Why German firms cannot stop China – DW – 11/21/2025 | EUROtoday

For Matthias Rüth, there is not any query of pivoting his enterprise away from China — regardless of rising authorities warnings in regards to the dangers of being too invested within the nation.

As the managing director of Frankfurt-based uncommon earths and commodity buying and selling agency Tradium, China stays basic to the enterprise, given the nation’s nearly full dominance of the more and more very important uncommon earths sector.

“With China covering, for instance, more than 95% of the rare earth market, you cannot replace this in a short time,” he informed DW. “These are long-standing and reliable trading relationships, and the material and processes are proven.”

For Rüth and so many different corporations in Germany, China stays an apparent place to do enterprise. For a very long time, the German authorities absolutely embraced and inspired that place.

However, the nation’s authoritarian shift beneath President Xi Jinping — which has seen China again Russia within the aftermath of the invasion of Ukraine — has modified EU-China relations.

The geopolitical place has shifted and for the previous few years, the German authorities has spoken of “de-risking” [reducing dependencies on a single country for components, goods or raw materials — the ed.] from China, not least due to the dangers of overseas firms going through harsh measures from the Chinese authorities.

Recently, German Chancellor Friedrich Merz mentioned of German firms working in China: “I always tell them when I meet them: That’s your risk if things go wrong, please don’t come to us.”

Earlier this week, German Finance Minister Lars Klingbeil visited Chinato focus on the 2 nations’ evolving financial relationship.

Speaking in Beijing, he mentioned Germany sees “fair competition at risk and also sees industrial jobs under threat,” however he emphasised the necessity for dialogue, saying: “We have to speak with China instead of speaking about China.”

A love story in automobiles

China is clearly a relationship that German trade finds exhausting to stop, and with good cause. Earlier this week, China overtook the US to as soon as once more turn into Germany’s prime buying and selling companion. Trade between the 2 nations was €185.9 billion ($215 billion) between January and September this yr.

For many years now, main German industrial titans have prioritized the huge Chinese market and funding volumes stay excessive.

According to a current research from the Mercator Institute for China Studies in BerlinGerman overseas direct funding accounted for 57% of complete EU investments in China within the first half of 2024, roughly 2.3% of German GDP. It notes that funding volumes are nonetheless rising, with company funding rising by €1.3 billion between 2023 and 2024.

One of the sectors that has seen Germany and China most entwined is carmaking. Some of the most important German carmakers, akin to Volkswagen and BMW, have invested and made billions in China over time, and regardless of extreme current struggles, nonetheless retain hopes of long-term success.

BMW just lately invested €3.8 billion right into a battery undertaking within the metropolis of Shenyang and the corporate informed DW it has no main plans to pivot away from the nation.

“The BMW Group is represented in the Chinese market by two joint ventures and operates several plants there,” Britta Ullrich, a spokesperson for the carmaker, informed DW. “In our largest single market worldwide, we pursue a long-term market strategy, which we regularly review and adjust as needed. There are no fundamental changes to our activities in the region.”

However, regardless of the continued significance of China for German carmakers, the connection is present process a basic shift — not simply due to geopolitics. The intense competitors German carmakers now face from Chinese rivals and the notion that a few of that competitors has been achieved by means of Chinese industrial practices undermine international commerce guidelines.

“It is crucial that there are equal competitive conditions and a level playing field on both sides,” a spokesperson for the German Association of the Automotive Industry (VDA) informed DW. “In this context, China is called upon to approach Europe with constructive proposals, to consistently and swiftly prevent anti-competitive behavior, and to ensure free trade in the current situation.”

Yet regardless of the continued significance of China to German enterprise, monetary stress is coming from all sides. German exports to China have fallen by 25% since 2019, whereas the principle German carmakers Volkswagen, Mercedes and BMW have seen their market share decline sharply in the previous few years, as China has ramped up its personal electrical automobile manufacturing.

The VDA spokesperson added that whereas “the necessary de-risking is being pursued and implemented vigorously by companies in the automotive industry,” it should even be “enabled politically, not merely demanded.” They additionally emphasised that de-risking shouldn’t imply the “closing off of markets.”

“The best policy is to do everything possible to promote business location, competitiveness, and growth,” they mentioned. “This not only creates a stronger negotiating position but also fosters investment and innovation at home.”

The chilly actuality of market stress

Rare earths dealer Matthias Rüth says it is very important do not forget that his enterprise contacts in China are additionally impacted by the geopolitical tensions.

“The current difficulties stem mainly from political decisions, not from the suppliers themselves,” he mentioned.

His enterprise has been primarily impacted by China severely proscribing uncommon earths exports, which has additionally pissed off his suppliers. “They are also facing disadvantages and challenges of the current export restrictions,” he mentioned.

He says his agency has not confronted political stress to “de-risk” from China however slightly the chilly actuality of market stress, ratcheted up by international tariffs and China’s export restrictions.

“For a supplier like us, that means long-established sourcing routines no longer work as reliably as they used to,” he says. “We nonetheless depend on our long-standing Chinese companions, as a result of for a lot of supplies, there may be merely no method round China.

Still, he notes that his firm is investing extra effort and time in establishing provide choices exterior China. “This is not about politics telling us what to do. It is the market forcing every serious trader and raw material processing company to rethink their sourcing strategy — and that pressure will only grow. This is the daily reality.”

Edited by: Rob Mudge