Despite growing geopolitical tensions, German businesses continue to view China as an indispensable economic partner, particularly due to Beijing’s dominance in critical supply chains such as rare earth minerals. Matthias Roth, director of Frankfurt-based raw materials trader Tradium, emphasized that with China controlling over 95% of the global rare earth market, short-term alternatives are virtually nonexistent. He noted that long-standing trade relationships, certified materials, and reliable processes make Chinese suppliers difficult to replace. n nFor many German firms, especially in manufacturing, China remains a central market. Historically, Berlin supported deep economic integration with China, but shifts in Beijing’s political stance—particularly its alignment with Russia in the Ukraine conflict—have prompted a reassessment of dependency risks. German Chancellor Friedrich Merz recently stated that companies operating in China must bear their own risks, signaling a move toward reduced state intervention in commercial setbacks. n nIn November 2025, German Finance Minister Lars Klingbeil visited Beijing, underscoring the need for dialogue while warning that fair competition and industrial jobs are under pressure. He stressed engagement over isolation: “We must talk with China, not about it.” n nChina has once again overtaken the United States as Germany’s largest trading partner, with bilateral trade reaching 185.9 billion euros between January and September 2025. German direct investment in China accounted for 57% of the EU’s total in the first half of 2024, equivalent to nearly 2.3% of Germany’s GDP. Investments grew by 1.3 billion euros from 2023 to 2024, reflecting sustained corporate confidence. n nThe automotive sector exemplifies this deep linkage. Volkswagen, BMW, and Mercedes have invested billions in Chinese operations. BMW recently committed 3.8 billion euros to a battery plant in Shenyang and reaffirmed its long-term retail strategy in what it calls its largest global market. A BMW spokesperson, Britta Ulrich, stated that while strategies are regularly reviewed, no fundamental withdrawal is planned. n nHowever, rising competition from Chinese automakers, coupled with concerns over unfair trade practices, has intensified pressure on European manufacturers. The German Association of the Automotive Industry called for balanced competition, urging China to propose constructive solutions, enforce anti-competitive measures, and uphold free trade principles. n nMarket realities are also reshaping procurement strategies. Roth noted that while political pressures exist, the main driver for diversification is economic: export restrictions and global tariffs have disrupted long-established supply chains. “Our traditional purchasing models are no longer reliable,” he said, adding that his firm is increasingly exploring non-Chinese sources—not due to policy mandates, but because market forces demand adaptation. n
— news from DW
