Contents
Introduction:
“Germany wants a divorce from China.” This was how The Wall Street Journal recently characterized the current state of China–Germany economic relations. The phrase was quickly echoed by global media and broadly reflects the policy narrative emerging from Berlin: reducing dependence on China, reassessing industrial security, and promoting what German officials describe as “de-risking” in key sectors.
However, when viewed from the perspective of corporate behavior, this so-called “divorce” appears incomplete—and in many respects, paradoxical. In highly competitive, time-sensitive industries such as machinery, automotive manufacturing, and chemicals, speed, coordination, and engineering efficiency are themselves sources of competitiveness. A full disengagement from China’s manufacturing and R&D ecosystem would almost certainly slow product iteration, development cycles, and industrial collaboration for German firms.
Corporate decisions already reflect this reality. Market behavior provides additional evidence. Based on data from GWBMA’s company report system, international inquiries into Chinese machinery and electrical equipment manufacturers have increased noticeably over the past two years. This trend is not driven by political rhetoric, but by real commercial decision-making, as global buyers and partners increasingly and proactively integrate Chinese companies into their supply and cooperation networks.
I. The Foundations of China–Germany Economic Relations Are Shifting
Until around 2020, the division of labor within China–Germany economic relations appeared relatively stable. China was widely perceived as the center for mid- to low-end consumer goods and large-scale manufacturing support, while Germany maintained a strong position in high-end machinery, industrial equipment, and capital goods. This structure was not only reflected in trade statistics but also formed the basis of Germany’s long-standing industrial advantage.
By 2025, this underlying logic has begun to change. According to multiple forecasts, Germany’s trade deficit with China is expected to expand to approximately €87–88 billion around 2025, reaching a historical high. This is not a short-term fluctuation, but a structural adjustment occurring within sectors where Germany has traditionally been strongest.
The shift becomes clearer when examining global export structures. If machinery and electrical equipment are divided into two core categories:
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In HS84 (machinery, boilers, machine tools, and related capital goods), China’s share of global exports has risen to around 21%, while Germany’s stands at approximately 11.5%.
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In HS85 (electrical and electronic equipment), China’s global export share approaches 30%, whereas Germany’s has declined to roughly 6–7%.
Taken together, China’s share of the broader machinery and electrical equipment market is now close to 20%, while Germany’s has fallen toward the 10% range. At the same time, Germany recorded its first-ever capital goods trade deficit in 2024—a category that notably includes machine tools, long regarded as the symbolic core of German industrial strength. This development is reshaping the industrial foundation of China–Germany economic relations.
II. A Long-Term Trend: China’s Machinery Exports Are Reshaping the Reality of China–Germany Economic Relations
To understand this structural reversal, it is essential to recognize a more fundamental fact: the growth of China’s machinery and electrical exports is not accidental, but the result of a long-term structural trend.
According to data released by Chinese customs authorities and industry organizations, China’s machinery and electrical exports exceeded USD 2.07 trillion in the first eleven months of 2025, representing growth of approximately 8% year-on-year and continuing to drive overall export expansion. Machinery and electrical products now account for nearly 60% of China’s total exports, forming the core of its export structure.
More importantly, this growth is not merely quantitative. China’s machinery exports are steadily shifting from mid- to low-end manufacturing toward system-level production and integrated delivery capabilities. Within the practical operation of China–Germany economic relations, China functions not only as a major exporter of machinery, but also as a significant importer and purchaser of large-scale industrial equipment—simultaneously acting as both seller and buyer within global supply chains.
Global trade data further confirms China’s stable position as the world’s second-largest exporter and second-largest importer. This dual role indicates that China is no longer simply a “manufacturing base,” but has become a central node in global production and demand networks—a reality that inevitably shapes China–Germany economic relations.
III. German Manufacturing Capabilities Are Extending into China
When shifting from macroeconomic data to corporate behavior, changes within China–Germany economic relations become even more tangible.
