Merz: Germany seeks gains from open Chinese markets and stronger domestic demand

Merz: Germany seeks gains from open Chinese markets and stronger domestic demand

Germany Seeks Balanced Economic Ties with China Amid Trade Imbalance Concerns

German Chancellor Friedrich Merz concluded a high-level visit to Beijing on February 25, 2026, emphasizing the need for "fair cooperation" with China while addressing growing concerns over a widening bilateral trade imbalance. During meetings with Chinese Premier Li Qiang, Merz underscored Germany's commitment to maintaining robust economic ties with its largest trading partner, but stressed the importance of open communication to address structural challenges.

Germany's trade deficit with China reached €87 billion in 2025, a €20 billion increase from the prior year, driven by declining German exports to China and rising competition from Chinese manufacturers in global markets. Merz's delegation included 30 firms, including automotive giants Volkswagen and BMW, which face intensifying pressure from China's low-cost, state-subsidized exports. Chinese overcapacity in sectors like automotive and machinery has accelerated the displacement of European firms in third markets, while domestic demand in China has softened due to economic slowdowns.

Premier Li Qiang, meanwhile, advocated for multilateralism and free trade, positioning China as a stabilizing force amid U.S.-led trade disruptions. He highlighted China's advanced manufacturing base and massive consumer market as opportunities for European partners, despite growing scrutiny over Beijing's industrial policies according to reports. Chinese state media echoed this stance, noting that German business enthusiasm for China's market outweighs political rhetoric about "systemic rivalry."

However, German policymakers face mounting calls for protectionist measures to shield domestic industries. The Rhodium Group noted that China's competitive advantages—low production costs, state subsidies, and strategic exchange rate management—have eroded European market shares, particularly in capital goods and automotive sectors. Merz acknowledged these challenges, signaling a shift toward prioritizing "systemic competitiveness" to balance open markets with industrial resilience.

While both sides expressed optimism about deepening cooperation, the visit underscored the delicate balancing act for Germany: leveraging China's economic scale while mitigating risks from an increasingly assertive Chinese industrial strategy. The outcome of these efforts may shape broader EU-China relations in 2026.