Hook: On a high-stakes visit to Beijing, German chancellor Friedrich Merz tried to fix a relationship that many in Berlin now call “unhealthy” — one where growing Chinese exports and state support have left German factories exposed and the trade deficit widening.
Why Merz went to China
Merz arrived with a clear brief: call for more Chinese investment in Germany while pressing Beijing to fix what Berlin sees as unfair market distortions. He brought business leaders from the auto and tech sectors — a signal that this trip was as much about jobs and factories as it was about diplomacy. The message was pragmatic and pointed: Germany needs access to Chinese markets and technology, but not at the cost of asymmetric dependence.
What’s driving the call to rebalance
German officials point to three structural pressures behind their concern:
– Overcapacity in key Chinese industries that undercuts global prices. – A currency environment that amplifies those price advantages. – State-backed subsidies that skew competition and trade flows.
Taken together, these pressures have widened the Germany–China imbalance and left manufacturers — especially in automotive and electronics — vulnerable. Merz repeatedly likened the current exposure to past strategic misreads, such as Germany’s dependency on Russian energy, warning that concentrated reliance can turn into political and economic leverage.
ESG, resilience and the politics of supply chains
Berlin is framing resilience and sustainability as inseparable from competitiveness. Diversified, transparent supply chains reduce environmental risks and commercial shocks — and that’s a business argument, not only a moral one. Proposals under discussion include tighter screening of foreign subsidies, stricter rules for state-backed investments, and incentives to reshore strategic production. Officials stress these are calibrated measures — targeted risk-management, not full decoupling.
Industry pressure and political constraints
German business leaders want firmer action. Yet Merz must walk a narrow line: preserving market access that supports jobs and tech transfer, while limiting exposure to unfair practices. U.S. unpredictability and China’s economic heft shrink Berlin’s policy room. The result: selective safeguards aimed at key sectors rather than broad-based economic disengagement.
What Merz actually asked for in Beijing
In talks with Chinese officials, Merz pushed two threads at once: more capital flowing into Germany, and clearer reciprocity on market access, subsidy transparency and competitive practices. German diplomats framed these demands as calls for enforceable rules, not protectionism. They also flagged interest in investments that meet sustainability and governance standards — reinforcing the idea that “sustainability is a business case.”
Deals, delegations and the practical outcome
The agreements signed during the visit were modest and narrowly focused — climate and green transition cooperation, animal disease prevention and sports exchanges — rather than sweeping industrial packages. Merz’s business delegation included executives from Volkswagen and BMW; follow-up business-to-business talks concentrated on smaller, targeted projects and joint ventures. Those kinds of selective partnerships can still deliver tangible ESG and technology-transfer gains without exposing firms to major geopolitical risk.
Wider implications for EU-China relations
Germany’s approach could become a model for the EU: measured engagement combined with enforceable safeguards. That middle path seeks to avoid both full decoupling and unchecked openness. The real test will be whether Berlin turns policy language into binding rules that other capitals will copy — and whether Brussels aligns on screening and due-diligence standards.
What to watch next
Look for three concrete signals:
– Tighter screening and clearer rules on foreign subsidies and state-backed investments. – Standardised due-diligence requirements for critical suppliers and stronger dispute-resolution mechanisms. – Any uptick in meaningful Chinese investment into Germany versus mostly symbolic commitments.
Why Merz went to China
Merz arrived with a clear brief: call for more Chinese investment in Germany while pressing Beijing to fix what Berlin sees as unfair market distortions. He brought business leaders from the auto and tech sectors — a signal that this trip was as much about jobs and factories as it was about diplomacy. The message was pragmatic and pointed: Germany needs access to Chinese markets and technology, but not at the cost of asymmetric dependence.0