Chancellor Merz's scheduled trip to Beijing next week presents a significant challenge as Germany's economy remains heavily dependent on China while navigating the complexities of international relations. The visit comes at a time when German companies, particularly in the automotive sector, are reassessing their supply chains and market strategies in light of potential geopolitical tensions between the U.S. and China.

The CEO of Mercedes recently expressed concerns about this dependency, indicating that the company is working urgently to replace China as a tier-one supplier due to the risks associated with increased hostilities between the U.S. and China. The fear is that deteriorating relations could jeopardize access to the lucrative American market, compelling Mercedes to rethink its sourcing strategies. However, the intricacies of global supply chains mean that complete control over all supply levels remains elusive, leaving a significant amount of risk unresolved.

This visit and the broader implications for German industry underscore the balancing act that Berlin must perform: fostering strong economic ties with China while also adhering to the principles of a rules-based international order that does not capitulate to Chinese dominance. According to research from the Frankfurt School of Finance & Management, about 40% of surveyed companies are acutely aware of the risks posed by over-reliance on the Chinese market, indicating that this is a pressing concern for many in the German business landscape.