Germany and China have been deeply intertwined in economic cooperation for decades, with Germany viewing China as a vital trade partner and China seeing Germany as its gateway to Europe. However, over the past five years, this relationship has evolved from strategic partnership to cautious engagement, marked by political tensions, economic dependencies, and shifting global alliances. While trade remains robust, political differences over human rights, technology security, and foreign policy have driven Germany to reassess its approach.

As China becomes more assertive on the global stage, Germany has sought to navigate its ties carefully, balancing economic interests with strategic security. This analysis explores the transformation of Germany-China relations over the past five years, detailing key events, economic entanglements, political rifts, and future trajectories.

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Five years of shifting tides

Germany’s stance toward China has undergone a significant transformation, reflecting growing concerns over security, supply chain risks, and political coercion. Once dominated by economic pragmatism, Germany’s China policy has shifted toward strategic caution and diversification.

2018–2019: Economic optimism tempered by strategic concerns

1. The European Commission, with Germany’s backing, officially designated China as a "systemic rival" in March 2019, signaling growing discomfort with Beijing’s state-driven economic model and influence operations in Europe.
2. German companies continued to expand investments in China, with Volkswagen, Siemens, and BASF increasing their footholds despite concerns over unfair market practices and intellectual property theft.
3. Tensions surfaced when German Foreign Minister Heiko Maas met with Hong Kong activist Joshua Wong in September 2019, leading to diplomatic protests from Beijing.
4. Merkel visited China in September 2019, advocating for deeper economic engagement but raising concerns over human rights in Xinjiang and Hong Kong.

2020: COVID-19 disruptions and diplomatic tensions

1. The pandemic highlighted Germany’s heavy dependence on Chinese supply chains, leading to discussions about reducing overreliance on Chinese manufacturing.
2. Germany criticized China’s imposition of the Hong Kong National Security Law in June 2020, marking a shift toward a more confrontational stance on human rights.
3. Chinese diplomats engaged in “Wolf Warrior” diplomacy, with Beijing warning Berlin about repercussions for supporting human rights activists.
4. The EU-China Comprehensive Agreement on Investment (CAI), backed by Merkel, was finalized in December 2020, despite growing EU skepticism toward China’s economic practices.

2021: Sanctions, retaliation, and recalibration

1. The EU, including Germany, imposed sanctions on Chinese officials in March 2021 over human rights abuses in Xinjiang. China retaliated with sanctions against German think tanks, scholars, and members of the European Parliament, leading to a breakdown in trust.
2. Germany’s business sector, particularly its automotive industry, warned that escalating tensions could jeopardize economic interests, but political leaders continued to emphasize the need for diversification.
3. Merkel left office in December 2021, and the new Scholz-led coalition government signaled a tougher stance on China, with the Greens and Free Democrats pushing for stronger measures on human rights and security.

2022: Zeitenwende and strategic reassessment

1. Russia’s invasion of Ukraine in February 2022 reshaped Germany’s approach to authoritarian regimes, reinforcing concerns about dependence on China for critical goods and materials.
2. Olaf Scholz became the first G7 leader to visit Beijing post-pandemic in November 2022, attempting to maintain economic dialogue while addressing geopolitical concerns.
3. The German government blocked two semiconductor acquisitions by Chinese firms in December 2022, citing national security risks.

2023: The year of de-risking

1. Germany released its first-ever China Strategy in June 2023, emphasizing the need to reduce economic dependencies on China while maintaining selective engagement.
2. Berlin backed the EU’s investigation into Chinese electric vehicle subsidies in September 2023, escalating trade tensions between the two economic powers.
3. Foreign Minister Annalena Baerbock stated in October 2023 that a Chinese invasion of Taiwan would be a "worst-case scenario" for Germany’s economy and security, further straining diplomatic ties.

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Economic interdependence and vulnerabilities

Despite political differences, Germany and China remain deeply interconnected through trade and investment. However, this economic relationship comes with risks, including supply chain vulnerabilities, market access restrictions, and China’s increasing competitiveness in key industries.

