Family-owned Mayer & Cie is not only a giant in the German textile industry. Over 80,000 of the circular sewing machines it has manufactured are used throughout the world to make clothes for global brands like H&M, Uniqlo, and Decathlon.

In April, the 120-year-old company became yet another German entity to fall into the hands of a Chinese buyer, Huixing Machinery in this case, after it declared bankruptcy last year and laid off nearly all of its over 200 staff. It blamed a raft of reasons for its failure, including an inability to compete with Chinese rivals on price, a predicament European industrial companies are all too familiar with.

“State-subsidized manufacturers from China offered their textile machines at low prices on the world market,” Mayer & Cie wrote in its insolvency filing in September. European machines are usually at least 20% more expensive than Chinese ones.

For four generations, the company supplied the world with circular-knitting machines from its base in Germany’s southwestern town Albstadt. They make tube-shaped fabric for collars, socks, hats and mattresses, to name some items and are much more productive than flatbed machines. Each Mayer & Cie machine manages over 12 million stitches per minute, which equates to around 380 T-shirts per hour.

Huixing has now taken over the Albstadt site and a subsidiary in the Czech Republic and one in Jintan, China, for an undisclosed sum. Apart from Chinese competition, Mayer & Cie also blamed its collapse on the US-China trade war and the Ukraine war, both of which led to inflationary pressure. At the same time, Turkey, a major importer of textile machines, was struggling with hyperinflation, in part brought on by its own unconventional economic policy before June 2023.

An arranger of the Mayer & Cie deal said the German company can benefit from the reach of Quanzhou-based Huixing in China, a key market for the industry.

Wang Jiawei, head of consultancy Roedl’s China practice, further explained that the deal was waved through by authorities because it was about vertical integration to expand market share and not aimed at technology transfer.

Huixing’s commitment to gradually rehire the employees who had been laid off would have helped its case with German authorities. It will also keep key functions, such as manufacturing, research, and development, in Albstadt.

An analyst said Mayer & Cie could thrive under the new leadership, citing the 2005 takeover of industrial sewing-machine maker Duerkopp Adler. The company that was established in 1860 became the first German-listed company to come under the control of a Chinese shareholder, Shanghai-listed ShangGong Group.

“At the time, the news was treated across Europe as a sensation, but 20 years on, Duerkopp Adler still operates from its plant in Bielefeld-Oldentrup, employs more than a thousand people, has materially improved its margins under Chinese ownership, and runs the German sister brand Pfaff Industrial within the same group,” said Anton Schumann, partner and CEO of textile consultancy Gherzi Germany.

Schumann also cited the 2023 acquisition of the bankrupt, Stuttgart-based Terrot, one of the oldest names in circular knitting, by Santoni Shanghai Knitting Machinery, an Italian-Chinese group. The company continues to trade under the brand, with an intact workforce.

Germany’s Machinery and Equipment Manufacturers Association (VDMA) observed that European textile machinery manufacturers are operating in a challenging market environment that has changed noticeably since 2022. Orders have declined, particularly for clothes. At the same time, the Ukraine war and subsequent sanctions on Russia have pushed up energy and regulatory costs in Europe.

“Chinese textile machinery manufacturers benefit from several advantages, including government support measures for financing, energy, and infrastructure, and as a result, they are increasingly penetrating market segments that were long dominated by European manufacturers,” said Nicolai Strauch of VDMA’s textile machinery division.

Strauch said that European machines, however, have longer lifespans, higher performance rates and are more technologically advanced.

“European textile machinery manufacturers also possess extensive expertise in energy saving, emission reduction, recycling, and circular economy solutions, as well as regulatory compliance to EU regulations,” he added.

Schumann also urged European textile machinery makers to specialize in niche products with markets either too small or too complex for Asian volume manufacturing, such as nonwovens for filtration or medical knit.

Another option is to focus on tapping nearer markets such as Morocco, Tunisia, Jordan, Turkey, southern Spain, Portugal, and parts of central Europe that are yet to be fully served by Asian volume producers or suppliers of premium machines.

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.