Comment: China has been cross-subsidizing German auto jobs for years – now comes the bill

There are great complaints about the “China shock” in the German auto industry. Hundreds of thousands of jobs are at risk of being lost in the coming years. But the bitter truth is: many of these jobs only exist thanks to China. Over the past decade, they have been cross-subsidized with billions in profits from business in China. The necessary structural change was delayed as a result – and is now hitting with full force.

There have long been warnings that the German auto industry is becoming too dependent on China. But managers and shareholders alike were blinded by the high profits. They treated themselves to lavish bonuses and dividends, and special payments to their employees. Added to this was an arrogant self-assurance that German engineering was superior to any competition.

Worse still: Instead of using the billions in profits to prepare for the future, they sometimes flowed into the development of defeat devices that made the exhaust gases on the test bench appear lower than they actually were.

Now not only are China's profits disappearing, but Chinese manufacturers are increasingly giving German companies global competition. This competition may be distorted due to Chinese subsidies. However, it is not entirely unimportant that, according to OCED, cheap loans are the largest subsidy in terms of volume. These also flow into research and development (R&D). This has meant that Chinese electric cars are not only cheap, but also technologically good.