Bilateral trade and investment

1. China has been Germany’s largest trading partner for seven consecutive years, with bilateral trade reaching €298 billion in 2022.
2. German exports to China totaled €107 billion, while imports from China stood at €191 billion, creating a significant trade imbalance.
3. Major German companies, including Volkswagen, BASF, and Siemens, have substantial operations in China, contributing to Germany’s reliance on the Chinese market.

Key sectoral dependencies

1. The automotive industry is particularly vulnerable, with nearly 40% of Volkswagen’s global sales occurring in China. BMW and Mercedes-Benz also rely heavily on the Chinese market for growth.
2. German industrial machinery and chemical industries depend on China, with BASF investing €10 billion in a new chemical plant in China despite political risks.
3. Germany imports 64% of its rare earth metals from China, making its clean energy and defense industries heavily reliant on Chinese supply chains.

Economic vulnerabilities and strategic risks

1. Supply chain disruptions during COVID-19 exposed Germany’s overreliance on Chinese manufacturing, leading to renewed efforts to diversify trade partners.
2. Market access barriers, including China’s state subsidies and regulatory restrictions, have made it difficult for German firms to compete on equal terms.
3. Intellectual property theft and forced technology transfers remain major concerns for German companies operating in China.

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Political rifts and foreign policy challenges

Germany’s foreign policy toward China has become increasingly assertive, challenging Beijing on human rights, territorial disputes, and economic coercion.

1. Germany has taken a firm stance against China’s “Wolf Warrior” diplomacy, summoning Chinese diplomats on multiple occasions to protest aggressive rhetoric and economic threats.
2. Berlin has been critical of China’s Belt and Road Initiative, refusing to join due to concerns over debt sustainability, transparency, and geopolitical influence.
3. Germany has increased its naval presence in the Indo-Pacific, participating in freedom of navigation operations in the South China Sea to counter Chinese territorial claims.
4. On Taiwan, Germany has maintained a one-China policy but has grown more vocal in warning against military escalation. Berlin has emphasized that a conflict in Taiwan would have severe economic repercussions for Europe.

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Balancing economic interests with security concerns

As Europe’s leading economy, Germany faces the challenge of protecting its economic interests while addressing national security and geopolitical risks.

1. The Scholz government has prioritized de-risking rather than decoupling, aiming to maintain trade ties while reducing strategic vulnerabilities.
2. Berlin has pushed for stronger EU-wide investment screening mechanisms to prevent China from acquiring critical infrastructure and technology firms.
3. Germany is actively diversifying supply chains by strengthening economic ties with India, Vietnam, and Latin America to reduce dependence on China.

The European approach and Germany’s role

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Germany’s China policy is closely aligned with that of France and the broader European Union, though with some differences in emphasis.

1. France has taken a more military-focused approach, regularly sending naval patrols to the Indo-Pacific, while Germany focuses on economic security.
2. The EU has collectively shifted toward de-risking, with Germany leading efforts to impose investment restrictions and trade defense mechanisms.
3. Germany has played a key role in shaping the EU’s response to China’s trade coercion, supporting measures such as the anti-coercion instrument to counter economic pressure tactics.

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The road ahead

Germany’s relationship with China is evolving toward a more cautious and strategic approach. While economic interdependence remains strong, Berlin is increasingly prioritizing national security, democratic values, and supply chain resilience.

In the coming years, Germany’s China policy will likely focus on strengthening economic diversification, enhancing European unity on China-related issues, and reinforcing security cooperation in the Indo-Pacific. At the same time, Germany will seek to maintain open communication with Beijing to prevent unnecessary confrontation and explore areas of mutual interest, such as climate change and global trade stability.

The challenge for Germany will be to navigate this complex relationship without compromising its economic competitiveness or strategic autonomy. The balancing act between economic pragmatism and geopolitical caution will continue to define Germany’s approach to China in the years ahead.

Germany China Relations