China and Germany Move to Mend Trade Ties Amid Rare-Earth Tensions
China has made a renewed push to strengthen relations with Germany’s new government, seeking to ease trade frictions that have disrupted German manufacturing and raised calls for reduced dependence on Chinese supply chains. The diplomatic outreach marks a quick reversal from earlier tensions over export curbs on chips and rare earths that led to Germany’s foreign minister cancelling a planned visit to China in October.
Beijing Calls for Deeper Cooperation
At the G20 summit in South Africa, Chinese Premier Li Qiang met German Chancellor Friedrich Merz and called for greater dialogue to resolve trade concerns. “China and Germany are important economic and trade partners,” Li said, according to state media. He urged both governments to “strengthen communication and properly address their respective concerns,” while proposing closer cooperation in advanced industries such as new energy and smart manufacturing.
The meeting between the two leaders had seemed unlikely just months ago. However, with both nations affected by the ongoing US-China trade war and looking to diversify economic ties, they appear ready to set aside differences. Merz is expected to visit China soon, with plans to meet President Xi Jinping, while Foreign Minister Johann Wadephul has agreed to reschedule his postponed trip to Beijing.
Trade Relations Remain Vital
Despite disputes over China’s stance on Russia, human rights issues, and industrial subsidies, Berlin and Beijing remain tightly linked through extensive trade. China bought $95 billion worth of German goods last year, including cars and industrial machinery, while Germany imported $107 billion in Chinese products, mainly chips and electronic components.
Germany also stands out as a key investor in China, contributing $6.6 billion in new capital in 2024. That figure accounts for nearly half of all European Union and UK investment into the country, according to the Mercator Institute for China Studies. Li expressed hope that Germany would maintain a “rational and pragmatic” China policy and resist external “interference and pressure.”
A Focus on Future Industries
For Germany, China remains an essential market for automakers and chemical producers, representing almost one-third of car sales and a major base for pharmaceutical production. Yet growing competition from Chinese firms has increased pressure on German companies operating in the country.
Li Qiang emphasised that both nations should seize opportunities in fast-growing sectors such as hydrogen energy, biomedicine, and intelligent driving technology. The talks, which followed earlier meetings between senior Chinese and German economic officials, signal a shared interest in stabilising trade and preserving one of the world’s most important economic partnerships.
with inputs from Reuters
