Germany's export-led industrial model is under growing pressure from Chinese manufacturers whose goods can approach German quality at substantially lower prices. The China shock has become a major factor in Germany's economic stagnation since the COVID-19 pandemic: Europe's biggest economy contracted in 2023 and 2024 and grew just 0.2% last year. The weakness has contributed to the unpopularity of Chancellor Friedrich Merz's governing coalition ahead of Sunday's election in Saxony-Anhalt, where the far-right Alternative for Germany has its strongest opportunity yet to win a state governor's office. German companies once earned large profits in China, but Beijing's support for targeted industries and weak domestic demand have redirected more Chinese production toward Europe. Germany now imports more from China than it exports in several sectors where its companies once dominated, including vehicles, trains, aircraft, machinery and medical devices. Companies such as Jungheinrich AG are responding by combining Chinese manufacturing scale with German engineering and distribution, while Volkswagen is developing vehicles in Hefei for the Chinese market. Policymakers are also seeking to prevent a repeat of the solar industry's collapse under Chinese price competition. Germany has announced a 500 billion euro ($579 billion) infrastructure fund and proposed tax cuts and deregulation, while economists argue that a stronger European Union trade policy may be needed to address the effects of China's industrial policy.