Germany to Review Its Policies on China, As Trade Tensions Rise

The German government is looking to toughen its trade dealings with China, saying it will set up a committee of experts to review its policies.

The move comes amid rising tensions between the two countries, which have the world’s second and third largest economies.

Chancellor Friedrich Merz has broken with decades of German free-trade dogma by calling this week for Europe to adopt protectionist measures to sustain Europe’s steel industry in the face of a Chinese competitive onslaught.

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The German coalition government plans to re-examine its China policies in regard to energy, raw material imports and Chinese investment in critical German infrastructure. It will set up a committee of experts to report to parliament, it said.

Panel to review ‘security-relevant’ dealings

The committee will examine “security-relevant trade relations between Germany and China” and make recommendations to the government, according to a motion submitted by Chancellor Friedrich Merz’s conservatives and their Social Democratic coalition partners, seen by Reuters on Saturday.

The motion is likely to be passed next Friday and the committee – which will be staffed by a dozen academics, industry associations, labour representatives and think tank members – will be established shortly after.

For decades, Germany saw China, another major exporter, as a natural ally in advocating for the open global trading system that helped Germany’s manufacturing sector flourish.

But a series of recent blows – including Chinese restrictions on rare earth exports that threatened to paralyse Germany’s crucial car industry – have prompted a rethink.

The new committee will report to parliament twice a year.

“The aim of the committee is to examine from a legal, economic and political perspective the need for changes to foreign trade rules,” the motion read. The committee will also look at other countries’ trade ties with China.

Last month, German Foreign Minister Johann Wadephul, who has criticised China’s rare earth export restrictions and tacit backing for Russia in its war against Ukraine, postponed a trip to China at the last minute after Beijing confirmed only one of his requested meetings.

Social Democrat Finance Minister Lars Klingbeil talked of the need for “a little more European patriotism”.