Germany is suffering from an acute case of China shock. After decades supplying a rising China with cars, machine tools and technological know-how — and reaping billions of euros in profits in the process — German companies are now struggling to compete with Chinese rivals that produce at lower cost, are more innovative, and have the backing of the powerful Chinese state. Ola Källenius, the chief executive of Mercedes-Benz, has described this new world as a “Darwinian battle” in which only the strongest will survive.  

At the same time, China has emerged, in the words of NATO leaders, as a “decisive enabler” of Vladimir Putin’s brutal war in Ukraine, making it a security threat to Europe in its own right. Attack drones are being produced in western China for use by Russian troops on a battlefield that abuts the European Union. Over the past year, two Chinese ships have damaged cables and a gas pipeline in the Baltic Sea by suspiciously dragging their anchors along the sea bed. 

Together, these dynamics are forcing Germany to reassess not only its bilateral relationship with Beijing, but its entire economic model and defense doctrine. As the head of Germany’s domestic intelligence agency told members of the Bundestag last year, Russia may be a terrible storm, but China is climate change.

In Freedom, the new autobiography from former German Chancellor Angela Merkel, there is surprisingly little discussion of the momentous changes that turned China, during her 16 years in power, from a close economic partner of Germany into an intense competitor and geopolitical rival. It is Merkel’s failure to tackle this portentous evolution head-on that is perhaps the most perplexing aspect of her memoirs — even if her “no regrets” verdict on relations with Putin’s Russia has received the most attention.

“My cooperation with the country was an example of realpolitik,” Merkel says of China, noting that deeper economic ties brought “significant benefits for Germany”.  Merkel notes matter-of-factly that China’s share of German exports doubled to 9.5 percent on her watch. Is she highlighting the deeper trade ties because she views them as an achievement of her time in office? The reader is left guessing. 

Vital Economic Crutch

Merkel’s relationship with China got off to a rocky start when she hosted the Dalai Lama for a meeting in the Chancellery in Berlin in 2007, less than two years after narrowly defeating Gerhard Schröder. The move infuriated Beijing, which froze dialogue with Berlin for half a year. Merkel quickly recalibrated, toning down her criticism of China’s human rights record and embracing closer business ties. During the global and eurozone financial crises of 2008-2012, China emerged as a vital economic crutch for Germany. Merkel sealed a “strategic partnership” with Beijing in 2010 and a year later launched regular cabinet-level consultations with China. 

German investments in China soared, led by the big three German carmakers BMW, Mercedes and Volkswagen. And Chinese firms pushed into Germany, with Huawei carving out a dominant role for itself in the country’s telecommunications infrastructure and Midea snapping up German robotics firm Kuka in 2016. That same year China overtook the U.S. to become Germany’s largest trading partner.

At the time, Germany’s close relationship with China was seen as a model for other countries. British Prime Minister David Cameron, inspired in part by Berlin’s approach, embarked on an ill-fated “golden era” with China. In her book, Merkel speaks with reverence and admiration about China and its economic metamorphosis during this period. “I was in awe of the place, and had never seen anything like it,” she says of a 2010 trip to Xi’an, where she visited the Terracotta Army in the mausoleum of Emperor Qin Shi Huang. “The speed at which the cities were growing was breathtaking,” she later notes, describing her amazement at the construction boom in Hefei, during a trip with Premier Li Keqiang in 2015.

One suspects that Merkel’s glowing early impressions of China may have clouded her views of the country once it took a more ominous turn in the years after Xi Jinping ascended to power in late 2012. Merkel discusses meeting Xi for the first time during her 2010 trip, when he was vice president and director at the Central Party School of China’s Communist Party. She speaks of a “profound difference” between the two leaders on the notion of individual freedoms and says on human rights that “our opinions couldn’t have been more different”.

What she does not explain is why she failed to adjust her approach to China when it became clear, a decade into her chancellorship, that Xi was taking China down a path of authoritarianism and industrial supremacy that came with profound risks for Germany and Europe.

Relic of Another Era

Merkel’s memoir spans her entire life, from her youth in communist East Germany, to her improbable political ascent after the fall of the Berlin Wall, and her years as the most influential leader in Europe. It is not a book about China, and readers may be disappointed by the lack of insight she offers into the defining diplomatic relationships of her years in power.

Still, it is remarkable what Merkel does not say about China in a 720-page tome that she spent two years writing. There is no meaningful discussion, for example, of the economic dependencies on China that Germany built up on her watch and how these have turned into a major vulnerability. Merkel barely touches on China’s role during the pandemic, when its “mask diplomacy” and “wolf warrior” bullying of European countries exposed the risks associated with these dependencies and tarnished Beijing’s image across the continent. Instead, she offers thinly veiled criticism of the de-risking agenda that European Commission President Ursula von der Leyen, her former defense minister, launched last year in order to mitigate these risks. “There is a fine line between the much-discussed policy of de-risking in trade relations — refraining from becoming wholly dependent on a single country for a particular product — and decoupling, the severing of economic ties. The latter would not be in our interest, and avoiding it requires skillful negotiation,” she writes.

