Germany's China Pivot: How Merz's Beijing Visit Will Reshape European Industrial Policy

6 predicted events · 9 source articles analyzed · Model: claude-sonnet-4-5-20250929

The Strategic Crossroads

German Chancellor Friedrich Merz's February 2026 visit to Beijing marks a watershed moment in European economic policy. As he arrives with a large business delegation, Merz confronts an uncomfortable reality: Germany's industrial model is under existential pressure, and the solutions require engagement with the very country he once warned made Germany "susceptible to blackmail." The numbers tell a stark story. China has reclaimed its position as Germany's top trading partner with €252 billion in trade, but this comes with an unprecedented €89 billion trade deficit (Article 8). German exports to China plummeted 9.7% while Chinese imports surged 8.8% (Article 7). Most dramatically, German vehicle exports to China have collapsed by two-thirds since 2022 (Article 9).

The Second China Shock

What industry insiders call the "second China shock" is fundamentally different from the first. China is no longer just a low-cost manufacturer but a formidable competitor in high-tech sectors that Germany has dominated for decades. As Oliver Richtberg of the German Mechanical Engineering Industry Association notes, "We never have seen a challenge like China in the machinery industry before. They put their finger in our wound" (Article 1). His organization predicts machinery jobs will fall below the symbolic 1 million mark this year. The automotive sector provides the clearest warning signal. Chinese EV maker BYD increased German sales by over 700% in a single year (Article 9), while legacy German carmakers issue profit warnings. This isn't just about electric vehicles—it reflects China's systematic advance into advanced manufacturing, robotics, and industrial technology.

The Geopolitical Accelerant

Merz's pivot toward China is being forced not just by economic necessity but by America's retreat from multilateralism under Donald Trump. As Article 3 notes, Chinese Foreign Minister Wang Yi offered Germany exactly what it now finds lacking in Trump's America: "multilateralism, a rules-based world order and free trade." This creates an opening that Beijing is expertly exploiting. The timing is deliberate. China proposed the visit immediately after the Lunar New Year—"a good omen," according to German officials (Article 6). The itinerary reveals Beijing's sophisticated approach: Merz will visit not just political leaders but also Mercedes-Benz facilities, Unitree Robotics, and Siemens Energy operations in both Beijing and Hangzhou. China is showcasing its role as both market and manufacturing partner.

Predicted Outcomes

### 1. A Pragmatic Industrial Accord Merz will likely announce sector-specific cooperation agreements, particularly in renewable energy and industrial automation. Despite his hawkish rhetoric, the fiscal reality is undeniable: as Article 2 notes, "moral posturing does not sustain an industrial economy." Expect joint ventures in areas where German engineering expertise can be paired with Chinese manufacturing scale and market access. ### 2. Managed De-risking, Not Decoupling The visit will produce a framework for "de-risking" that sounds tough but maintains deep interdependence. Germany will seek reciprocal market access and commitments on technology transfer, but won't pursue aggressive decoupling. The VDMA's shift shows the German industrial consensus is evolving toward pragmatic engagement rather than confrontation (Article 1). ### 3. EU Tensions Will Intensify Germany's bilateral outreach will create friction within the EU. Smaller European nations and Eastern European members remain wary of China, particularly regarding security concerns. Germany's economic weight will push EU policy toward accommodation, but this will come at the cost of European unity on China policy. ### 4. Selective Trade Barriers Ahead Paradoxically, closer economic ties will be accompanied by targeted protectionism. As Article 9 notes, "momentum is building for fresh trade barriers to stop unfair trade practices." Expect EU-level measures on electric vehicles and critical technologies, negotiated with Chinese acceptance as the price of broader market access. ### 5. The New German Formula A new German approach will emerge: deep commercial engagement with China coupled with strategic hedging in critical technologies. This resembles the old Ostpolitik—pragmatic economic ties that reduce, rather than increase, conflict risk. Merz's statement about seeking "the right balance of cooperation" (Article 5) signals this calibrated approach.

The Broader Implications

This visit represents more than bilateral diplomacy—it signals Europe's recognition that the Atlantic partnership can no longer be its sole anchor. Germany's industrial survival depends on navigating between American security concerns and Chinese economic opportunities. The outcome will establish a template for how middle powers manage the US-China rivalry. The China experts are clear-eyed: "Not everything China wants is automatically in Germany's interests," notes Eberhard Sandschneider (Article 3). But with German machinery manufacturers changing their minds at "China speed" and Trump's America offering uncertainty rather than partnership, Merz has limited options. The coming months will reveal whether Germany can execute this high-wire act—deepening economic ties with China while maintaining technological sovereignty and transatlantic security commitments. Early signs suggest Merz will try, driven by industrial necessity rather than strategic choice. Whether this gambit succeeds will shape European economic security for the next decade.