Germany-China ties reached a decisive moment as Chancellor Friedrich Merz travelled to Beijing amid mounting economic and political pressure at home. This week, Germany’s ties to China hit a decisive moment. As the economy becomes more precarious, Chancellor Friedrich Merz made a trip to Beijing. For many years, Germany’s trading relationship with China has been a major driver of German economic development and industrial might. In recent months, however, this trading relationship has become a significant point of contention in German politics. Concerns about lost manufacturing jobs continue to rise while more and more companies are attributing their manufacturing difficulties to a flood of low-priced imports produced by Chinese companies that benefit from government-financed overcapacity and subsidies.
Furthermore, Berlin is under increasing pressure to adjust its policies towards China. Merz’s visit was a signal of firm cooperation with China without breaking off relations completely. He interpreted his trip as a necessary “adjustment” to the relationship by forcefully framing the trip as both an economically and strategically important visit for Germany.
How trade imbalances and competition shaped Merz’s message on Germany-China ties
Merz met with Xi Jinping, Premier Li Qiang, and other top leaders in China. He pointed out Germany’s €90 billion trade deficit due to China’s excessive production. Merz emphasized the need for fair and transparent competition and reiterated the importance of reliability and compliance with rules. He also stated that German executives share some of the same concerns about China’s subsidies/disregarding of rules. All manufacturing industries have been hit hard by Chinese competition, and Germany loses around 10,000 manufacturing jobs every month. Merz did not support an economic decoupling from China, however, but instead supported “de-risking” their supply chains. Germany continues to have a very large economic partnership with China, and thus Berlin’s goal is to adjust to the new environment rather than fully disengage from it.
Why business diplomacy and geopolitics now intersect
Merz was accompanied by approximately 30 business leaders (including those from BMW, Volkswagen, and Siemens) on a trip to Beijing. The German delegation highlighted Germany’s dependence on China economically. China took advantage of the visit to show a united front and demonstrate to the world that it is stable. In addition, the Chinese government focused on promoting multilateralism and free trade cooperation during the visit.
The officials announced the signing of Airbus’ orders and other deals to encourage German companies to do business in China. Merz also asked the Chinese government to restrain Russia with respect to its exports of dual-use goods and to consider their influence in Moscow when making decisions affecting Ukraine and other countries. Trade, security, and geopolitics were intertwined during the visit. Observers believe that Germany’s position on these issues is important to the rest of Europe, and that its position could affect how other EU member states think about China.
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