In February this year, the German Chancellor Friedrich Merz arrived in China. This was his first visit there since taking office, and he’s the latest Western leader seeking to reset ties with Beijing. The trip came amid warnings from German industry of growing competition from China. It is clear that both countries now want to pursue increasingly practical cooperation.
Any curious observer of China knows that the country is currently celebrating the year of the horse. It is therefore symbolically significant for Germany that the first high-profile visitor to Beijing during this highly auspicious lunar year has been their Chancellor.
One of the difficult asks Merz had for President Xi Jinping was that China should encourage Russia, its key ally, to end the war in Ukraine. But that will be a topic for another piece. For this trip, the primary focus for Germany was on seeking closer cooperation with Beijing as a hedge against rising global trade protectionism and tariffs.
Ahead of his journey to the Land of the Dragon, Merz remarked thus: “Foreign policy and economic policy belong together just as much as defence policy and domestic policy. We can no longer separate them today. That’s why I’ll be travelling to China to discuss future cooperation between Europe and Germany on the one side and China on the other…”
Remember, Merz is the latest leader to trip his way to China, seeking to stabilise economic ties and navigate geopolitical shifts. Countries which in the past had blocked China during its trade dispute are now impatiently knocking at the Middle Kingdom’s door, all keen to strike business deals. The British, Canadian, and South Korean leaders have all visited Beijing this year, yet we have not even moved half of the year!
Firstly, it is obvious, even common sensical that Merz should tread carefully not to cause a rift with Washington over China. President Trump recently threatened 100% tariffs on Canada for holding trade talks with Beijing. Germany will be aiming to strengthen ties without triggering a similar retaliation from the US.
Secondly, there is apparent domestic pressure for Merz, too. Over the past year, German politicians and business groups have increasingly warned about intensifying industrial competition with China and the risk of a new China shock. Even European/Western experts have spoken out and recognise that China has become a sophisticated manufacturer and is advancing rapidly in key technologies, a growing challenge for Germany’s export-driven economy. Last year, China sold a trillion dollars more overseas than it imported. Germany’s economy is highly export-driven, but exports to China fell more than 9% in 2025. Overall, car exports to China have dropped by a staggering 2/3 since 2022.
The other concern on Merz’s hands is that he needs to balance the need to protect vulnerable German industries from cheap Chinese goods while repairing strained ties. This would be a defining challenge for him. German automakers are already feeling the pinch from Chinese competition, since China is now the global leader in EVs, and a distant number one for that matter. This is something that Merz has to navigate along with the whole question of where rare earths will come from in the future, as China becomes more and more restrictive and is very open that it wants to use this as a political instrument as well. The other key challenge on Merz’s table is the pressure from the United States. America, of course, wants to see its European partners take a tough line on the Chinese government and particularly on their trade deficit.
Therefore, whereas Merz may want to have a stable, prosperous relationship with China, the foregoing issues I have highlighted are real concerns for him to deal with. The reality of the time is that Germany is exporting less to China. German brands in China have less of a market share, and Chinese brands are increasingly competing with Germany in third countries around the world. Merz travelled with several European manufacturers on this trip, and they all had/have serious concerns that this is costing jobs in Germany. The business people are definitely critical of what they may find to be unfair practices by China, such as things like government subsidies, although basic knowledge of economic history would reveal that this is the same process by which Western industries accumulated significant growth and came to dominate the global market.
For President Xi Jinping, it must be a very great experience hosting yet another powerful Western leader. Xi has effortlessly been positioned by Western leaders themselves as a stable partner compared to the US, whose leader, Donald Trump, seems to be as fragile to rely on as the weather.
These events have also added to the image of China as the true leader of the new multipolar world order. And since Germany and Europe in general are important markets for China, Xi must be glad to welcome more European leaders to China to strike trade deals. This is even more urgent now, when the Chinese economy’s domestic demand has been slowing down. China, therefore, needs to rely increasingly on the export market.
We should remember that the relationship between Germany and China has really flipped over the years. It had been the case that Germany was a big exporter to China, with China having to rely significantly on German machinery and German expertise. However, in recent years, China has become the one exporting a lot to Germany. There is a lot of dependency on Chinese manufacturing for the German economy to survive. Nevertheless, China still relies heavily on German imports for materials and other chemicals and manufacturing, although Germany is the most dependent of the two countries.
The writer is a senior research fellow – Development Watch Center.