How is Germany Rethinking Its Trade Policy Towards China?

CGTN Europe

Professor Horst Löchel, Professor of Economics and Co-Chairman of the Sino-German Centre at the Frankfurt School of Finance & Management spoke to CGTN Europe about the significance of deepening financial cooperation between the two countries. Professor Löchel discusses concerns from German companies about fair and transparent market conditions in China, how Germany is responding to industrial competition and supply-chain risks, and why both countries continue to stand firmly against global protectionism. He also shares his outlook for 2026, projecting a recovery in Germany supported by stronger trade and investment flows with China.

Transcript

00:00China is now Germany's largest trading partner. It overtook the U.S. in the first eight months of this year

00:06as President Trump's tariffs dampened Berlin's enthusiasm for trade with Washington.

00:11German imports and exports with China totaled over $190 billion at the end of August.

00:17Germany imported far more than it exported during that time.

00:22China bought German goods worth $64 billion,

00:25but Germany bought Chinese exports worth $126 billion.

00:30That's a record trade deficit.

00:32But trade between the two countries has been growing for decades.

00:36In 2001, it totaled at $27 billion.

00:39By 2024, it had ballooned to $273 billion.

00:45That's a 900% increase.

00:47Germany accounts for over a third of total EU China trade.

00:52Horst Lachelle is Professor of Economics and Co-Chairman of the Sino-German Center

00:57at the Frankfurt School of Finance and Management.

01:00The concern is that sometimes the German, but also the European companies in general

01:08have the feeling that their business conditions in China are a little bit disadvantaged

01:15compared with their Chinese peers, or the Chinese domestic companies,

01:21though they hope very much that the market exists for the German companies,

01:26plus also the general treatment by the regulator and the government

01:32is also fair to foreign companies in China.

01:35Okay.

01:36And in terms of the trade tensions we saw from Trump's tariffs,

01:41that's played a huge part in this shift, hasn't it?

01:45This is really a huge, huge challenge for all.

01:50On the other side, it brings, let's say, Germany and China more together,

01:55but because both of our countries are very much in favor of free trade

02:00and against productionism or against tariffs,

02:04so maybe he has a new coalition merging up.

02:07So where do we go from here?

02:09I mean, how do you see Germany rethinking its trade policy towards China?

02:14I think we are underway in Germany to change, to adjust, let's say, somehow our China policy again

02:23and put more in focus our economic interests,

02:28because also we have some struggles here with the economy in Germany,

02:33and so we hope very much that trade and other direct investment, for example,

02:39with China, the overall business, will develop well in order to improve also the growth rate here in Germany.

02:47And how does all of this affect China's trade relationship with Europe more broadly?

02:55This, I mean, within Europe, Germany is the largest economy in Europe.

03:01In Europe, we have the largest business with China.

03:04So if the largest economy and the largest business maker with China is moving forward

03:10in a somehow not new direction, but in more business with China,

03:14I think this will have an impact on the European Union and the European countries as well,

03:20more or less in the same direction.

03:22So looking back on 2025 and then looking ahead to what 2026 might bring,

03:29what's your outlook for the German economy and trade with China?

03:34Yes, I think we will see a recovery in Germany.

03:38There's already all projections are in this direction to have a higher growth rate,

03:44basically driven by the spending, fiscal stimulus by the German government.

03:51But overall, expecting also for the world economy and hence for trade,

03:56that we will see increase in a leverage of trade, also with regards to China.

04:02And that means we will have more business in future, which is a very good thing.

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