After Canada and UK leaders, Germany’s Merz heads to China: What’s driving the visits, despite criticism?

Merz’s visit is in line with Germany’s more consistent outreach to China. On February 20, official data showed that China was Germany’s biggest trading partner in 2025, as it had been from 2016 to 2023, before briefly being replaced by the United States.

The obvious trigger for the closeness is the presidency of Donald Trump, who has taken a belligerent approach towards longstanding Western allies. This has ranged from expansionist plans and calling Canada the “51st” US state, to criticising Europe for its defence spending, and its handling of issues like immigration.

At a time when China continues to battle overcapacity, or manufacturing output surpassing demand, it makes sense for it to look West. For the West, however, the story is not as simple.

What Europe seeks from China

Merz said the theme of the trip will be “competition” and “the right balance of cooperation” with China, in a reference to China’s massive trade surplus.

Despite being the world’s third-largest economy (by GDP), Germany has been battling slowing growth. For the country, and others in Europe, China supplies cheap machinery and consumer goods and has long been a market for cars, luxury items and industrial goods.

But as China has gradually moved up the value chain in its domestic manufacturing, there is little reason for it to import goods at a similar scale. In addition to a real estate downturn and low demand, Chinese consumers are either turning to cheaper Chinese goods (like electric vehicles) or not buying at all.

As The Economist recently noted, “Exports of German cars and other goods to China have fallen off a cliff, and surging imports from Chinese companies facing price pressure at home have driven the trade deficit to €90bn ($105bn), a head-spinning 2% of German gdp.”

Researchers from the think tank Rhodium Group also analysed China-Germany trade since 2000. They stated that “To put the overall export decline in perspective, if the average annual drop of the past three years were to continue for another three, German exports to China would sink to roughly €63 billion by 2028, well below the level of German exports to Austria or Switzerland, countries with populations that are just 0.6% the size of China’s.”

Simultaneously, cheaper Chinese goods continue to find a market in Europe, but this is now pinching some European manufacturers. Many in Europe have now sought Chinese investments instead, and asked China to open its market to their goods.

Why some have criticised the visits

Merz has said that Germany should have no “illusions” about China, which he said “asserts the claim to define a new multilateral order according to its own rules.” Countering criticism about engaging with China, UK PM Starmer had also said, “As one of the world’s biggest economic players, a strategic and consistent relationship… is firmly in our national interest. That does not mean turning a blind eye to the challenges they pose – but engaging even where we disagree.”

The challenges include diplomatic issues like China’s support for Russia amid the ongoing Ukraine war, which directly impacts Europe. Trade, however, is at the forefront.

Ursula Von der Leyen, President of the European Commission, said as much last year while in Beijing to mark 50 years of China-Europe diplomatic relations. She said they were at a “clear inflection point”, and that “Unlike other major markets, Europe keeps its market open to Chinese goods… However, this openness is not matched by China.”

Senior Chinese officials and President Xi Jinping himself have flagged the trend of Chinese producers selling their goods at very low prices, which is also hurting their own profits. However, analysts believe that quickly abandoning a model that powered China’s growth for decades will face resistance.

For instance, local governments in China often have some freedom to manage their jurisdictions, but must also meet targets set from the top. Toning down manufacturing will further result in losing tax revenue and lead to other problems, like unemployment.

There are other ramifications for closer trade ties with China, including for security, as analysts recently argued for the think tank European Council on Foreign Relations (ECFR). Relying on China “hollows out crucial industrial capacities and augments China’s coercive power. It also has political implications: the geographic concentration and speed of the impact in traditional European industrial heartlands bolsters the rise of extremist parties,” they wrote.

They added that Europe should resist “opportunism” and look for alternative partners, such as India. “The India-EU trade deal… is the best embodiment of the kind of “pragmatism” the moment really requires—a deal that would not have been concluded like this in a different era, given that both sides were previously rigid in their negotiating positions—and proves that a like-minded approach to China can provide economic and strategic payoffs,” they wrote.

The other argument is that China is too big a player to be ignored, especially at a time when the US has become more unreliable.

Writing for the magazine International Politics and Society, German professors at the Helmut Schmidt University said that “In a world of competing empires, middle powers cannot be beholden to a single power centre… Yet an equitable relationship with China – not to mention the US or Russia – will only be possible if Germany has its own house in order.” Raising investments in its military and social spending, and developing industrial competitiveness were necessary to achieve that, they added.

What China seeks from Europe

China is cognisant of what’s driving Western leaders towards it. A January report in China Daily, the English-language state newspaper, described the European leaders’ “high-profile” visits as a “pragmatic pivot by the bloc toward closer economic engagement with Beijing as a counterweight to rising global instability.”

Like Europe, it makes sense for China to deepen the partnership amid the precariousness of trade ties with the US. It has also turned to the Global South amid the market losses due to US tariffs. And, there is a natural convergence in areas such as investments in green technology and climate change with Europe, which the US has abandoned under Donald Trump.

It remains to be seen how Western leaders sell the decision to engage back home, also complicated by the trust deficit that continues to plague relationships with China. It is difficult to justify a pivot when governments like Canada and the UK have themselves flagged threats like alleged espionage from China not too long ago. Many leaders are thus careful to emphasise that this is not a hard turn, but rather a transactional decision to engage selectively, on better terms.