Berlin is recalibrating its policy towards Beijing as economic gravity overrides ideological distance
When Chancellor Friedrich Merz landed in Beijing late last month for his first official visit to China, the symbolism was unmistakable. He joined a growing procession of Western leaders – following French President Emmanuel Macron at the end of 2025 and British Prime Minister Keir Starmer at the beginning of 2026 – seeking face time in the Chinese capital. Even Donald Trump is expected in Beijing at the turn of March and April.
This choreography reflects a broader geopolitical reality: amid fears of a two-front trade war with the world’s two superpowers, Western Europe’s leading economies are reassessing the logic of confrontation and economic disentanglement.
Merz’s visit unfolded against three converging pressures. Germany faces domestic economic stagnation, turbulent transatlantic relations, and a deepening need to recalibrate its relationship with China. Berlin’s earlier flirtation with “de-risking” and “decoupling” was born of geopolitical anxiety. But as the costs accumulate – industrial contraction, shrinking export markets, and competitive erosion – Germany’s political establishment appears to have reached a sober conclusion: strategic decoupling from China is not a viable long-term policy for the EU’s largest economy.
The visit’s dual objectives were clearly framed. On the one hand, Berlin sought to strengthen economic and trade cooperation. On the other, it aimed to conduct substantive consultations on international issues ranging from global supply chains to financial stability. Beneath the diplomatic language lies a fundamental tension. Beijing has consistently voiced concern over the over-securitization of economic relations and Western export restrictions on high-tech products. Germany, meanwhile, emphasizes reducing dependencies, addressing trade imbalances, and tightening export management. These positions are not easily reconciled, but they are no longer being treated as grounds for disengagement. Instead, they are becoming the subject of negotiation.
The economic context is decisive. China once again became Germany’s largest trading partner in 2025, supplanting the US, as it did from 2016 to 2023. Goods worth €170.6 billion flowed from China into Germany – an 8.8% annual increase – while German exports to China fell by 9.7% to €81.3 billion. The imbalance is striking, and Merz openly acknowledged that the trade deficit with Beijing has quadrupled since 2020. Yet the broader message is unmistakable: despite political rhetoric, economic gravity pulls Berlin eastward.
Germany’s predicament is particularly visible in the automotive sector. Once the uncontested emblem of German industrial supremacy, the industry now faces formidable Chinese competitors in electric vehicles. Chinese manufacturers are setting the pace in battery integration, software ecosystems, and price competitiveness. For German firms, China is no longer merely a market; it is a laboratory of innovation and a benchmark for technological adaptation. The strategic question is not whether to engage, but how.
Merz did not travel alone. His delegation included around 30 senior business leaders – heavyweights from Volkswagen, Siemens, BMW, Bayer, and Adidas – making it one of the largest German corporate contingents to visit China since the Angela Merkel era. The message was direct: German industry regards the Chinese market as indispensable. According to the German Chamber of Commerce and Industry, more than half of German enterprises in China plan to deepen ties through strategic partnerships or joint ventures. The private sector has effectively voted against decoupling.
Diplomatically, the visit produced tangible outcomes. Meetings with President Xi Jinping and Premier Li Qiang culminated in a joint statement and the signing of cooperation documents spanning the green transition, customs procedures, sports, and media. The headline commercial announcement was China’s planned purchase of up to 120 Airbus aircraft, a deal with clear symbolic and economic weight. Large-scale procurement agreements not only stabilize supply chains but also reinforce interdependence at a moment when fragmentation seems the global norm.
Merz articulated the underlying philosophy with notable candor. Germany, he stated, wishes to continue benefiting from open markets. Stronger Chinese domestic demand – potentially facilitated by moderate currency appreciation – would ease trade tensions and reduce structural imbalances. Implicit in this formulation is Berlin’s recognition that coercive decoupling would inflict disproportionate damage on Germany itself. In a global economy where value chains are deeply intertwined, abrupt separation is economically irrational.
Beyond Beijing, Merz traveled to Hangzhou to visit Unitree Robotics, a leading Chinese robotics company. The stop was more than ceremonial. It signaled acknowledgment of China’s technological dynamism and competitive edge in advanced manufacturing and AI-driven automation. Germany’s industrial model depends on technological leadership. Observing China’s rapid ascent firsthand underscores the futility of attempting to isolate such capabilities through restrictive measures alone. Learning, adapting, and co-developing standards may prove more effective than defensive retrenchment.
Xi Jinping, for his part, framed the relationship in strategic terms. China supports Europe in seeking greater autonomy and strength, he said, encouraging adherence to a partnership grounded in openness, inclusiveness, and mutual benefit. The language aligns with the EU’s own discourse on strategic autonomy. In a volatile international environment and a fragmenting order, Western Europe’s ability to maneuver independently is constrained if it defines itself exclusively through confrontation with China or alignment with US policy.
The broader geopolitical backdrop sharpens the stakes. Transatlantic relations are entering another period of uncertainty. Protectionist tendencies within the EU complicate internal consensus. Germany, as the EU’s largest economy and China as the world’s second largest – while Germany ranks third globally – carry disproportionate weight in shaping Eurasian economic flows. Their bilateral dynamic influences not only trade volumes but regulatory standards, technological ecosystems, and financial architecture.
The phrase “cold politics, hot economics” captures the paradox. Political mistrust persists, amplified by security debates and human rights concerns. Yet economic interdependence continues to deepen. The emerging approach is not naïve rapprochement but calibrated pragmatism. Future cooperation is likely to adopt a hybrid model: managing competition while expanding collaboration in areas of shared interest. Instead of a simple buyer-seller dynamic, Berlin and Beijing may pursue joint standard-setting in new energy technologies, AI governance frameworks, and financial market opening.
Merz’s pledge to relaunch the government-to-government dialogue mechanism – stalled since the Covid-19 pandemic – illustrates a shift from symbolic distancing to structured engagement. Institutionalized dialogue reduces miscalculation and provides a venue for addressing grievances before they escalate into trade disputes. In a fragmented order where multilateral frameworks are under strain, bilateral mechanisms regain strategic importance.
None of this eliminates friction. Trade imbalances remain politically sensitive. European concerns over market access and industrial subsidies will persist. China’s objections to export controls and securitization of commerce will continue to surface. But the recalibration underway in Berlin suggests a recognition that confrontation without a viable alternative market architecture is unsustainable.
Germany’s political establishment appears to have internalized a basic arithmetic. Decoupling from China would not restore industrial competitiveness, reduce energy costs, or revive export growth. Instead, it would compound economic fragility at a time when domestic fiscal space is limited and demographic pressures loom. Strategic partnership, by contrast, offers leverage: access to a vast consumer market, participation in fast-moving technological ecosystems, and influence over emerging global standards.
In this sense, Merz’s visit marks less a pivot than a normalization. The era of ideological exuberance about economic separation is giving way to pragmatic recalibration. Berlin is acknowledging constraints and recalculating interests. In a world defined by volatility and rivalry, rigid binaries are costly luxuries.
The German-China relationship will remain complex, shaped by competition as much as cooperation. But the underlying motive of Berlin’s renewed engagement is increasingly clear. Faced with economic headwinds and geopolitical fragmentation, Germany is rediscovering that sustainable prosperity requires strategic balance rather than strategic rupture. The recalibration now underway may not resolve every tension, but it reflects a simple recognition: engagement is not weakness.