When a new German government takes the helm in a few weeks, the context for Germany's China policy will have changed significantly. Even back in 2023, the China strategy drafted by the Germany’s foreign office was described by some insiders as a “dark clouds” paper. Since then, however, multiple storm fronts have been converging to pose a massive challenge to Germany’s effectiveness in its relations with China.
The first such front is looming over economic relations. The former model of complementary trade links between Germany and China has long been obsolete. The new normal involves displacement in key industries, fierce competition in external markets, and ever more evident damage—a “China shock 2.0”—to the European single market through systematic market distortions and surplus capacities resulting from Chinese output.
While German exports in particular are falling rapidly, European business groups are complaining about continuing and new difficulties in securing a fair footing in the Chinese market. In many cases, there has been a role reversal: These days, companies are not only seeking salvation in China’s market size and favorable investment conditions but have also become dependent partners profiting from the globalization and innovation of Chinese players.
The second front is equally challenging—the world’s growing technological divide. New US regulations on high-performance chips used in artificial intelligence (AI) are creating a whole new global power architecture. The Chinese race to catch up on chips and AI—illustrated most recently by OpenAI competitor DeepSeek—will accelerate the drifting apart of global technology ecosystems. US regulations, Chinese attitudes, and concrete countermeasures from Beijing are driving the decoupling. Germany and Europe are falling behind in key technology fields and becoming trapped in the middle.
Europe’s security and resilience are at stake under the third storm front. Russia's escalation in the Ukraine war has been accompanied by increasing Chinese support for Moscow—including through deliveries of drones. Chinese espionage against German companies has become an underestimated part of everyday life and is on the rise. Cyberattacks on the Federal Agency for Cartography or the Christian Democratic Union (CDU) party headquarters, for example, have been attributed to China.
The hybrid threat to Europe is becoming increasingly serious, while simmering tensions in the Taiwan Strait and the South China Sea mark geopolitical fault lines. Beijing is using authoritarian partnerships and pragmatic parallel structures to open up new international spheres, pushing into gaps in the political order that the US no longer wants to fill and that are beyond the EU’s reach.
The outcome of this foreboding weather system won’t just shape the future of European competitiveness and security but will also determine whether Germany’s green and digital transformation will succeed—and whether democratic societies will remain resilient. The old scenario outlined by Germany’s China strategy isn’t obsolete yet, but the urgency to act has increased immensely. Writing another fundamental policy paper on China wouldn’t help anyone. So where should the momentum come from?
Focus on Systemic Conflict
In the brief election campaign of early 2025, CDU leader Friedrich Merz has outlined a new foreign policy strategy, which would also have to involve a change in approach toward China.
There is a clear focus on risk and systemic conflict with the emphasis on the axis of autocracies between China, Russia, Iran, and North Korea. A National Security Council could provide a framework for resolving departmental conflicts of interest and internally updating guidelines on dealing with China. In addition, the Weimar Triangle—i.e., closer cooperation between Berlin, Paris, and Warsaw—is to be revived as a new source of strength for a united European policy.
However, the acid test for such a theoretical approach is already imminent. How will the next German government calibrate its concrete China policy while it deals with massive external pressure from the second Trump administration and many industry leaders are privately pushing for a better relationship with China?
The pendulum mustn’t just swing back: In the current environment, deeper relations with China will no longer expand Germany's strategic room for maneuver. There must be no geopolitical vacillation here.
Anyone who still hopes for Beijing’s support for European security interests against Moscow, or who regards China as a reliable stabilizing factor in global trade or is counting on political change, is deluding themselves. To be sure, the dismantling of the global post-war order by the Trump administration isn’t in Germany's interest either. However, the continuing potential for convergence, overlapping strategic interests, and security policy realities should forbid Berlin from flirting with mercantilist equidistance.
If parts of German industry see the future of the automotive and green energy sectors primarily in China or with Chinese investment in Europe, or if dependencies on raw materials are so strong that they can only be scaled back slowly, the macroeconomic risks must be soberly analyzed and clearly stated. More German trade and investment with China can still be in Europe’s interest—but only under certain conditions.
“Homework Policy”
Germany’s China policy therefore remains first and foremost one of getting its homework done. Together with the EU, it must reposition itself structurally. This is the only way to ensure Europe’s long-term relevance in global value chains and its geopolitical independence, and to re-secure its viability as an industrial location as well as its own capacity for innovation in competition and in tough disputes with China.
Pursuing a more effective integrated approach toward economic security and foreign trade policy will be hard work. The silos within government are entrenched—successful strategic coordination with the private sector is limited at present. In this phase of globalization, Germany in particular needs to explore new avenues internally.
The Bundestag should require the government to conduct a regular “resilience audit”—or the government should develop benchmarks at the European level for reducing dependencies, including on China. At the same time, exchange and cooperation between EU member states should be intensified. In the next legislative period, the KRITIS Umbrella Act, can finally be passed to improve the protection of critical infrastructures. In “outbound investments” in highly sensitive sectors, a European inspection framework should be designed in such a way that it closes gaps in export controls and also provides guidance for German companies. Clear and regular attribution of verifiable Chinese cyberattacks and information campaigns should be part of a standard repertoire to heighten business and public awareness of the forms of hybrid conflict. Cooperation between the security authorities of like-minded states must be intensified, while investment in broad-based expertise on China will remain necessary.
The outgoing German government of Chancellor Olaf Scholz did not live up to its ambition to act in a more European way. Many in Germany remain blind to the fact that the German business model of maximum globalization may have helped to establish Europe's strength, but today—especially in relation to China and the US—it entails vulnerability and thereby responsibility for the whole of Europe. National and European coordination on policy toward China is still treated as secondary at best, apart from in very limited circles. The new government must first prove that it will not only handle this differently, but also invest in initiatives, structures, and capacities that make Brussels more effective.
From G7 to G11
As a possible response to autocratic cooperation worldwide, the new German government could therefore strive to broaden the G7 mechanism into a G11, thereby strengthening Europe’s effectiveness vis-à-vis China and embedding that approach in transatlantic cooperation. It would be in Germany’s and Europe's interest to include Australia, India, and South Korea, and to give the European Union its own seat to do justice to the pressing realities of security and economic policy—including its policy toward China. Such a structure would reflect the fact that Europe and the Indo Pacific are increasingly closely linked through supply chains, investment flows, and security policy concerns. India as an emerging economic power and South Korea with its cutting-edge technology could, together with Australia, considerably broaden the horizon and resonance of Europe’s China policy.
There will be resistance to such an expansion of the G7 format: Washington might see it as a dilution of American power. Yet US President Donald Trump already proposed a G11 in 2020 —albeit one that included Russia. India is pursuing a complex “multi-alignment” foreign policy and won’t be easy to integrate. Seoul is delicately navigating a tense relationship with China, and few players are interested in the EU gaining power. Nevertheless, a G11 could maintain and increase effectiveness in competition and conflict with China—be it in securing access to critical raw materials or in technology initiatives.
The new German government faces the task of reshaping Germany’s China policy at a time of profound global upheaval. Despite all its own internal weaknesses: China is becoming an even greater systemic challenge. The existing structures and approaches aren’t enough. A resolute realignment is required. Only through close, strategic cooperation within the EU and with partners worldwide can German interests in relations with China be safeguarded over the long term.
Mikko Huotari is the executive director of the Mercator Institute for China Studies (MERICS) in Berlin.
