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TRADE PATTERN CHANGING
China was Germany’s largest trade partner last year and German manufacturers have been embedded in China’s economy for decades but the pattern of trade has shifted dramatically over the past five years.
Chinese exporters, helped by what German officials consider an undervalued yuan, have reversed years of German surpluses, leaving Europe’s major industrial power with a yawning trade deficit with China of almost 90 billion euros ($106 billion) in 2025.
«The trade imbalance has reached alarming proportions,» said Mikko Huotari, executive director of the Merics think tank in Berlin.
«Ultimately, this means that the economic and business outlook for German companies in China has deteriorated for a large proportion of them.»
Merz, in comments to reporters shortly before take-off, said both sides had to mitigate risks arising from ever closer integration and unilateral dependencies: «This applies in particular to supply chains, technologies and raw materials.»
DUE TO SIGN ECONOMIC AGREEMENTS
Merz will meet President Xi Jinping and Premier Li Qiang and is expected to sign a number of economic agreements during a visit that will also take in stop-offs at a Mercedes-Benz electric vehicles plant and a Siemens Energy facility.
China has been at pains to present itself as a reliable global partner in a geopolitical environment roiled by U.S. President Donald Trump’s unpredictable swings. Its huge consumer market as well as the technical sophistication of its manufacturers make it an indispensable partner for Western companies.
But they have found the environment increasingly challenging and Germany’s main industry association appealed to the chancellor to address what it called «overcapacity, competition distortion and export controls on strategic commodities».
«We see pricing pressure, we see new competitors and entrants in nearly every segment, and thus, heavy shifts in what used to be the structure of the market,» Mercedes-Benz’s China boss Oliver Thoene said this month.
TRADE TENSIONS ARE ON THE RISE
Relations have not been made easier by EU efforts to protect its local market from what it says are underpriced Chinese imports, including by raising tariffs on Chinese-made electric vehicles that are shipped back to Europe.
The EU is also moving to protect struggling steelmakers by lowering import quotas and raising tariffs, following years of sector lobbying against Asian rivals.
Merz said that fair and transparent trade was the prerequisite for successful Sino-German relations, adding agreed trade rules needed to be adhered to.
«We also want to discuss how we can remedy situations where systemic overcapacity, export restrictions and access restrictions distort competition and prevent us from exploiting the full potential of our partnership,» Merz added.
($1 = 0.8488 euros)
Additional reporting by Christoph Steitz, Liz Lee and James Mackenzie; Editing by Alison Williams
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