Friedrich Merz’s ascent to the German chancellorship marks a significant political transition at a moment of extraordinary global flux. As Berlin recalibrates its foreign policy compass, one of the most consequential decisions facing Merz is how to navigate the nation’s relationship with China – a strategic partner, economic powerhouse, and geopolitical puzzle rolled into one. The new chancellor has already signaled a tougher rhetorical posture on Beijing, invoking the familiar language of “systemic rivalry” and “strategic de-risking.” Yet beneath the surface of diplomatic caution lies a simple reality: Germany cannot afford to decouple from China, nor should it want to.
In congratulating Merz, President Xi Jinping described the China-Germany relationship as entering a “new chapter.” It was a carefully worded message that underscored continuity as much as change. For all the talk in Berlin about reducing dependencies, the economic ties between these two giants remain too deep, too mutually beneficial, and – perhaps most importantly – too essential for any meaningful disengagement.
China has been Germany’s most important trading partner for eight consecutive years, with bilateral trade reaching €253.1 billion in 2023, despite a 15.5% decline from the previous year. This decline was primarily due to a 19% drop in German imports from China, while exports decreased at a slower rate, leading to a narrowing of Germany’s trade deficit with China from €86 billion in 2022 to €58.4 billion in 2023. In 2024, the United States overtook China as Germany’s largest trading partner, with trade with China falling by 3.1% to €246.3 billion . However, China remains Germany’s top supplier of goods, accounting for 10.9% of total imports.
This divergence between political rhetoric and economic reality reflects not just a dilemma but an opportunity. Merz has the chance to articulate a more nuanced and pragmatic China policy – one that acknowledges legitimate concerns about overdependence and strategic autonomy, but also leverages China’s ongoing technological renaissance to secure Germany’s economic competitiveness.
The technological dimension is critical. As China continues to lead in fields like electric vehicles, green energy, and artificial intelligence, Germany must decide whether to treat this surge as a threat or a partnership prospect. Under Olaf Scholz, Berlin resisted the EU’s push for punitive tariffs on Chinese electric vehicles – an acknowledgment of how deeply enmeshed the German auto industry is with China’s EV supply chain. That instinct, grounded in pragmatism, must not be discarded in a new wave of ideological posturing.
Merz should remember that Europe’s industrial competitiveness is already under siege – from Trumpian trade tantrums across the Atlantic to energy insecurity closer to home. If the United States, once a dependable pillar of transatlantic unity, is now openly questioning its NATO commitments and imposing tariff barriers on European goods, why should Germany instinctively follow Washington’s cues on Beijing? Merz himself acknowledged this when he stated earlier this year that “the Americans… are largely indifferent to the fate of Europe.” That realization must extend to a broader strategic independence – including on China.
There is also a geostrategic logic to deeper China-Germany engagement. The international order is being buffeted by tectonic shocks – wars in Europe and the Middle East, economic fragmentation, climate breakdown. In this context, EU-China stability is not merely desirable; it is imperative. At a time when multilateralism is unraveling, the EU’s engagement with China could offer a rare zone of cooperation on shared challenges, from climate mitigation to global health governance.
Merz is right to urge China to play a constructive role in ending the war in Ukraine. But making this appeal while sustaining robust economic ties is not a contradiction. Diplomacy is rarely about moral clarity; it is about leverage. And economic interdependence remains one of the few levers Europe still holds with Beijing.
Moreover, German public opinion is not as hawkish as political elites sometimes suggest. Indeed, Merz’s own coalition with the Social Democrats – who under Scholz championed economic engagement with China – will require political finesse to hold together. Differences over China policy could become flashpoints. But rather than suppressing this tension, Merz should channel it into crafting a new, balanced doctrine: one that combines strategic resilience with economic realism.
That doctrine could draw inspiration from the very principle of “strategic autonomy” that the EU claims to cherish. If Europe truly seeks independence from both Washington and Beijing, it must first acknowledge its interdependence with both. That means engaging China not as a rival to be isolated but as a partner to be persuaded, challenged, and, where possible, embraced.
The challenge now is to forge a policy that protects Germany’s strategic sovereignty while positioning it to thrive in a multipolar, digitally-driven world where China is not just a player but a rule-maker. That future will be shaped not by declarations in the Bundestag but by decisions in boardrooms, factory floors, and innovation labs across both nations. Merz has a narrow window to ensure that Germany remains not just relevant but resilient in that future. Embracing China’s tech surge – not fearing it – may be the smartest move he can make.
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