Germany Seeks to Reduce Economic Dependence on China Amid Political Balancing Act

Germany is intensifying efforts to address its economic dependence on China, especially concerning critical raw materials and the automotive industry's supply chain. The German automotive industry relies heavily on Chinese suppliers, particularly for battery production, as noted by Esther Goreichy from the China Institute Merics. China dominates over 90% of the global rare earth processing market—materials essential for producing smartphones, laptops, wind turbines, and electric motors. According to the German Chamber of Commerce (DIHK), China will impose export restrictions on these rare earths starting April 2025, requiring German companies to undergo complex approval processes. This development threatens production continuity in Germany, with long delivery times and limited alternatives raising concerns about possible production halts across various sectors.

On a political front, Friedrich Merz, a leading figure in Germany's government, is actively searching for solutions to lessen this dependence. However, his approach sparks debate within political circles. Critics warn Merz faces accusations of practicing "selective realpolitik" combined with "showy value politics," reducing Europe's normative surpluses simply to secure economic and strategic interests. Such a shift, some analysts suggest, could inadvertently legitimize autocratic regimes and undermine Europe’s core value of individual self-determination, potentially resulting in long-term detrimental effects.

This complex balancing act highlights Germany’s challenging position: defusing economic vulnerabilities linked to China while trying to uphold its traditional commitment to values in foreign policy. The industry’s reliance on Chinese inputs makes such recalibration urgent but difficult, especially as the geopolitical landscape presses German policymakers to weigh economic realities against normative ideals.

As the export restrictions approach in April 2025, Germany’s political and industrial sectors are preparing for the ripple effects that may alter the country’s economic strategies and its relations with China. Merz’s ongoing efforts epitomize the broader debate over how Germany navigates these competing demands in an increasingly interdependent and contested global environment.