During meetings this week with Chinese President Xi Jinping and Premier Li Qiang, German Chancellor Friedrich Merz pushed to deepen economic ties with China while flagging concerns about unfair competition and a widening trade imbalance. He stressed the need to expand cooperation amid unpredictable US trade policy, but also sought clearer rules to manage competition.
Merz avoided labeling China a “systemic rival,” a phrase used by his predecessor Olaf Scholz that had irritated Beijing. He traveled with a delegation of about 30 German business leaders and held talks with leading Chinese and German business figures in Hangzhou, a Chinese tech hub.
China’s Foreign Ministry highlighted the German delegation as evidence of “practical cooperation,” with spokesperson Mao Ning calling the visit “fruitful and significant.” Merz pointed to a Chinese commitment to buy 120 additional Airbus aircraft as an example of the tangible potential of high-level meetings.
Analysts said the visit was meant to demonstrate both sides’ willingness to keep cooperation at a steady level amid difficult transatlantic relations. Nadine Godehardt of the German Institute for International and Security Affairs (SWP) described the trip as happening at a sensitive moment for transatlantic ties, while Wan-Hsin Liu of the Kiel Institute for the World Economy said the main achievement was restoring face-to-face channels and avoiding missteps.
Germany and the EU are important markets for Chinese green-energy and electric-vehicle exports. As Europe’s industrial heavyweight, Germany can influence EU economic policy and serve as a gatekeeper for market access. Liu noted that Europe’s above-average purchasing power and large decarbonization demand make it attractive to China, which faces massive industrial overcapacity and seeks external markets.
Germany and China signed five memoranda of understanding covering climate cooperation, animal disease prevention, the resumption of certain agricultural exports, and exchanges in sports and media. Observers said these agreements signal a willingness to cooperate but do not address core issues such as Germany’s growing trade deficit with China or Beijing’s controls on key exports like rare earths.
The trade deficit has become a central concern. Data from Germany’s Federal Statistics Office showed Germany’s trade deficit with China rose to over €89 billion in 2025, up from nearly €67 billion in 2024. Merz told Premier Li the deficit had “quadrupled in five years” and described the trend as “not healthy.” He urged fair competition for German firms, pointing to Chinese state subsidies, restricted market access and opaque regulations as long-standing problems. “We must be able to rely upon agreed rules,” he said.
But analysts cautioned against expecting immediate policy shifts from Beijing. Godehardt suggested Merz’s aim was to define limits and clarify German and European interests rather than to force rapid change. Liu said that unless China accepts that its policies undermine fair competition, substantive policy changes are unlikely solely because of Merz’s visit.
Other issues remain unresolved, including concerns about China maintaining a relatively low renminbi exchange rate and providing state support to strategic industries—measures Western governments view as distortive but Beijing treats as industrial policy tools. Merz’s trip, supporters say, restored a valuable communication channel that could help prevent speculation from driving policy and buy time to negotiate clearer rules and guardrails for economic relations.