Germany's China Pivot: Strategic Partnership or Temporary Pragmatism? Five Predictions for the Merz Era

7 predicted events · 20 source articles analyzed · Model: claude-sonnet-4-5-20250929

# Germany's China Pivot: Strategic Partnership or Temporary Pragmatism? Five Predictions for the Merz Era

German Chancellor Friedrich Merz's first official visit to China in late February 2026 marks a pivotal moment in European-Chinese relations. What began as a skeptical relationship—Merz previously warned that economic dependencies make Germany "susceptible to blackmail" (Article 16)—has evolved into a pragmatic recalibration driven by stark economic realities and American unreliability under the Trump administration.

The Current Landscape: Economic Necessity Meets Strategic Vulnerability

The numbers tell a sobering story. Germany's trade deficit with China reached a record €89 billion in 2025, having quadrupled since 2020 (Article 1, Article 10). Chinese imports surged to €170.6 billion while German exports fell 9.7% to €81.3 billion (Article 10). Merz himself acknowledged this "dynamic is not healthy" (Article 1), yet he traveled to Beijing with 30 senior executives from Germany's industrial giants, securing a major Airbus deal for up to 120 aircraft (Article 2, Article 11). This visit represents more than routine diplomacy. As Article 17 notes, "Germany is in search of global partners after the US has relinquished much of its longstanding role." Chinese Foreign Minister Wang Yi strategically offered multilateralism and free trade—precisely what Germany finds lacking in Trump's America. Meanwhile, German machinery manufacturers report unprecedented challenges, with the sector's employment expected to fall below one million for the first time (Article 15).

Key Trends and Signals

**1. The Parade of European Leaders to Beijing** Merz joins a growing procession of European leaders—from Finland, Ireland, France, Spain, and the United Kingdom—visiting China (Article 4). This isn't coincidence; it's strategic repositioning as US-China competition intensifies and Trump's confrontational approach forces European recalibration. **2. China's Technology-First Approach** Premier Li Qiang's emphasis on "deeper technological cooperation" and "joint technology development" (Article 4) signals Beijing's strategy to lock in European partnerships through innovation ecosystems rather than just trade. Merz's visit to Hangzhou—home to DeepSeek AI and Alibaba—and tours of Unitree Robotics facilities (Article 6) underscore this technological dimension. **3. Germany's Changing Risk Calculus** The "China speed" with which German industrial groups are reassessing their positions (Article 15) reflects a fundamental shift. Germany's export-dependent model faces existential pressure, and as Article 16 observes, "moral posturing does not sustain an industrial economy."

Predictions: What Happens Next

### Prediction 1: Incremental Trade Agreements, Not Transformation **Timeline: 3-6 months** Expect a series of sector-specific agreements in automotive, renewable energy, and aviation, but not a fundamental rebalancing of the €89 billion deficit. The Airbus deal—while significant—is largely symbolic, representing continued dependency rather than resolution. Chinese Premier Li's call for "bilateral flows of innovation resources" (Article 4) will translate into joint ventures in green technology and AI, particularly in battery manufacturing and autonomous vehicles. However, structural issues remain unaddressed. As Article 10 notes, Chinese subsidies and currency undervaluation create price advantages that "cannot just come from more innovation and efficiency." Germany lacks leverage to force Beijing to abandon industrial policies that underpin its competitive advantage. ### Prediction 2: A New "Two-Track" EU-China Policy Emerges **Timeline: 6-12 months** Germany will increasingly diverge from the more hawkish EU stance on China, creating tension within Brussels. As Article 14 suggests, Merz is identifying "reliable partners"—notably Italy's Meloni—who share pragmatic economic interests over ideological positioning. This will manifest in: - Germany blocking or diluting EU measures on Chinese subsidies and dumping - Increased bilateral agreements that bypass EU coordination - Quiet resistance to expanded export controls on dual-use technology The irony: Merz's CDU party previously condemned Scholz's approval of Cosco's Hamburg port stake as a "fatal mistake" (Article 16). Expect similar or larger Chinese infrastructure investments under Merz, rebranded as "strategic partnerships." ### Prediction 3: German Manufacturing Hollowing Accelerates **Timeline: 12-18 months** Despite increased cooperation rhetoric, German industrial erosion will accelerate. The machinery sector's fall below one million jobs (Article 15) is just the beginning. Chinese firms will continue absorbing German technical expertise through joint ventures while undercutting German exports in third markets. Article 4's mention of "encouraging companies to explore third-country markets together" signals China's strategy: use German brand credibility to penetrate markets where Chinese products face resistance, while German firms become junior partners in Chinese-led supply chains. ### Prediction 4: The Ukraine Question Creates Persistent Friction **Timeline: Ongoing, flare-ups within 3-6 months** Merz urged China to use its influence on Moscow to end the Ukraine war (Article 12), but this will remain an unresolved irritant. Beijing has no incentive to pressure Russia while consolidating partnerships with European nations desperate for economic relief. Expect: - Continued symbolic German statements on Ukraine - No meaningful Chinese action on Russia - Growing German tolerance of this gap as economic pressures mount The trade deficit provides China with significant diplomatic leverage, which it will deploy to moderate European criticism of its Russia policy. ### Prediction 5: Technology Transfer Accelerates Through "Cooperative" Frameworks **Timeline: 6-12 months** Premier Li's call for "shared research platforms" and "deeper joint technology development" (Article 4) will result in new German-Chinese innovation centers, particularly in: - Artificial intelligence and autonomous systems (reinforced by Merz's Hangzhou tech hub visit, Article 6) - Renewable energy and battery technology - Advanced manufacturing and robotics These will be framed as mutually beneficial but will primarily serve Chinese technological advancement. German firms, facing extinction in domestic markets due to Chinese competition, will see technology-sharing as their only survival path—even as it erodes long-term competitive advantage.

The Underlying Reality

Article 16 captures the essence: Merz "confronts an export model under strain, a deteriorating transatlantic environment and the fiscal reality that moral posturing does not sustain an industrial economy." The chancellor's pragmatism reflects not strength but constraint. China, meanwhile, is playing a patient game. As Article 17 notes, Beijing has been "laying the foundations for this over many years with strategic patience." Wang Yi's Munich Security Conference overtures offering multilateralism and rules-based order—precisely when Trump abandons these principles—represent strategic opportunism at its finest.

Conclusion: A Recalibration, Not a Reset

Merz's China visit marks Germany's acceptance of diminished options rather than an empowered strategic choice. The €89 billion trade deficit isn't a problem to be solved but a dependency to be managed. The "worthwhile" trip (Article 2) yielded deals that deepen rather than diversify Germany's exposure. The next 12-18 months will reveal whether this pragmatic pivot preserves Germany's industrial base or accelerates its transformation into a secondary player in a Chinese-led manufacturing ecosystem. Current trends suggest the latter, with German firms increasingly resembling premium brand subsidiaries in Chinese supply chains rather than independent industrial powerhouses. The real question isn't whether Germany will deepen ties with China—economic gravity ensures it will—but whether European unity can survive the resulting tensions as Germany's national interests increasingly diverge from collective EU positioning. That fracture, more than any bilateral agreement, may be China's most significant achievement from Merz's visit.