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Thomas O. Falk

There are moments in statecraft when a government reveals its strategic character. German Chancellor Friedrich Merz’s new administration has shown one such moment – and it was encouraging. On Ukraine, Berlin has moved with a decisiveness long thought beyond its political metabolism. Weapons are flowing. Defence production is expanding. Germany is anchoring Nato’s eastern flank and, for the first time in decades, speaking like a country prepared to bear the burdens of European security.
On China, however, the same government has shown the opposite: hesitancy, confusion and, above all, drift. And drift, in geopolitics, is not a harmless default. It is a choice, with consequences.
The status quo of Sino-German relations is complicated. The relationship has had its heights – both sides grew and prospered – but the power dynamics have shifted.
How complicated are things? Last month, for example, Foreign Minister Johann Wadephul postponed at short notice a planned trip to Beijing, his inaugural visit, after Chinese officials offered only one official engagement, which was seen as a diplomatic slight. Yet last week, Finance Minister Lars Klingbeil rushed to Beijing, insisting that dialogue must continue and trade must be protected. This hardly amounts to Bismarckian grand strategy.
To be fair, Merz did not inherit a model of strategic clarity. The previous government was already stumbling on China.
Former chancellor Olaf Scholz’s last major visit, in April last year, was a textbook example of how not to manage Beijing. He arrived with a planeload of CEOs and lobbied for better market access and equal treatment for German firms, but it was a fruitless trip on the whole. Beijing did agree to open its market further to German agricultural products – pork, apples and some beef – but offered nothing meaningful on industrial overcapacity, market access or curbing dual-use exports to Russia.

China wanted access to German technology and know-how; Germany came home boasting it could sell more fruit. What used to be an industrial powerhouse arrived as a supplicant and left as an agricultural petitioner.
While Foreign Minister Annalena Baerbock talked of “de-risking”, the Chancellery told industry not to worry. Berlin called China a partner, a competitor and a systemic rival – then acted as if only the first word counted.
Merz was supposed to change this dynamic. Instead, he has, thus far, reproduced it. The problem is not merely confusion but denial. Berlin is fearful of any step that might jeopardise the Chinese sales of Germany’s export giants. And so Germany clings to a fantasy that worked in the 2000s: that it can profit from China’s state-capitalist rise without confronting the strategic risks.
Germany’s predicament is understandable – but not excusable. In the first nine months of the year, bilateral trade reached €185.9 billion (US$214.9 billion), even edging out the United States. However, Germany is reportedly also heading for a record €87 billion trade deficit with China this year. German companies are losing ground in electric vehicles and advanced machinery – even as Berlin imports more of China’s surplus output.
The vulnerability runs deeper than balance sheets. What Germany buys from China is no longer just cheap consumer goods, but the very materials that underpin its industrial might and security. China controls over 90 per cent of the world’s processed rare earths and magnets – the hidden materials of modern power. Beijing’s latest export controls on these materials are not bureaucratic tinkering but leverage.


A government with a viable China strategy would treat this as a national security emergency. Merz has treated it as a scheduling problem. China sees Germany as indispensable as a buyer, but replaceable as a seller – and Beijing is happy to show it.
So Berlin must now choose: either a coherent strategy or improvisation. Germany has less leverage than it once did, but that doesn’t mean it has none at all. It needs to stop acting like a nervous junior partner and decide what it stands for.
How could this be done? First, Berlin must stop believing that moral sermons constitute a China strategy. Beijing will not tolerate being lectured on human rights by a country that continues to have deep commercial engagement with Saudi Arabia, Qatar, Egypt, Turkey and a list of other partners which are hardly celebrated as liberal beacons.


Second, Germany must turn dependence into bargaining power in critical inputs – above all rare earths and magnets. Berlin does not control the minerals, but it controls capital, engineering talent and access to Europe’s biggest market. It can underwrite alternative supply chains in Australia, Canada or Scandinavia with long-term purchase guarantees. That won’t hurt China tomorrow, but it will change the balance over time.
Third, Germany should tighten the screw where it still has leverage: advanced machinery, industrial software, high-end automotive and chemical technology. Berlin cannot mirror Washington’s sweeping export controls – but it can restrict strategic transfers and make market access conditional on reciprocity.
None of this will suddenly reverse the power imbalance. Germany will remain more exposed to China than it should be, and for longer than it would like. The country rose by shaping globalisation. If it doesn’t learn to defend its interests, it may well become one of its casualties.


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Stumbling Germany needs a clear strategy on China

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Berlin must ditch the fantasy that it can profit without strategic risks, stop acting like a junior partner and decide what it stands for


Berlin must ditch the fantasy that it can profit without strategic risks, stop acting like a junior partner and decide what it stands for.


Germany

China-Germany relations

Friedrich Merz

Nato

China-EU relations

Defence

Trade

Ukraine

China trade

Rare earths

Johann Wadephul

Ukraine war

Olaf Scholz

China economy

China technology

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Stumbling Germany needs a clear strategy on China

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Berlin must ditch the fantasy that it can profit without strategic risks, stop acting like a junior partner and decide what it stands for

Berlin must ditch the fantasy that it can profit without strategic risks, stop acting like a junior partner and decide what it stands for