In Taicang, Jiangsu Province, a city rarely highlighted in global headlines, German companies refer to the area as “Klein Schwaben” (Little Swabia). This is not a symbolic label, but a concrete industrial phenomenon: more than 500 German companies operate in Taicang, forming a highly stable manufacturing cluster. Most notably, six of Germany’s top ten family-owned machine tool groups have established significant production or operational bases there.
As machine tools represent the foundational “industrial mother equipment” of manufacturing, this concentration sends a clear signal: within China–Germany economic relations, parts of Germany’s core manufacturing capabilities are being extended into China in a systematic way. This is not a simple cost-driven relocation, but a rational response by highly specialized German manufacturers to global supply chain restructuring.
A similar pattern is evident in Shanghai and the surrounding regions. The China–Germany (Shanghai) Enterprise Cooperation and Exchange Center in Zhangjiang has operated for many years, providing platforms for corporate coordination, industrial cooperation, and policy dialogue. It has become part of the institutional infrastructure underpinning China–Germany economic relations.
IV. The “Speed Gap” in China–Germany Economic Relations
In research and innovation, the interdependence within China–Germany economic relations continues to deepen. Volkswagen has invested approximately €2.5 billion in an R&D and innovation center in Hefei, with one explicit objective: leveraging China’s supply chain density and engineering coordination to shorten vehicle development cycles by roughly 30%.
Upstream industrial investments further reinforce this trend. BASF has committed around €10 billion to an integrated chemical production complex in Zhanjiang—its largest single investment project to date. Bosch plans to invest approximately RMB 10 billion in Suzhou over the next five years, focusing on intelligent driving control and related technologies. Bayer, Mercedes-Benz, and Siemens have also announced or expanded investment and R&D initiatives in China.
Together, these projects indicate that, at the corporate level, competition within China–Germany economic relations has evolved beyond cost or quality alone, toward speed, system integration, and closed-loop engineering capabilities.
V. Germany’s government calls for “moving away from China,” but German companies are accelerating their investments instead.
Contrasting sharply with corporate expansion is the policy narrative. In recent years, German authorities have increasingly emphasized “de-risking,” anti-dumping measures, and national security considerations, redefining the strategic boundaries of China–Germany economic relations.
Yet trade structures tell a different story. Europe—including Germany—has become more dependent on Chinese capital goods, not less. German imports of Chinese capital goods now exceed exports to China, directly contributing to Germany’s first capital goods trade deficit around 2025. This indicates that Chinese machine tools, industrial automation equipment, and precision machinery are increasingly integrated into German and European supply chains.
At the firm level, the picture is consistent. Surveys show that over 90% of German companies in China plan to maintain or expand their presence, and more than half intend to increase investment over the next two years. These are not emotional decisions, but rational choices made within the existing structure of China–Germany economic relations.
This tension does not imply that either side is “wrong.” Rather, it reflects a transitional phase in China–Germany economic relations shaped by global industrial restructuring. On one hand, Germany seeks to reduce dependence on China by strengthening ties with the United States in areas such as energy and strategic industries. On the other hand, this shift also places Germany within systems that operate at a slower pace in industrial R&D and manufacturing efficiency.
As artificial intelligence and new industrial cycles reshape global production, the central question is no longer who “wins” or “loses,” nor whether de-China strategies are correct. Instead, the reality is that China–Germany economic relations are deepening at the industrial level while diverging at the policy level—a process best understood not as decoupling, but as restructuring.
Conclusion:
Against the backdrop of AI and a new round of industrial restructuring, the question is no longer who wins or loses between China and Germany, nor whether “de-Chinaization” is the right path. Rather, it reflects a reality that has been unfolding since 2025: China–Germany economic relations are deepening at the industrial level, while diverging at the level of policy and strategic narratives. This simultaneous coexistence of closer integration and growing distance is not a short-term anomaly, but more likely a transitional phase shaped by broader shifts in the global industrial structure.
