What Merz's inaugural visit to China means to China-Germany relations

At the invitation of Premier of the State Council Li Qiang, German Chancellor Friedrich Merz will pay an official visit to China from February 25 to 26.

Merz's visit to China shortly after the Chinese New Year holiday comes amid high expectations for a stable strategic partnership as transatlantic alliances face strains. Joined by a delegation of Germany's top industrial leaders, Merz's two-day visit seeks to deepen bilateral ties by tapping into China's market potential and expanding cooperation in emerging technology sectors.

"May the Year of the Horse bring strength and give new impetus to German-Chinese relations." Merz wrote on X on February 17, the first day of the Year of the Horse, adding he is looking forward to the trip, his first since taking office last May.

An extensive delegation, including the heads of top DAX-listed companies such as Bayer, Volkswagen, Mercedes-Benz, BMW, Adidas, Siemens and Commerzbank, is expected to travel with Merz, according to German outlet Handelsblatt. The companies include automobile manufacturers, industrial conglomerates, pharmaceutical giants, financial institutions and consumer goods companies.

Merz said he will discuss future cooperation among Europe, Germany and China. The "right balance of cooperation" will be the focus of the trip, according to a German government spokesperson.

"Foreign policy today is also foreign economic policy, and foreign economic policy is an essential part of our economic policy," Merz said at the congress of the conservative CDU party in Stuttgart on February 21.

China reclaimed its position as Germany's largest single trading partner in 2025, a title it held from 2016 to 2023, according to recent data from the German Federal Statistical Office (Destatis). Trade between the two countries reached 251.8 billion euros (about $297.3 billion), up 2.1 percent from 2024.

German economy strained by an uncertain world

"The world has become more uncertain, and alliances that we have trusted and relied on are beginning to crumble," German Economic Minister Katherina Reiche said at the Handelsblatt Energy Summit, urging the need to seek new partners as Washington leans on tariffs.

"Higher U.S. tariffs are making German goods less competitive on the U.S. market," said Ralph Solveen, an economist at Commerzbank, in an interview with AFP.

According to Destatis, German exports to the U.S. plunged 9.3 percent in 2025. In the first seven months of 2025, Germany's export surplus with the U.S., its biggest trading partner in 2024, fell to its lowest level for that period since 2021. In the automotive sector alone, shipments of cars and parts to the U.S. market fell 17.5 percent, while chemical exports dropped 14 percent.

German firms have long been committed to the highly competitive Chinese market, which has become a benchmark for emerging technologies.

Oliver Zipse, BMW's CEO and part of Merz's delegation, said on February 19 that cooperation with Beijing is fundamental.

"Those who close their minds to China's enormous market and innovation potential are missing out on great opportunities for global growth and economic success," Zipse warned.

"Complex global challenges can only be solved by working together," Zipse told Reuters. "With his trip to China, the chancellor is sending a strong signal for dialogue and cooperation."

"Innovation and progress do not arise from isolation, but rather when pioneering spirit, openness and global expertise come together," Zipse said.

In April last year, BMW announced plans to begin integrating DeepSeek's artificial intelligence. The German automobile manufacturer said it would use the AI model from the Chinese startup in new vehicle models at the Shanghai auto show.

"Key advances in AI are happening here. We are strengthening AI partnerships for integration in our vehicles in China," Zipse said in 2025. "Starting later this year, we will integrate AI from DeepSeek in our new vehicles in China."

The German automotive sector remains the primary driver of business localization. Audi announced its onboard AI assistant, powered by the Douban large language model from ByteDance and iFlytek's voice recognition, last year, alongside its fully electric vehicle developed with SAIC, a Shanghai-based automotive manufacturer. Volkswagen, which refers to China as its "second home market," has similarly signed a series of deals with Chinese firms to accelerate technological development and digital integration.

Yet the automotive sector is not the only German sector anchored to the Chinese market through extensive investment and local cooperation. German foreign direct investment in China reached a four-year high in 2025, according to the IW German Economic Institute, totaling over 7 billion euros between January and November, up 55.5 percent from 4.5 billion euros in 2024 and 2023. These investments are increasingly directed toward large-scale research and development projects aimed at securing a long-term market presence.

Chemical giant BASF opened an 8.7 billion euro complex last year – its largest investment to date. Bayer, a German pharmaceutical giant, launched a 20 million euro innovation center in Shanghai in 2024, designed to deepen its integration into the country's local research and innovation ecosystem.

Suzhou, a city west of Shanghai, has become a hub for prominent German companies. Taicang, a county-level city under the administration of Suzhou with a population of over 800,000, now hosts more than 560 German-funded enterprises. By July 2025, the broader Suzhou area had utilized over $3.6 billion in actual German investment. Leading firms such as Bosch and Siemens have established global production and R&D bases in the city, transforming these facilities into core regional hubs serving the wider Asia-Pacific market.

Partners, not 'systemic rivals'

Less than two weeks ago, Chinese Foreign Minister Wang Yi emphasized that China and Europe should be viewed as partners rather than "systemic rivals" in remarks at the Munich Security Conference.

Economic and trade cooperation serves as the anchor of China-Germany relations, Wang said during his meeting with German Foreign Minister Johann Wadephul at the conference. China is committed to high-standard opening up and is ready to foster a first-class business environment that is market-oriented, law-based and internationalized for German and other foreign enterprises so they may share in China's development opportunities.

Wang's German counterpart responded with high hopes. Wadephul said Germany attaches high importance to China, welcomes a more open China and holds high expectations for the Chinese market. Noting that Germany-China cooperation has enormous potential, Wadephul said the German side opposes economic decoupling and trade protectionism and welcomes fair competition.

(With inputs from agencies)