German Chancellor Visits China: Hangzhou Robot Demonstration and Adjustments in Sino-German Economic and Trade Relations

On February 26, 2026, German Chancellor Friedrich Merz watched a robot performance at Hangzhou Unitree Technology Company. This marked the final stop of his first visit to China as Chancellor. The day before, he held talks with President Xi Jinping and Premier Li Qiang in Beijing. This two-day visit was nominally aimed at restarting intergovernmental consultations between Germany and China, but the large accompanying business delegation and Merz's mention of overcapacity issues in Hangzhou actually revealed that the economic relationship between the two countries is undergoing profound adjustments.

From the Beijing talks to the Hangzhou presentation

Merkz arrived in China on February 24, with the delegation including representatives from companies such as Siemens Energy and Mercedes-Benz. On the 25th in Beijing, he discussed bilateral relations with Chinese leaders. Merkz expressed to Xi Jinping the hope that China could assist in ending the Russia-Ukraine war. Li Qiang responded that China would consider the reasonable demands of Western enterprises.

During his visit to Hangzhou the next day, Merz observed a robotics demonstration by Unitree Technology, toured the Siemens Energy factory, and experienced Mercedes-Benz's autonomous driving technology. At the press conference, he described these as good examples of cooperation and technological development, but immediately pointed out that some issues need to be addressed openly. He specifically mentioned the problem of production capacity: China's high production capacity has exceeded market demand, which also puts pressure on Europe. He announced that upon returning home, he would send the Minister of Economic Affairs to visit China and plans to initiate a new round of government consultations before 2027.

The Pressure Behind a 100 Million Euro Trade Deficit

Merkel's visit inevitably revolves around one number: 87 billion euros. According to expert Jörg Wuttke, Germany's trade deficit with China surged from 20 billion euros in 2024 to 87 billion euros in 2025. In 2025, Germany imported 170.6 billion euros from China while exporting only 91.3 billion euros. This breaks Germany's long-standing tradition of maintaining a trade surplus with China.

This imbalance has multiple causes. Wuttke points out that the euro exchange rate is one of the factors. Influenced by U.S. policies, the euro has appreciated by approximately 15% to 16% against the U.S. dollar, while the Chinese yuan is pegged to the dollar. This has increased the competitiveness of Chinese exports by 15% to 20%. At the same time, China's dominance in areas such as chips and rare earths has also made Germany's supply chain appear vulnerable. A survey by KfW on February 26 shows that nearly one-fifth of small and medium-sized enterprises feel pressure from Chinese suppliers, not only due to price but also because of the speed at which their quality is improving.

German companies in China are troubled by export control issues. Oliver Oms, Executive Director of the German Chamber of Commerce in China for North China, mentioned that export license approvals are plagued by uncertainty, lack of transparency, and excessive delays. A key objective of Merz's visit is to convey these concerns to the Chinese side.

Merkz's Pragmatic Shift and Europe's Dilemma

This visit demonstrates Merz's adjustment in his China strategy. Originally seen as a China skeptic, changes in U.S. policy have compelled Germany to reassess its stance. He stated in Hangzhou: "We should strengthen our relationship with China, and I am personally determined to do so." This statement highlights Germany's dilemma: security dependence on the United States, while economically inseparable from China.

This pragmatic attitude is also reflected in the style of the visit. Wuttke once advised Merz to avoid a didactic tone: "We cannot teach the Chinese anything." Before his departure, Merz cited the Chinese zodiac story of the Fire Horse year, stating that a horse cannot demonstrate its strength alone, attempting to convey a more dialogic posture.

However, Germany's domestic stance toward China is not unified. On the very day Merz visited China, German Vice Chancellor and Finance Minister Lars Klingbeil delivered tough remarks in Berlin. Taking China's green steel as an example, he claimed it is not produced under fair rules and stated that we should not naively cooperate. This divergence reflects the contradictions in Europe's de-risking strategy: wanting to reduce dependence on China while finding it difficult to abandon the Chinese market.

Investment, Talent, and Rule Competition

Merkz's visit aims to establish a new framework for Germany-China relations. Attracting Chinese investment is one of the directions. Wuttke believes that as profit margins in the Chinese market shrink, Chinese enterprises are accelerating globalization, which presents opportunities for Germany. Ooms also points out that German companies still possess high-end technologies that China needs.

The competition for talent is another front. Wuttke suggests that Germany should attract Chinese engineers and digital experts, much like it integrated Indian talent in the past. However, Germany's investment environment poses a challenge. Many Chinese professionals prefer Tokyo or Dubai.

Deeper competition lies in the rules. China denies allegations of overcapacity, emphasizing that its advantages in the renewable energy sector contribute to the global green transition. On the exchange rate issue, Beijing claims to be a responsible major country and states that it will not deliberately devalue its currency. Meanwhile, the European Union is discussing strategies such as "Buy European," which may clash with China's industrial policies. Merz's restart of government consultations aims to establish a regular communication mechanism, seeking a balance between cooperation and competition.

The robot demonstration in Hangzhou showcased China's capabilities and competitive pressure in high-tech manufacturing. Merz's first visit to China was a probe against the backdrop of Germany's economic challenges and geopolitical turmoil. An 87 billion euro trade deficit serves as a warning, while technological competition and market contention will define the complex nature of future bilateral relations. Dialogue has resumed, but every issue on the negotiating table concerns the redefinition of interests and rules.