Fall in German orders amid Chinese import fears

GERMAN factory orders declined by a tenth during February in a fresh blow for Chancellor Olaf Scholz as he battles to revive Europe’s biggest economy.

Orders were 10pc lower than a year earlier, despite hopes that demand for the country’s manufactured goods had started to recover.

They were only 0.2pc higher than in January, according to the Federal Statistical Agency, rather than the 0.7pc that was predicted by economists.

It figures came as Janet Yellen, the US Treasury Secretary, warned that China’s “unfair” subsidies mean its cheap goods are undercutting Western businesses.

The underlying index for German factories, which strips out major oneoff orders that can obscure the wider trends in industry, shows demand for German-made goods is at its lowest level since the worst days of the Covid crisis in June 2020.

Some industries are rebounding. Orders in chemicals rose 3.1pc with pharmaceuticals up 6.6pc. However, elsewhere, such as in the carmaking sector, which is critical to the nation’s success and its sense of identity, orders have plunged by 8.1pc.

Eric Heymann, an economist at Deutsche Bank, said that sales of electric cars in particular have been hit by the phasing out of subsidies at the end of last year. Battery electric vehicles (BEVs) accounted for one sale in every eight in the first quarter, down from the peak of one-in-four at the end of 2022.

He said: “Without such subsidies, it becomes even more challenging to

‘Chinese carmakers have started to enter Europe’s market with BEVs in the volume segment’

convince lower-income households, people living in city centres without access to a charging station, families that own ‘only’ one car to cover all mobility needs, and all car drivers that have so far been reluctant to switch to an electric car.

“The public charging infrastructure (including outside Germany) is perceived as insufficient, the charging times are too long or the range is too short.”

He warned that sales of the newer models will only take off with lower prices, longer ranges, shorter charging times and a better public charging infrastructure.

Mr Heymann said: “Chinese carmakers have started to enter the European market with BEVs in the volume segment.” European Union officials worry that these cars are being sold at artificially reduced prices, and France has already excluded Chinese models from the new subsidies that it is offering for EV customers.

Ms Yellen echoed these concerns on a visit to China. “Direct and indirect government support is currently leading to production capacity that significantly exceeds China’s domestic demand, as well as what the global market can bear,” she said.

The former chairman of the Federal Reserve accused Beijing of “imposing barriers to access for foreign firms and taking coercive actions against American companies.”

“This doesn’t only hurt these American firms: ending these unfair practices would benefit China by improving the business climate here.”