For decades, thousands of niche, world-class manufacturers that form the backbone of the German economy relied on an unassailable moat: unmatched quality. Now that moat is drying up.
The Mittelstand—a broad tier of midsize manufacturers, mainly specialized in capital and intermediate goods and reliant on exports—once thrived by making machines for factories everywhere. But China is now closing the quality gap and offering prices as low as half those of their European rivals.
