Merz in China: Germany Between De-Risking and Strategic Partnership

Why It Matters

Germany’s approach will shape EU‑China relations, influencing trade balances, industrial competitiveness, and security coordination across Europe and the transatlantic alliance.

Key Takeaways

• Trade deficit hits $100bn, quadruple in five years
• German auto exports slump as Chinese EVs dominate market
• Merz pushes de‑risking while seeking selective Chinese partnerships
• EU China strategy shifts toward rivalry, resilience
• Security concerns tighten tech imports, e.g., Huawei restrictions

Pulse Analysis

The February visit of Chancellor Friedrich Merz to Beijing marked the first German cabinet‑level outreach since the pandemic and underscored Berlin’s nuanced China policy. While Merz pledged a “comprehensive strategic partnership” with President Xi, he also warned of trade distortions and called for a “de‑risking” agenda. This dual signal mirrors the EU’s shift that now labels Beijing a systemic competitor. By aligning German diplomatic language with broader European priorities, Merz seeks to preserve market access while tying economic engagement to geopolitical realities. The dialogue also touched on climate cooperation and supply‑chain resilience.

Economically, the relationship remains deep but increasingly lopsided. Bilateral trade rose from $27 billion in 2001 to $298 billion in 2025, yet Germany’s deficit swelled to nearly $100 billion last year—four times the 2020 level. German FDI in China totals $80 billion, 60 percent of EU capital, while Chinese investment in Germany sits at $35 billion, making Beijing the tenth‑largest investor. In autos, Chinese EV makers now hold 70 percent of domestic sales, forcing Volkswagen’s Nanjing joint venture to close and prompting German firms to rethink localisation. German chipmakers are seeking joint R&D to offset Chinese dominance.

Security and technology concerns are reshaping the partnership. Berlin has tightened limits on Chinese telecom gear and is preparing the 2025 KRITIS law to protect critical infrastructure. These steps reflect worries about espionage and supply‑chain shocks as China deepens ties with Russia. Germany’s stance will be crucial for an EU China strategy that balances competitiveness with strategic autonomy. Merz’s upcoming Washington talks could tighten transatlantic pressure, pushing Europe toward a coordinated yet pragmatic de‑risking approach while keeping essential economic links. Both sides recognize that mutual dependence demands calibrated risk management.