German Chancellor Friedrich Merz's recent two-day visit to China marks a pivotal moment in European diplomacy, signaling that Germany—and potentially the broader European Union—is moving away from viewing Beijing as a "systemic rival" and instead positioning it as a strategic cooperation partner. However, this diplomatic pivot also underscores a harsh economic reality: the golden era of German manufacturing is steadily being eclipsed by China's industrial rise.
Reevaluating the 'Systemic Rival'
In 2019, the European Union categorized China in three distinct ways: a partner, a competitor, and a systemic rival. While partnership and competition accurately reflected the deeply intertwined yet increasingly contested supply chains, the "systemic rival" designation was inherently political. It reflected Western anxieties that China's authoritarian model posed a direct challenge to democratic principles and international rules. This framing intensified after President Joe Biden took office in 2021, driven by Washington's calls for democratic alliances to contain Beijing.
However, the return of Donald Trump to the White House has sharply altered Europe's strategic calculus.
Germany appears to be arriving late to this diplomatic reset. The rush to strengthen bilateral ties with China is largely a reaction to the "Trump effect."Ironically, these nations are beginning to realize that the United States currently poses a more unpredictable economic threat than China.
The Hegemonic Misalignment
China's political system is undeniably different from Western democracies. Yet, if Beijing is not actively exporting revolution, subverting European governments, or imposing its ideology globally, the EU's fixation on China's domestic system appears disproportionate. Washington routinely courts authoritarian governments—such as its 2023 comprehensive strategic partnership with Vietnam—when it serves its strategic interests.
The U.S. drive to contain China is fundamentally rooted in hegemonic competition, not democratic values. According to geopolitical principles, the United States will not allow another power to challenge its global dominance. By adopting Washington's geopolitical anxieties as its own, the EU effectively reduced itself to a subordinate role. As Kishore Mahbubani, Singapore's former United Nations ambassador, observed, Europe blindly followed American geopolitical priorities, expecting dividends but instead getting "kicked in the face."
The Breakdown of Germany's Golden Formula
Merz's discussions of a "strategic partnership" in Beijing are a clear attempt to offset "Trump risk" and officially end the era of treating China as an adversary. However, whether this diplomatic shift can secure substantial economic support for Germany remains highly uncertain.
During the era of former Chancellor Angela Merkel, Germany’s economic success was built on a potent, three-pronged formula: cheap Russian energy, superior German manufacturing, and unfettered access to the massive Chinese market. Today, that formula has collapsed.
The war in Ukraine permanently severed access to cheap Russian gas. Concurrently, China’s manufacturing capabilities have rapidly advanced, squeezing out the German products that once dominated the market.Germany’s crown jewel—its automotive sector, including BMW, Mercedes-Benz, and Volkswagen—is facing unprecedented pressure.
Despite official policies aimed at "de-risking," China remained Germany's largest trading partner last year, underscoring the failure of European economic decoupling.
While Merz's visit corrects past policy errors by pivoting back toward practical cooperation, Germany's industrial recovery will ultimately depend on its own technological innovation and competitiveness.
