{"id":112965,"date":"2026-02-26T11:30:59","date_gmt":"2026-02-26T08:30:59","guid":{"rendered":"https:\/\/www.capitalfm.co.ke\/business\/?p=112965"},"modified":"2026-02-26T11:31:15","modified_gmt":"2026-02-26T08:31:15","slug":"german-chancellor-warns-of-trade-imbalance-with-china-during-first-beijing-trip","status":"publish","type":"post","link":"https:\/\/www.capitalfm.co.ke\/business\/2026\/02\/german-chancellor-warns-of-trade-imbalance-with-china-during-first-beijing-trip\/","title":{"rendered":"German chancellor warns of trade imbalance with China during first Beijing trip"},"content":{"rendered":"
\n
\n
<\/div>\n<\/div>\n<\/div>\n
<\/div>\n
\n
\n
\n

FEB 26 – During his first official visit to Beijing, Germany’s Chancellor Friedrich Merz said that a yawning trade imbalance between his country and China is “not healthy”.<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

Imports into Germany from China were more than double the value of those exported back last year, according to federal statistics.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

Merz said he wanted to find ways “to reduce this trade deficit” which had “quadrupled” in five years.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

Merz said he’d also asked Beijing to use its influence with Moscow to help end the war in Ukraine.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

However, the huge trade gap loomed large over the talks with the Chancellor, who was followed by a big business delegation.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

China once again\u00a0took the top spot as Germany’s biggest trade partner<\/a>\u00a0in 2025, supplanting the US.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

Behind that headline is a stark and worrying imbalance for Germany, the EU’s largest economy.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

In 2025, goods worth \u20ac170.6 billion (\u00a3148.8bn; $200.9bn) came from China into Germany – an 8.8% annual increase – while German exports to China\u00a0fell by 9.7% to \u20ac81.3 billion<\/a>.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

The situation “is eroding the core of German industry, especially in the car, machinery and chemicals sectors,” warns J\u00fcrgen Matthes at the German Economic Institute (IW).<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

Matthes, the IW’s head of International Economic Policy, believes distortions are chiefly down to “massive” Chinese subsidies and currency under-valuation.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

Chinese price advantages “cannot just come from more innovation and efficiency,” he told the BBC.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

Beijing has previously said its subsidy policies are transparent and fully consistent with international trade rules.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

In response to past allegations of unfairly controlling its currency’s value, China said it is committed to implementing a floating exchange rate regime, based on market supply and demand, but managed where necessary.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

The bloating trade deficit, that’s hitting the EU as a whole, is being dubbed the latest “China shock”.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

The trend was partly caused by the pandemic and Russia’s full-scale invasion of Ukraine which led to rising production costs in Europe, according to Brussels-based economic think tank Bruegel.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

“During the same period, China entered a prolonged deflationary phase, stemming from over-investment in manufacturing, creating the overcapacity we see today.”<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

It has left leaders weighing how best to offset the impact of cheap Chinese goods.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

That is as the continent has already been rocked by the turbulence of US President Donald Trump’s tariff policies.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n