
Merz Leans on Xi to Reassert Rules-Based Trade on First China Trip
Merz opens a restrained, strategic dialogue in Beijing
Chancellor Friedrich Merz arrived in Beijing with a pragmatic pitch: Germany will invest in its own industrial strength, but Beijing should help level the playing field for rules-based commerce. He framed the engagement not as confrontation but as a candid commercial conversation, flagging systemic overcapacity and restrictions that distort competition while signalling Berlin’s readiness to pair domestic reforms with diplomatic bargaining chips.
Berlin paired admission of domestic shortcomings — the need to boost industrial competitiveness and supply-chain resilience — with explicit expectations of reciprocal market openness. Public messaging emphasised negotiation and regulatory clarity rather than punitive measures, reflecting a pattern also visible in other Western capitals that have recently moved from blanket decoupling rhetoric to transactional, sector‑by‑sector approaches.
Merz calibrated diplomatic signals to preserve access for German exporters while nudging China toward more transparent procurement and export conduct. Officials in Berlin expect the visit to seed technical talks on market access, industrial subsidies, and export controls, with follow-up working groups likely within months. Those mechanisms would aim for verifiable, timebound commitments rather than open‑ended assurances.
The trip occurs amid a broader European and transatlantic shift: contemporaneous high‑level delegations to Beijing emphasise services and low‑carbon cooperation, the EU has advanced trade ties with partners like Vietnam and India for predictable market access, and some governments have calibrated trade tools (for example, moving from blunt tariffs to price‑floor measures or easing select EV tariffs) to limit market disruption without provoking escalation. That broader context gives Berlin more diplomatic room to offer conditional carrots while keeping guardrails in place.
Commercial reactions are already visible: Chinese OEMs and suppliers are expanding capacity in Hungary, Spain, Brazil and parts of Africa to shorten supply chains and serve redirected demand, while European firms accelerate diversification. Financial flows have shown tactical reallocations in response to policy signals, which could shorten windows of uncertainty for major contracts but also reprice risk for investors.
Domestically, the visit reassures exporters but also foreshadows policy shifts — tighter investment screening, selective industrial incentives, and possible reinterpretations of export licensing in other tracks of Berlin’s policy agenda. Parallel proposals in German policymaking to speed certain procurements or recalibrate export controls elsewhere (e.g., suggested streamlining of some Gulf export licenses) underscore a government leaning toward pragmatic industrial facilitation, raising parliamentary and civil‑society scrutiny.
The key test for the trip’s value will be enforceability: Beijing can issue paper commitments on procurement transparency or export paperwork, but independent verification and dispute‑resolution mechanisms will determine whether those concessions change market economics. If bilateral technical groups translate into measurable, monitored steps, German firms could see procurement uncertainty fall and contract pipelines firm up within 6–12 months.
Human‑rights cases and influence concerns — including recent high‑profile detentions elsewhere — continue to limit political room for manoeuvre. That constraint means practical deals are likely to be sector‑specific, accompanied by explicit safeguards for critical technologies and infrastructure rather than broad, unconditional market reopenings.
In short, the visit resets expectations: Berlin is pursuing conditional integration — offering incremental access in return for clearer rules and verifiable transparency — while preserving escalation options. Whether this approach yields durable changes or merely defers tougher EU measures will depend on the speed and credibility of follow‑up technical agreements and on how Brussels, Berlin and partners align their screening and subsidy tools over the next 6–12 months.
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