Germany and China Pledge Deeper Economic Cooperation
German Chancellor Friedrich Merz concluded a two-day visit to Beijing, where leaders from both nations pledged to deepen economic ties. Despite signing multiple agreements, Merz also voiced concerns over a trade imbalance and China's market access restrictions. The talks highlight ongoing strategic tensions between Western economies and China's industrial policy.
- Germany's trade deficit with China hit a record €87 billion in 2025, a figure that has grown substantially in recent years. This imbalance is a central point of friction, with German officials citing concerns over an undervalued yuan, market-distorting subsidies, and overcapacity among Chinese exporters. - The five agreements signed during the visit focused on climate change, green transition, animal disease prevention, a poultry products protocol, and sports collaborations. These deals were in industries considered peripheral to the core economies of both nations. - For the eighth consecutive year, China was Germany's most important trading partner in 2023, with a total trade volume of €253.1 billion. However, this was only €0.7 billion more than Germany's trade with the United States, a significant decrease from the €50.1 billion gap recorded in 2022. - The German delegation included a significant business contingent with senior executives from around 30 major firms, including automakers like Volkswagen and BMW. These companies are facing increasing competitive pressure from Chinese manufacturers, particularly in the electric vehicle sector. - The European Union's official policy, which Germany follows, frames the relationship with China as multifaceted: a partner for cooperation, an economic competitor, and a systemic rival. This "de-risking" strategy aims to reduce critical dependencies on China without completely decoupling the economies. - China's industrial strategy, "Made in China 2025," aims to establish the country as the dominant industrial power. This has led to German companies localizing their production within China, which in turn reduces imports from Europe and can decrease their market share over time.
