In line with the European Union’s policy on China, the German government’s current approach is to view China as a “partner, competitor and systemic rival”. In their recent study “The Dependence of SMEs on Supplies from China”, researchers at the IfM Bonn have examined the obstacles currently preventing small and medium-sized enterprises (SMEs) from reducing their dependence on Chinese business partners. They also show how policymakers at European and national level can support SMEs in their efforts to diversify their supply chains.
Although the Chinese government has repeatedly used access to raw materials and intermediate goods as a political lever in recent years, many companies continue to rely on supplies from China. As a result, the value of goods imported from China, after a temporary decline, rose significantly again in 2025. The reasons for this behaviour are particularly diverse in the Mittelstand: while companies consider current geopolitical risks in trade with China to be high, they also perceive the economic risks associated with abandoning long-established business relation-ships and building new partnerships as considerable. ʺEven when entrepreneurs conclude that reducing dependencies – also known as de-risking – would make sense for their business, there are a number of practical obstacles. These include not only a lack of alternatives, but above all the cost disadvantages associated with moving away from China. Many customers are in principle interested in de-risking, but they are not always willing or able to pay higher prices for it. In addition, regulatory barriers are also hindering de-risking,ʺ reports Dr Markus Rieger-Fels. Together with his team, he interviewed entrepreneurs and representatives of business associations for whom Chinese suppliers are important. They also surveyed experts from the foreign trade agency Germany Trade & Invest and the German Mineral Resources Agency.
The interviews showed that direct importers do indeed assess alternative sourcing options and importing countries in terms of the associated opportunities and risks. But many Mittelstand enterprises continue to rely on Chinese raw materials and intermediate goods due to competitive prices, good quality, and the often long-standing, trust-based business relationships with their existing suppliers.
When Mittelstand enterprises are positioned further down a (complex) value chain and have no direct contact with Chinese suppliers, awareness of dependencies may diminish.
ʺPolicy should take into account the economic considerations of Mittelstand enterprises in its efforts to reduce dependencies, and not enforce diversification through regulatory requirements, as is currently being discussed in the EU at least for large enterprises. Such an approach would impair companies’ competitiveness, involve additional bureaucracy, and limit entrepreneurial scope to find innovative ways of reducing dependencies,ʺ explains the IfM researcher. Instead, trade barriers with third countries should be reduced, raw material partnerships strengthened, recycling opportunities improved, and regulatory obstacles lowered. In this way, enterprises could identify the most appropriate path to reducing their dependence on China.
ʺAt the European and national level, there should be a greater awareness that policies often interact across different fields and must therefore be considered in conjunction. Many regulatory requirements in the environmental, social or health domains pursue important societal objectives. Higher environmental standards, stricter safety requirements, supply chain reporting obligations, or re-approval requirements for adapted products can pose significant barriers for companies seeking to reduce their dependence on China,ʺ says Dr Markus Rieger-Fels.
You find the study "The dependence of Mittelstand enterprises on supplies from China" in the internetside of Institut für Mittelstandsforschung (www.ifm-bonn.org/en/).
https://www.ifm-bonn.org/fileadmin/data/redaktion/publikationen/ifm_materialien/...
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