China shock: Rivalry tests Merz and German economy
Deutsche Welle
February 24, 2026
AI-Generated Deep Dive Summary
China's rapid rise in high-tech industries, particularly electric vehicles (EVs), has disrupted Germany's dominant position in key sectors like automotive manufacturing and machinery. The competition between China and Germany is intensifying, with Chinese companies like BYD making significant strides in European markets. While German automakers such as Volkswagen, BMW, and Mercedes-Benz are struggling due to declining sales in China and Europe, Chinese EVs have surged in popularity, leading to a 700% increase in BYD's sales in Germany last year alone.
The broader economic implications are evident: German exports to China have dropped by over 9%, marking the lowest level in a decade. This shift has caused significant challenges for German industries, with exports declining not just in China but also in third markets like Asia, Latin America, and Africa. According to experts, Chinese companies are offering cheaper products that are outcompeting German goods in these regions. The Rhodium Group warns that this decline is structural and could accelerate unless German industries find new markets or adapt to the changing competitive landscape.
Chancellor Friedrich Merz is set to visit China to address these trade tensions during his first official trip. While he aims to reaffirm Germany's economic ties with China, he also plans to raise concerns over market access and unfair trade practices. Both nations are seeking a reset in their strained bilateral relations, which have been tested by the pandemic's spotlight on Germany's reliance on Chinese parts and raw materials. Merz faces a delicate balancing act: stabilizing ties while advocating for fairer economic conditions.
This rivalry highlights a broader shift in global trade dynamics. Once seen as complementary partners, China and Germany are now direct competitors, particularly in high-tech industries. The outcome of Merz's visit will be closely watched, as it could influence the future trajectory of Sino-German relations and
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Originally published on Deutsche Welle on 2/24/2026