Germany’s Finance Minister Visits Beijing as Trade Deficit Soars and Supply-Chain Risks Mount

Germany’s Finance Minister became the first senior member of the new coalition government to visit China on Monday, arriving in Beijing at a time when Berlin faces mounting pressure to show it can regain control over the direction of its China policy. The visit comes against the backdrop of a record trade deficit and worsening supply-chain disruptions.

Lars Klingbeil’s arrival in China comes more than six months after Germany’s conservative-led coalition took office and follows last month’s aborted trip by Foreign Minister Johann Wadephul, whose proposed agenda was rejected by Beijing.

German officials stressed that Klingbeil will focus on major trade issues, including China’s restrictions on rare earth elements. A Finance Ministry source said Berlin has already coordinated positions with EU authorities, who are responsible for the bloc’s trade policy.

Before departing, Klingbeil said in Berlin:
“Access to critical raw materials and reducing Chinese overcapacity in sectors like steel and electric mobility are essential to Germany’s economy and to protecting jobs.”

The coalition also faces domestic pressure to demonstrate that it can secure meaningful dialogue in Beijing and regain its footing in a relationship overshadowed by strategic and economic concerns.

Germany’s export-driven economy has been hit hard by former U.S. President Donald Trump’s trade war, a surge in Chinese imports, and fresh anxieties over supply-chain reliability—most recently involving rare earth metals and automotive chips.

Klingbeil will meet Vice Premier He Lifeng for the German-Chinese financial dialogue, first established in 2015. He is accompanied by Bundesbank President Joachim Nagel and a small delegation of German banks and insurers.

“The relationship between Europe and China is highly ambiguous,” said Denis Depoux, Global Managing Director of Roland Berger. “On the one hand, we need each other; on the other, security concerns loom large.”

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

‘Political will’ needed for tough decisions

Recent export control moves by China—particularly restrictions on rare earths—and the dispute with the Netherlands over automotive chip supplier Nexperia have sent shockwaves through Europe.

“Recent months have shown that China’s export controls can push German industry close to production standstill,” said Maximilian Butek, Executive Director and Board Member of the German Chamber of Commerce in East China. “China has demonstrated its leverage clearly in the rare earth sector.”

In Germany, political voices are increasingly calling for a full reassessment of China policy. Some critics argue that previous Social Democrat–led governments allowed Germany to become overly dependent on China both as an export market and as a supplier of critical materials.

Jacob Gunter, head of the Economy and Industry Program at the MERICS think tank, said only “a level of decisive pain” would generate the political will needed for major policy changes.

Last week, the German parliament established an expert commission to review trade policy toward China.

Volker Treier, Head of Foreign Trade at the German Chamber of Commerce (DIHK), said the Nexperia dispute would prompt Germany to push harder for transparency:
“Otherwise a commercial dispute risks being weaponized into a geopolitical tool.”

Jürgen Hardt, foreign policy spokesperson for Chancellor Friedrich Merz’s CDU, added:
“The Chinese government must understand that we cannot allow economic and political interests to be blurred together.”

Trade deficit with China continues to widen

U.S. tariffs are prompting Chinese exporters to redirect shipments from America to Europe, further pressuring German manufacturers.

“Industry is sounding the alarm over competition with China,” said Ferdinand Schaeff, Senior Manager for Greater China at the BDI industry association. “We need rapid measures to correct distortions and strengthen our competitiveness.”

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

“As the U.S. market partly closes, China is trying to sell more here—and the trade numbers prove it,” Treier said. “That’s why this dialogue matters so much.”

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

“Germany is uniquely exposed to the risks of Chinese industrial overcapacity—and the impact could be severe,” said MERICS’ Gunter.