German Finance Minister Arrives in Beijing as Trade Deficit Widens and Supply Chains Falter

Germany’s finance minister became the first representative of the new coalition government to visit China on Monday, at a time when Berlin faces growing pressure to demonstrate it can manage Beijing effectively while the country’s trade deficit with China hits record levels and supply chains show signs of strain.

Lars Klingbeil’s arrival in Beijing comes more than six months after Germany’s conservative-led coalition took office — and shortly after last month’s cancellation of Foreign Minister Johann Wadephul’s planned visit, which was scrapped after China declined most of the proposed meetings.

German officials have emphasized that Klingbeil will focus on major commercial issues, particularly China’s restrictions on rare earths. A finance ministry source said Berlin had already aligned its position with EU authorities, who hold responsibility for trade policy.

Before departing for Beijing, Klingbeil told reporters in Berlin: “Access to critical raw materials and a reduction in Chinese overcapacity in sectors like steel and electric mobility are essential for Germany’s economy and for jobs.”

Domestically, the coalition also needs to demonstrate that it still commands attention in Beijing and can maintain its grip on a relationship that remains economically vital but politically fraught.

The U.S.–China trade war launched by President Donald Trump has hurt German exports, while a surge in Chinese imports has added to supply-chain anxieties — particularly concerning rare earth metals and automotive chips.

Klingbeil will meet Vice Premier He Lifeng for the German–Chinese financial dialogue, launched in 2015. He is accompanied by Bundesbank President Joachim Nagel and a small delegation of German banks and insurance companies.

“Europe’s relationship with China is extremely ambiguous,” said Denis Depoux, Global Managing Director of Roland Berger. “On one hand, we need them; on the other, we’re increasingly concerned about security risks.”

On Wednesday, Klingbeil will travel to Shanghai to meet heads of Germany’s mid-sized companies before heading on to Singapore.

‘Political Will’ Needed for Tough Choices, Experts Warn

In recent weeks, China’s restrictions on rare earth exports and its dispute with the Netherlands over the export controls of automotive chip supplier Nexperia have sent shockwaves through Europe.

“Recent months have shown that China’s export controls can affect German industry to the point of almost halting production,” said Maximilian Butek, Executive Director and board member of the German Chamber of Commerce in East China. “China has demonstrated its leverage especially with rare earths.”

In Germany, many politicians are calling for a fundamental reassessment of China policy, with some blaming the previous Social Democratic–led government for allowing Germany to become heavily dependent on China both as a market for industrial exports and as a supplier of critical materials.

Jakob Gunter, head of the Economy and Industry program at the MERICS think tank, said: “Only more decisive pain will create the political will needed to make some difficult but necessary choices.”

Last Thursday, the German parliament set up an expert commission to reassess trade policy toward China.

Volker Treier, head of foreign trade at the DIHK, said: “The Nexperia case will push us to negotiate and demand transparency — otherwise a commercial dispute risks being weaponized as a geopolitical issue.”

Jürgen Hardt, foreign policy spokesperson for Chancellor Friedrich Merz’s CDU party, added: “The Chinese government must understand that we cannot tolerate the merging of economic and political interests.”

Germany’s Trade Deficit With China Continues to Surge

Trump’s tariffs have encouraged Chinese companies to divert exports from the United States to Europe.

“Industry is sounding the alarm about competition with China — we need rapid measures to eliminate distortions and strengthen our competitiveness,” said Ferdinand Schaff, Senior Manager for Greater China at the BDI industry association.

China is on track to overtake the United States as Germany’s largest trading partner in the first eight months of 2025. According to Germany Trade & Invest, the government’s foreign trade agency, Germany faces a record trade deficit of €87 billion ($101.46 billion) with China this year.

“As the U.S. market partially closes, China is trying to sell more here — and our trade data reflect that,” said Treier. “That’s why this dialogue is so important.”

From January to August, German exports to China fell 13.5% year-on-year, while imports rose 8.3%.

“Germany is uniquely vulnerable to the risks of Chinese industrial overcapacity — and it will be hit very hard,” warned MERICS’ Gunter.