Merz Flags Economic Strains In China

German Chancellor Friedrich Merz concluded his visit to China by acknowledging both the scale of bilateral trade and the structural economic challenges that continue to strain relations. While reaffirming the importance of cooperation, he highlighted persistent imbalances that complicate Germany’s industrial outlook.

China remains one of Germany’s largest trading partners, underpinning export demand for machinery, vehicles and industrial technology. However, Berlin has expressed concern over widening trade deficits and competitive pressures linked to Chinese industrial overcapacity. German officials argue that excess production in sectors such as electric vehicles and renewable technology risks distorting global pricing and weakening European manufacturers’ market position.

The visit underscored the delicate balance between economic engagement and strategic caution. German companies remain deeply invested in the Chinese market, benefiting from scale and supply chain integration. At the same time, policymakers are increasingly attentive to dependency risks, particularly in critical supply chains and advanced manufacturing inputs. Diversification strategies and resilience planning have become central themes in Berlin’s economic diplomacy.

From a macroeconomic perspective, the trade relationship carries broader implications for Europe’s growth trajectory. Strong export performance supports Germany’s industrial base, yet prolonged imbalances can influence domestic employment, competitiveness and fiscal stability. Addressing structural frictions requires coordination on market access, subsidy transparency and fair competition standards.

Merz’s remarks signal that economic pragmatism will continue to guide German policy, but with clearer emphasis on reciprocity and sustainability. As global trade patterns shift and geopolitical tensions persist, managing the China relationship remains a central challenge for Europe’s largest economy. The visit reinforced that cooperation is economically essential, yet unresolved competitive issues remain at the forefront of bilateral dialogue.

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