Germany Seeks to Reset China Trade Relations

- In 2025, China regained its position as Germany's top trading partner with a bilateral trade volume of €251.8 billion, a 2.1% increase year-over-year. This surpassed the United States, which had been Germany's most important trading partner in 2024. - A key point of contention is Germany's growing trade deficit with China, which reached a record level of €87 billion in 2025. German imports from China have been rising while its exports to China have been in decline. - The German business delegation includes executives from major companies like Volkswagen, BMW, and Siemens Energy, highlighting the automotive and industrial sectors' deep integration with the Chinese market. These industries now face intense competition from Chinese domestic manufacturers. - German officials are pressing Beijing on issues of "fair competition," market access restrictions, and Chinese industrial overcapacity, particularly in sectors like electric vehicles and solar panels, which they argue distorts global markets. - The visit is part of Germany's broader "de-risking" strategy to reduce critical dependencies on China for specific products and raw materials. Germany is particularly reliant on China for laptops, mobile phones, and critical raw materials like scandium and antimony, which are vital for battery production and other high-tech applications. - Beyond trade, discussions are expected to cover China's backing for Russia in the war in Ukraine, a significant point of friction with Germany and other European nations. - German direct investment in China has continued to rise, reaching over €7 billion between January and November of the previous year, as companies localize production to serve the Chinese market directly and hedge against global supply chain risks. - The German government's official China strategy, released in 2023, frames the relationship as one with a "partner, competitor, and systemic rival," signaling a more assertive and cautious approach compared to the past.