Merz in China: Germany Between De-Risking and Strategic Partnership |
China Power | Diplomacy | East Asia
Merz in China: Germany Between De-Risking and Strategic Partnership
Merz’s trip should not be viewed as a strategic pivot, but as a focused attempt to rebalance an increasingly uneven economic relationship.
Chinese President Xi Jinping met with German Chancellor Friedrich Merz in Beijing, Feb. 25, 2026.
German Chancellor Friedrich Merz concluded his inaugural visit to China on February 26. The two-day trip saw Merz leading a senior business delegation, and committing to advance a “comprehensive strategic partnership” in meetings with President Xi Jinping and Premier Li Qiang. Merz’s visit followed trips to China by France’s Emmanuel Macron and the United Kingdom’s Keir Starmer, reflecting a broader European effort to stabilize relations with Beijing despite ongoing tensions over trade, market access, and strategic competition.
Despite talk of a “reset” in Sino-German relations, Merz’s trip was less about romance and more about realism. It should not be viewed as a strategic pivot, but as a focused attempt to rebalance an increasingly uneven economic relationship. Merz openly spoke about persistent trade distortions, pointing to Chinese overcapacity as a driver of widening imbalances.
The visit reflects the China policy of the current government, which has been fairly consistent: demand fairer market access for German firms, attract Chinese investment where it serves German interests, and cautiously pursue a “strategic partnership” that acknowledges China’s growing global weight, but also the responsibilities that come with it. At the same time, Merz signaled that economic engagement cannot be divorced from geopolitics, pressing Beijing to assume a more constructive role in restraining Russia’s war against Ukraine.
Economic cooperation has been the backbone of the China-Germany partnership, defined by industrial complementarity and mutual benefit. This framework, formalized in a 2004 strategic partnership and upgraded in 2014, generated prosperity but also entrenched structural dependencies. Under former Chancellor Angela Merkel’s doctrine of “Wandel durch Handel” (“change through trade”) economic pragmatism set the tone.
That tone shifted in 2019, when for the first time the Federation of German Industries (BDI) labeled China a “systemic competitor,” influencing the EU’s “partner, competitor, rival” formula. The 2020s marked a decisive shift: the pandemic, supply chain shocks, and Beijing’s alignment with Moscow exposed the vulnerabilities of overreliance. Under Chancellor Olaf Scholz, Berlin began more openly describing China as a rival, and the 2023 China Strategy aimed to reduce critical dependencies while preserving selective cooperation. Under Friedrich Merz, Berlin moved further toward the EU’s “de-risking” agenda, placing greater emphasis on competition, resilience, and systemic rivalry. Germany’s approach reflects the EU’s broader shift from optimism to caution, shaped by economic exposure, transatlantic pressures, and European ambitions.
Over the past decades, Germany and China developed a highly interdependent economic relationship rooted in industrial complementarity. German cars, machinery, and chemicals fueled China’s rapid industrial rise, while booming Chinese demand sustained Germany’s export-led growth. Since 2001, bilateral trade has increased nearly tenfold, from $27 billion to $298 billion in 2025, making China Germany’s most important trading partner, and accounting for more than 35 percent of total EU-China trade.
Investment ties reflect similar depth. By 2024, German Foreign Direct Investment in China had reached $80 billion, nearly 60 percent of all EU investment there, while China’s cumulative FDI in Germany stood at $35 billion, making it Germany’s tenth-largest investor and third-largest source of new FDI projects that year.
Yet, the long portrayed “win-win” cooperation model has exposed large structural imbalances. Chinese imports to Germany have risen sharply while German exports have stagnated, pushing the trade deficit to almost $100 billion in 2025, quadruple its level five years earlier. Controversial acquisitions such as Kuka and Aixtron, and mounting manufacturing job losses, around 10,000 per month in Germany, have further heightened perceptions of economic vulnerability.
Strains are most evident in the automotive and machinery sectors. German carmakers, the backbone of the German economy, entered China in the 1980s through joint ventures, transferring technology in exchange for market access and contributing to the rise China’s modern auto industry. Supported by heavy subsidies and policies such as “Made in China 2025,” Beijing built a comprehensive EV value chain by the mid-2010s, while German firms remained focused on combustion-engine technology.
China now produces over 30 million vehicles annually, around 40 percent of them new energy vehicles, and is........