By Qaiser Nawab
Chairman Belt and Road Initiative for Sustainable Development – BRISD
Germany’s new Chancellor, Friedrich Merz, delivered his first major policy address this month, outlining a cautious yet significant shift in Berlin’s China policy. While reaffirming China’s status as an “important partner” for Germany and the EU in addressing global and economic challenges, he introduced the now-familiar phrase: “strategic de-risking.” It is not a policy of severance, but it signals an intention to reassess economic dependencies.
In practical terms, this raises fundamental questions. Germany’s economy—rooted in export-driven manufacturing, high-tech engineering, and complex global supply chains—has long relied on Chinese markets and manufacturing capacity. China has been Germany’s largest trading partner for eight consecutive years. In 2024, bilateral trade between the two countries exceeded €246 billion, with China importing German automobiles, machinery, and chemicals while supplying essential components, electronics, and increasingly, green technologies.
The idea of reducing dependency, therefore, must be weighed against the structural reality that Germany’s export economy is tightly integrated with China’s demand and production network. German automakers like Volkswagen and BMW sell more cars in China than in any other single market. Chinese investment in German industries—particularly in green energy, battery production, and industrial automation—has become a key enabler of Berlin’s sustainability and innovation goals.
Calls for “de-risking” should be seen in the context of broader concerns within the EU about overreliance on any single economic partner. However, diversification should not be mistaken for detachment. The economic relationship between Berlin and Beijing is far too layered and mature to be reshaped overnight without costs.
Moreover, Chinese companies are no longer just low-cost suppliers. They are increasingly emerging as competitors and collaborators in high-value industries. China’s lead in areas such as solar technology, EV batteries, and telecommunications has already shifted global market dynamics. Germany’s industrial strategy, if it aims to maintain competitiveness, will require engagement with these innovations—not insulation from them.
There are also implications for the EU’s broader economic strategy. China’s role in the global energy transition, digital infrastructure, and supply chain resilience will likely grow. If Germany, as Europe’s largest economy, begins to scale down ties with China beyond what is necessary for strategic security, it risks weakening Europe’s collective capacity to compete in the global economy.
Additionally, the prospect of German firms relocating supply chains to “like-minded” countries raises both costs and complexity. While India, Vietnam, and Indonesia are being considered as alternatives, none can currently replicate the scale, logistical efficiency, or industrial depth of China. Realigning supply chains may satisfy political optics but could reduce productivity and strain margins for German manufacturers.
The long-term concern lies in whether this reorientation risks undermining Germany’s historical strengths: openness, trade dynamism, and economic pragmatism. If managed poorly, “de-risking” could become a euphemism for overcorrection—one that introduces new vulnerabilities while failing to resolve old ones.
It is also important to acknowledge that Germany’s own industrial ambitions—particularly its green transformation and digital upgrades—will require rare earths, battery components, and technology partnerships, many of which are still dominated by Chinese producers. A cooperative framework, grounded in standards and regulatory clarity, may offer more stability than a defensive posture.
The strength of the German economy has long come from its ability to build, export, and adapt. That strength should not be diluted by broad-brush strategies. The future of global trade will not be built on rivalry—it will be shaped by who can manage interdependence intelligently.
About Author
Qaiser Nawab is an international development expert and commentator on global affairs. He writes regularly on trade policy, multilateral cooperation, and strategic economics. He can be reached at [email protected]
