DIHK's Chief Trade Officer Advocates for Closer Cooperation with China Ahead of Chancellor's Visit - Germany's Merz heads to China amid soaring trade deficit and export tensions

German Chancellor Friedrich Merz is set to visit China on Tuesday with a delegation of top business leaders. The trip comes as Germany faces a record trade deficit with China, reaching €89.3 billion in 2025. Discussions will focus on economic ties, security policy, and concerns over China's export controls on key resources.

While Germany has expanded sectors like battery production, semiconductor manufacturing, and renewable energy to reduce reliance on China, closer cooperation in environmental technology, recycling, and medical fields is still under consideration.

Over the past five years, Germany has worked to cut its dependence on Chinese supplies. Investments in battery production, semiconductor plants, and renewable energy—such as solar and wind technology—have grown. Alternative sources now include Australia and Canada for lithium and rare earths, the U.S. and Europe for chips, and Chile for copper. Recycling programmes within the EU have also been strengthened.

Despite these efforts, China remains a major economic partner. The head of foreign trade at DIHK, Volker Treier, described Beijing as more reliable than the U.S., citing the unpredictability of former President Donald Trump. However, Chinese authorities have been pushing German and European firms to increase local production and source more materials from China.

During his visit, Merz will meet Premier Li Qiang and President Xi Jinping. Business leaders want clearer rules on China's export restrictions, which affect critical resources. Treier urged the chancellor to seek firmer commitments from Beijing, arguing that serious dialogue could lead to more predictable trade conditions.

China's undervalued currency has also given its companies an advantage in global markets. This, combined with pressure on foreign firms to localise supply chains, has raised concerns among German industries.

The visit highlights Germany's balancing act between economic cooperation and reducing vulnerabilities. While trade with China remains vital, German businesses are calling for greater transparency in export controls. The outcome of Merz's discussions could shape future industrial policies and supply chain strategies.