe remains competitive in the future

| Expertise

What needs to happen for Europe to survive in global competition? We analysed this at the “12 Minutes Europe – Meeting Global Challenges” event organised by the Austrian Federal Economic Chamber.

Innovation Index Germany 2023

| Project

Once again, Prognos has compiled the Innovation Index Germany on behalf of the Vodafone Institute for Society and Communications. The index quantifies the impact the expansion of Germany’s digital infrastructure has had on its innovation strength.

Regional purchasing power of pensions

| Project

Where in Germany is retirement particularly cheap and where has it become more expensive than average? Prognos examined this for the German Insurance Industry Association.

Value added of German pharmaceutical exports

| Project

Compared to other export sectors, German pharmaceutical exports show above-average levels of innovation and value-added intensity. However, the industry is falling behind in the global re-search competition. This is shown by a new study commissioned by Roche.

New procurement markets for the Bavarian economy

| Project

New procurement markets can help increase the resilience and efficiency of the German and Bavarian supply chains. The study quantifies the current procurement markets and those still yet to be further exploited.

Supply chains: no climate neutrality without raw materials

| Project

Crises continue to put global trade routes at risk. This study by Prognos and partners indicates the measures necessary to secure strategically important supply chains.

The future of the automotive industry in Saarland

| Project

The automotive industry continues to undergo fundamental change worldwide. How does this transformation affect the Saarland economy?

Increased gas prices and gas price brakes

| Project

A study for the vbw on the impact of the gas price brake for Bavarian companies.

Effects of deglobalisation on Germany and Europe

| Project

Increasing geopolitical tensions are endangering the world trading system. On behalf of the vbw, Prognos investigated possible consequences for the economy in Germany and the EU.

Article in "Die Volkswirtschaft": EU reaction to electricity prices

| Expertise

The liberalisation of the electricity markets in the EU was once supposed to reduce costs. Sven Kreidelmeyer writes in the Swiss magazine "Die Volkswirtschaft" about the effects of free competition and current developments in the European electricity sector, among other things.

About us

Prognos – Providing Orientation.

Prognos is one of the oldest economic research centres in Europe. Founded at the University of Basel, Prognos experts have been conducting research for a wide range of clients from the public and private sectors since 1959 – politically independent, scientifically sound.

Learn more