by Muhammad Asif NOOR
German Chancellor Friedrich Merz’s official visit to China on Feb 25–26 comes at a time of economic pressure in Europe and strategic uncertainty globally. It is the first visit by a foreign leader to China in the Year of the Horse and follows the April 2024 trip by former chancellor Olaf Scholz. The context has changed significantly since then.
Germany’s economy has recorded two consecutive years of negative growth. High energy costs, weakening industrial competitiveness, and slow digital transformation have strained Europe’s largest economy. The automotive sector, which contributes significantly to Germany’s exports and employment, is under particular pressure. Since 2022, German car exports to China have fallen sharply. At the same time, Chinese electric vehicle manufacturers have gained global market share.
Despite these challenges, China remains Germany’s largest trading partner. In 2025, bilateral trade reached 253 billion euros, up 2.7 percent year-on-year. This figure surpassed Germany’s trade with the United States. German direct investment in China reached 7 billion euros, the highest level in four years. Around one-third of German automotive sales depend on the Chinese market, reflecting the scale of economic interdependence.
Merz is accompanied by nearly 30 senior executives from major German companies, including Volkswagen, BMW, Mercedes-Benz, Siemens, Bayer, Airbus, DHL, and Deutsche Bank. The size and composition of the delegation underline the importance German industry places on the Chinese market. Many of these firms are not only exporting to China but have localized research, development, and production.
Volkswagen has established a full-cycle vehicle development center in Hefei. Mercedes-Benz has expanded its cooperation with Chinese smart driving companies. BMW has strengthened its research and development presence and supply chain integration in China. Germany’s robotics firm Neura Robotics has set up its Chinese headquarters in Hangzhou. These moves indicate that German companies see China not only as a sales market but as a technology and innovation partner.
China’s domestic economic data supports this view. In 2025, China’s total imports reached 18.48 trillion yuan, about $2.58 trillion, a record high. Total foreign trade reached 45.47 trillion yuan. China maintained its position as one of the world’s largest import markets despite global economic uncertainty. This level of import demand is significant for export-oriented economies such as Germany.
The visit also takes place amid ongoing debate in Europe about “de-risking.” Over the past few years, Germany has discussed reducing strategic dependencies. However, economic data shows that complete decoupling is neither practical nor aligned with business interests. Bilateral trade remains strong, and investment flows continue.
Merz’s schedule includes meetings in Beijing and visits to Hangzhou, a major center of China’s digital economy and artificial intelligence development. Hangzhou’s digital economy accounts for roughly a quarter of its GDP. Germany has long promoted “Industry 4.0,” but it faces challenges in areas such as artificial intelligence and industrial internet. Cooperation with China in digital technologies and green transformation could help address some of these gaps.
At the same time, differences remain. The German government has emphasized alignment with transatlantic partners and has expressed concerns about certain political and security issues. Germany recently announced a 30 billion euro subsidy plan for new energy vehicles, including support measures that affect Chinese manufacturers operating in Europe. This reflects Europe’s attempt to balance economic cooperation with strategic caution.
The key outcome of the visit will likely be greater clarity. Both sides need to manage competition while expanding areas of cooperation in trade, green transition, advanced manufacturing and technology. The economic scale involved is substantial. With bilateral trade at 253 billion euros and China’s imports exceeding 18 trillion yuan, the relationship has structural depth.
