German Chancellor Friedrich Merz's first visit to China takes place at a moment of adjustment in global politics and industrial competition. The presence of a large German business delegation accompanying the Chancellor's visit signals that despite more complex geopolitical debates, the economic relationship between China and Germany remains foundational to both economies.

In his meeting with Chancellor Merz, Chinese President Xi Jinping emphasized the importance of "correctly grasping the interplay of competition and cooperation," calling for stronger strategic communication, strengthening strategic mutual trust and working towards new progress in China and Germany's all-round strategic partnership.

That formulation captures the central reality of the bilateral relationship today. China and Germany are no longer operating at different stages of industrial development. Both are advanced manufacturing economies with deep technological capabilities. As such, their engagement naturally contains elements of both cooperation and competition.

President Xi noted that greater global turbulence makes dialogue and mutual trust more necessary. He underscored the importance of facilitating the two-way flow of talent, knowledge and technology, strengthening synergy between development strategies, and maintaining stable industrial and supply chains. These principles reflect a recognition that innovation ecosystems remain deeply interconnected, even as geopolitical competition introduces new pressures and constraints.

Premier Li Qiang observed during Chancellor Merz's visit that the basic pattern of China–Germany cooperation, characterized by industrial complementarity, has not changed. This remains true at a structural level. The two economies retain distinct strengths: Germany's globally recognized capabilities in precision engineering, advanced manufacturing systems and industrial standards; China's scale, digital integration, supply chain coordination and accelerating commercialization of new technologies.

What has evolved is the form of complementarity.

In earlier decades, complementarity often meant a clearer division of roles within global value chains. Today, as China's industrial base has upgraded and German firms have intensified their innovation efforts, complementarity increasingly coexists with direct competition in shared sectors such as electric mobility, battery technology and advanced equipment.

This convergence is not a rupture in the relationship. It is a natural phase of maturity between two major industrial powers.

Competition at the product level has intensified. In China's electric vehicle market, now the world's largest, domestic manufacturers have advanced rapidly, leveraging integrated supply chains and accelerated innovation cycles. Foreign brands, including German carmakers, face genuine market and competitive pressures. Yet the response from German industry has not been retreat. Many firms are expanding their research and development centers not only to serve the China market but also to support their global operations. As the latest Business Confidence Survey from the German Chamber of Commerce in China notes, German companies increasingly view China as an innovation hub rather than merely a production base or end market. In response to intensifying competition, they are forming technology partnerships with Chinese firms and adapting product development cycles to match the pace of China's innovation ecosystem, strengthening their global competitiveness in the process.

 Innovation, increasingly, is reciprocal.

Just as Chinese companies learned from German engineering expertise and manufacturing excellence over many years, German firms today are closely studying China's speed of digital integration and industrial scaling. President Xi's call to support the two-way flow of knowledge reflects this new reality. Technological exchange no longer runs in one direction; it flows across a shared industrial landscape.

Chancellor Merz, for his part, emphasized that Germany supports German enterprises in deepening their investment in the Chinese market, while also welcoming greater Chinese investment into Germany, creating jobs and strengthening connectivity. This is an important and constructive signal as two-way investment strengthens resilience.

The opportunities for cooperation remain substantial.

China's 15th Five-Year Plan outlines an ambitious transition toward innovation-driven development and a comprehensive green transformation of the country. The massive scale of China's energy transition, including renewables deployment, electrification of transport, hydrogen development and industrial decarbonization, generates demand for advanced machinery, precision components, environmental technologies and specialized industrial services. German enterprises possess deep expertise in many of these areas. At the same time, Chinese firms have demonstrated strengths in rapid commercialization, digital ecosystems and cost-efficient scaling. Combining these capabilities can generate outcomes that neither side could achieve alone.

Particular attention should be directed to Germany's renowned Mittelstand, the small and medium-sized enterprises that form the backbone of German industrial success. Many Mittelstand firms are highly specialized global leaders in niche technologies, yet some remain cautious about engaging more deeply in China’s evolving market. As China's economy shifts toward higher-quality growth, new niches are emerging in smart manufacturing, green equipment, logistics automation, specialized components and industrial services. The German Chamber of Commerce in China can continue working closely with Chinese authorities, at national and local levels, to create transparent dialogue mechanisms, clarify regulatory frameworks and design targeted support initiatives that enable Mittelstand companies to explore opportunities in China with confidence. Broadening participation beyond large multinational corporations would deepen the resilience and diversity of the economic partnership between the world's second and third largest economies.

The relationship between China and Germany is entering a more complex, but also more mature phase. The task ahead is not to deny competition or overlook complementarity but to manage their coexistence with clarity and confidence. When two large economies engage in managed competition within a broader framework of cooperation, they contribute not only to their own growth but also to global industrial resilience.

The next chapter of China–Germany economic relations will be shaped by the two country’s ability to combine competitiveness at home with openness abroad, reciprocity with fairness, and innovation with mutual respect.

Competition will sharpen capabilities. Complementarity, evolving in form but intact in substance, will continue to anchor cooperation. Together, these dynamics can ensure that China–Germany relations remain not a source of division, but a pillar of stability and progress in an increasingly uncertain world.

(Cover via VCG)