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German Chancellor Friedrich Merz has urged China’s President Xi Jinping to reset trading relations between the EU and the world’s second-largest economy amid growing tensions.
Merz, who is making his first trip to China since taking office, said he discussed Germany’s widening trade deficit and Chinese restrictions on German companies during a meeting with Xi on Wednesday.
The two leaders also discussed reducing risks in supply chains in critical sectors, he added, a reference to Germany’s reliance on rare earths from China for its car and defence industries.
“Competition between companies must be fair,” Merz said after his encounter with the Chinese president. “We need transparency, we need reliability and we also need compliance with jointly established rules.”
The German chancellor had earlier recommended Beijing appreciate its currency, remove subsidies for domestic manufacturers and reduce industrial overcapacity blamed for flooding EU markets with cheap products, warning that “calls for protection” were “growing louder in Europe”.
“Stronger Chinese domestic demand, made possible by a moderate appreciation of your currency, would make it easier to continue trading without such barriers,” Merz said.
It was “important to reduce market-distorting subsidies and to consolidate the market where we see overcapacity”, he added.
In the meeting, Xi portrayed China as a champion of the multilateral world order and supporter of European efforts to become less dependent on the US.
“China and Germany should . . . take the lead in being defenders of multilateralism, practitioners of international rule of law, defenders of free trade,” Xi said, according to state media.
“China supports Europe’s self-reliance and strength, and hopes that Europe will work with China in the same direction,” he said.
Merz’s two-day trip comes as Europe’s largest economy faces intensifying deindustrialisation pressures and competition from low-cost producers in China in areas such as cars and machine tools — industries at the core of Europe’s export-orientated manufacturing sector.
German industrial companies shed more than 120,000 jobs in 2025, according to EY estimates.
As a result, Berlin has warmed to protectionist measures and last year backed EU tariffs against Chinese steel imports. It is now considering “made-in-Europe” requirements for certain sectors and wants Chinese companies to invest and create jobs in Germany.
Given China’s technological advance, Berlin also favours requiring Chinese firms to invest in Germany alongside domestic groups in joint ventures, with more technological transfers, according to German officials. This would mirror conditions imposed by Beijing on foreign companies wanting to access some sectors of the Chinese market.
Merz, who is being accompanied on the trip by representatives of 30 companies, has also sought to emphasise the benefits of a rebalanced relationship. Many large German groups, including carmakers, still see the Chinese market as crucial for profits and innovation.
“Few places move as fast in areas such as electromobility, software, artificial intelligence and battery technology — China is setting the pace and shaping standards,” said Ralf Brandstätter, chief executive of Volkswagen Group China.
“[The] high-level trade delegation . . . fully demonstrates Germany’s strong desire to deepen bilateral trade and economic relations,” state news agency Xinhua said on Wednesday.
Merz’s trip follows a progression of visits to Beijing by European leaders, including the UK’s Sir Keir Starmer last month and France’s Emmanuel Macron in December.
“Over the past two months, leaders from several countries in Europe and the Americas have visited China,” Premier Li Qiang told Merz at the opening of their meeting.
“Although each leader has had different priorities during their visit, the most frequently discussed topic has been how to strengthen dialogue and co-operation,” Li said.
Beijing has sought to capitalise on the visits to project itself as a reliable partner and amplify rifts between the US and its allies over President Donald Trump’s chaotic tariff policies and ambitions to take over Greenland.
But China has struggled to overcome deep scepticism in Europe over its growing trade surpluses and its tacit support for Russia’s war in Ukraine, according to diplomats in Beijing.
Germany’s trade deficit with China, its largest trading partner, rose to a record €87bn last year, up €20bn from 2024.
“The unilateralism and protectionism pursued by the US have prompted European countries to reassess their external relations,” said the Global Times, the Chinese Communist Party mouthpiece.
It added that Beijing was “a firm supporter of free trade” and “aimed at upholding the international system centred on the United Nations”.