One of the biggest surprises is her continued support for the Comprehensive Agreement on Investment (CAI), a deal she rushed through over the Christmas holidays in 2020 which would have deepened economic ties between the EU and China. The agreement was put on ice three months later when Beijing sanctioned European parliamentarians and think tanks in response to limited EU sanctions tied to human rights abuses in Xinjiang. Today, the CAI is widely seen as a relic of another era. “I remain convinced that the accord would bring an increase in dependable framework conditions for investments, compared with the current situation,” Merkel writes in the sort of labored prose that permeates the book. 

Absent is any discussion of China’s suppression of the Uyghurs in Xinjiang, its security crackdown in Hong Kong, or her steadfast support for Huawei as a supplier of components for Germany’s 5G network — a stance which triggered a years-long revolt within her own conservative party. Merkel also glosses over China’s role in supporting Russia’s war in Ukraine, suggesting that if it weren’t for the isolation of the pandemic, Putin may never have invaded Ukraine and sealed his “no limits” partnership with Xi. “The lack of face-to-face contact led to alienation, and the failure to forge new compromises. This was the case with both Russia and China,” she writes.

Underpinning all of these decisions was a Merkelian fear that China might retaliate against German companies that continue to depend on the Chinese market if Germany stood up for its interests. In that sense, Germany has reached a danger zone with China…

Merkel does accuse China of “jeopardizing the fragile balance” of its relations with Taiwan (although the English translation of her book mistakenly refers to the “one China principle”, language used by China’s leadership, instead of the “one China policy” supported by Germany, the EU and most countries in the world. She is also critical of China’s unilateral attempts to assert its territorial claims against neighbors in the East and South China Seas, praising U.S. efforts to curb China’s “aggressive behavior”.

The period when Merkel should have begun recalibrating her China policy coincided with the end of Barack Obama’s presidency and the election of Donald Trump, whose administration defined China as an adversary and set the U.S. on a path of decoupling. The notoriously cautious Merkel, whose relationship with Trump was abysmal, responded by going into hedging mode. Her speeches at the time suggest that she saw Germany as highly vulnerable in a world of great power competition. She appears to have seen herself as a mediating force in the escalating confrontation between Beijing and Washington. This led her to seek closer engagement with China at a time when key allies, from the United States to Japan and Australia, were heading in the opposite direction. The CAI was a prime example of this. But in her final years in office, Merkel also descended into self-censorship, her policy increasingly shaped by fears about Chinese retaliation against German business interests. It took her years to speak publicly about the abuses in Xinjiang. And she never used the term “systemic rival”, which was coined by the European Commission in 2019 and became the language of choice for European capitals to describe China in the years thereafter.

Germany has adapted its approach since Merkel’s departure from the political scene, publishing a toughly worded strategy last year which frames China as more of an economic risk than an opportunity. But the China policy of current Chancellor Olaf Scholz has much in common with that of Merkel. Just look at Scholz’s recent decision to side with Hungary, Cyprus, Malta and Slovakia in opposing EU tariffs on Chinese electric vehicles. Look at the closed-door deal he struck earlier this year with telecoms operators, which is likely to ensure a continued role for Huawei in Germany’s 5G network. Or look at his 2022 decision to overrule half a dozen members of his own cabinet and greenlight a deal by Chinese shipping giant COSCO to purchase a stake in a terminal at Germany’s largest port of Hamburg. 

Underpinning all of these decisions was a Merkelian fear that China might retaliate against German companies that continue to depend on the Chinese market if Germany stood up for its interests. In that sense, Germany has reached a danger zone with China when it comes to its own sovereign decisions. This zone was born during the Merkel years. What has changed is that this accommodative stance is increasingly contested. Russia has shown Germany’s political establishment what could be in store for relations with China. This would be a rupture with far greater consequences. 

Germany will hold an early election on February 23, 2025. Will the next German chancellor break this vicious cycle? It is anything but clear. The Greens, the party that has led the push for a more realistic China policy in the outgoing government, may not be part of the next coalition. The German economy hasn’t grown for over two years and may soon be hit by tariffs from a second Trump administration. A new government will be under intense pressure to increase defense spending. Against this backdrop, will de-risking from China be a high priority for conservative Friedrich Merz, the likely successor to Scholz? Merkel’s blind spot with China may be a German blind spot that only an acute crisis can cure.

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