Lars Klingbeil

Germany’s finance minister Lars Klingbeil has touched down in Beijing in a high-stakes mission that underlines Berlin’s growing alarm over its trade exposure to China.

The visit, his first since the new coalition government took power, comes amid mounting concern that Germany’s supply chains — particularly for critical raw materials and semiconductors — are increasingly vulnerable.

Klingbeil, accompanied by Bundesbank President Joachim Nagel and senior officials from German financial institutions, is scheduled to meet Vice-Premier He Lifeng in what is billed as the German-Chinese financial dialogue. The stakes are formidable: Germany is now contending with a record €87 billion trade deficit with China in 2025, driven by tumbling exports and surging imports.

This imbalance, according to Berlin, is not simply a commercial issue but a structural one — exposing German industry to risks stemming from over-dependence on Chinese supply chains.

At the heart of the talks, officials say, will be Germany’s demand for access to rare earth elements — vital for electric vehicles, wind turbines, and many high-tech applications. China’s recent tightening of export controls on these materials has raised alarm in Berlin, fuelling calls for a reassessment of the country’s China strategy.

Meanwhile, German industry warns that China’s overcapacity in sectors such as steel and electric mobility presents a dual threat: competitive dumping on global markets, and a weakening of Europe’s own industrial base. The new government, critics argue, must make “decisive choices” to protect German jobs and technologies.

Political resonance — and pressure at home

Klingbeil’s trip carries symbolic weight. It is the first by a minister from the current coalition government, six months after it assumed office. Observers see it as a test of Berlin’s ability to recalibrate its China policy in a moment of unease — when Germany can neither afford to antagonise Beijing nor ignore the security risks posed by economic dependence.

Domestically, the visit has triggered sharp debate. A parliamentary commission formed recently will audit Germany’s China strategy, focusing on “security-relevant” trade policies. The argument is clear: Germany’s industrial heartland must not be held hostage to unpredictability in Beijing.

Trade tensions meet geopolitics

Klingbeil is navigating in treacherous waters. On the one hand, Germany still needs China as a major trade partner. On the other, Beijing’s economic coercion looms larger than ever. “On the one hand, we need them; on the other, we’re concerned by security issues,” said Denis Depoux, managing director at consultancy Roland Berger.

Adding to the urgency, global supply disruptions and export restrictions have triggered renewed talk in Berlin of “de-risking” — scaling back dependence on China for strategic materials.

This is not mere rhetoric. Klingbeil’s delegation also includes banking and insurance leaders, underlining Germany’s desire to tie financial weight to its strategic demands.

China’s industrial leverage

Germany’s concerns are magnified by trends across the European Union. Chinese exports have increasingly flowed into the bloc, with surveillance task forces identifying “potentially harmful” import surges in sectors such as machinery, metals and electric transport.

This isn’t just about volume — it’s about the quality of those imports. In recent months, reports have pointed to low-cost, high-capability Chinese goods disrupting markets in Germany and beyond. bullionbite.com For Berlin, this raises the spectre of a widening trade imbalance, with Europe once again supplying the raw materials while China dominates downstream added value.

Klingbeil’s agenda does not end in Beijing. Later this week, he is set to travel to Shanghai, where he will meet leaders of Germany’s famed mid-sized Mittelstand firms — long the backbone of its economy — before heading on to Singapore. The visit is being framed as a “listening tour” of key industrial players, to understand more precisely where supply chain risk is most acute.

Back in Berlin, many are watching closely. A full-scale reassessment of China policy — once a quiet whisper — is now in full swing.

If Klingbeil succeeds in securing better access to rare earths and persuading Beijing to dial back overcapacity, the trip could mark a turning point in German-Chinese relations. But failure is also a very real possibility — particularly given the geopolitical stakes.

Germany may well be forging a new chapter in its China strategy: one grounded not only in commerce, but in cautious pragmatism. Whether Berlin emerges from Beijing with a firmer grip on its future supply chains, or merely more promises on paper, remains to be seen.

Main Image: Christopher Lemmer, Via X