Full Breakdown
German Business Lobby Urges Action Against China's Trade Practices Ahead of Merz's Visit
2/22/2026, 8:10:25 PM
Overview of the Trade Concerns
As German Chancellor Friedrich Merz prepares for a trade mission to Beijing, the powerful mechanical and plant-engineering lobby, VDMA, has called for urgent action against China's trade practices. The VDMA has urged Merz to demand an end to China's use of rare earth export controls and to address systematic market distortions that disadvantage German exporters. The association's statement highlights a significant decline in German machinery exports to China, which fell by 8.5% from January to November 2025, while imports from China increased by 12.5% during the same period.
Key Demands from the VDMA
The VDMA's executive director, Thilo Brodtmann, outlined several critical demands for Merz to raise with Chinese leaders. These include calls to cease state support for "zombie" firms—companies that are perpetually loss-making but sustained by government subsidies—and to reduce overall industrial subsidies, which the VDMA claims are four to five times higher than those in other major economies. The association emphasized that German companies are not merely competing with other businesses but with the Chinese state treasury itself.
Broader Implications for German Industry
The VDMA's concerns reflect a broader anxiety within German industry regarding China's evolving role as a competitor rather than just a market. The automotive sector, in particular, has seen significant shifts, with Volkswagen's market share in China declining sharply as domestic brands like BYD and Geely Auto gain ground. Analysts have warned that China's strategic inducements to German manufacturers may have facilitated the transfer of technology, which has now been used to displace German firms in both domestic and global markets.
Official Statements & Responses
In a position paper, the Asia-Pacific Committee of German Business echoed the VDMA's sentiments, warning of destabilizing trade practices by China, including overcapacity, massive subsidies, and politically motivated export controls. The paper stated, "Chinese competition, systemic risks, dependencies and distortions of competition have intensified significantly and have become a key challenge for prosperity and security in Europe." While Merz has framed his visit as an opportunity for constructive cooperation, the lobby groups stress the need for a unified European response to China's assertive trade policies.
Criticism & Opposition
Critics, including former Canadian diplomat Michael Kovrig, argue that Europe is not doing enough to counter China's coercive tactics, which include trade barriers and supply chain manipulation. Kovrig stated, "Germany's policy is trapped between fear and greed," urging Merz to seize the opportunity to redefine relations with China.
Conflicting Reports & Gaps
While the VDMA reported an 8.5% decline in machinery exports to China, other sources noted a slightly higher decrease of 8.8% year-over-year from January to September 2025. Additionally, the Chinese government has consistently rejected allegations of unfair trade practices, indicating a potential gap in the narrative surrounding these trade tensions.
Verbatim Quotes
- “Our companies are coming under increasing pressure because key competitive conditions are being systematically distorted,” — Thilo Brodtmann, Executive Director, VDMA
- “Chinese competition, systemic risks, dependencies and distortions of competition have intensified significantly and have become a key challenge for prosperity and security in Europe,” — Asia-Pacific Committee of German Business
- “As German Chancellor Friedrich Merz prepares to visit China next week, Europe’s not doing enough to counter Beijing’s coercive policies,” — Michael Kovrig, Former Canadian Diplomat
As Chancellor Merz embarks on his mission, the outcome of these discussions may significantly impact the future of German-China trade relations and the competitive landscape for German businesses.
