German officials are working behind the scenes to identify Chinese economic vulnerabilities that they could exploit if the European Union finds itself in a trade war with the world’s second-largest economy.
The German government is informally mapping China’s weaknesses by analyzing trade flows, supply chains and company-level data, according to people familiar with the matter. The exercise is aimed at identifying where China remains dependent on German and European technology, specialized components and industrial know-how and where Beijing could face pressure in a potential economic confrontation.
Initial findings include the German companies Trumpf SE and Carl Zeiss AG, key suppliers of technologies used by ASML Holding NV to manufacture machines that make advanced semiconductors, as potential vulnerabilities in China’s supply chain, said the people, who requested anonymity because of the highly sensitive nature of the assessment. The report may also include semiconductor firms such as Siltronic AG, Aixtron SE and SUSS MicroTec SE, whose highly specialized technologies occupy critical positions across the supply chain.
Chancellor Friedrich Merz has recently hardened his stance on China, concluding that Germany risks being caught between the strategic rivalry of the US and China unless it develops greater resilience and leverage of its own. EU leaders last month tasked the European Commission, which handles trade matters for the bloc, with presenting a slate of new trade defense measures to confront what they deem to be an unsustainable deficit with China that exceeds €1 billion ($1.1 billion) a day.
“Yes, there are dependencies, but these dependencies are mutual. That also applies to issues such as rare earths,” Merz said this month when asked how to deal with China. “We can only withstand unfair competition if we defend ourselves against it.”
The effort to prepare contingency measures in case China again weaponizes critical raw materials, as it did last year in the case involving Nexperia, forms part of 34 non-public measures formulated in Germany’s national security council aimed at strengthening resilience and reducing strategic dependencies, according to one of the people.
The vulnerabilities are concentrated in highly specialized products, intermediate goods and services that Chinese companies are still unable to replicate. While China has caught up dramatically in sectors such as automobiles and industrial machinery over the past decade and now competes with German firms on quality, it remains dependent in niche, technology-intensive areas requiring highly specialized know-how.
In many of those sectors, Germany’s most powerful lever would not only be halting exports of machinery and components but also suspending maintenance and servicing of equipment already operating in China, the people said.
Germany is having confidential exchanges with companies, including ones about country-specific risks, according to a government official when asked to comment on the new assessment. The official added that Germany’s policy on China hasn’t changed and there is no plan for mandatory data collection from companies.
One of the most important sectors in the assessment is the semiconductor industry, which underpins virtually every modern electronic device and has become central to the global race for technological leadership in artificial intelligence. While Netherlands-based ASML is already barred from exporting its most sophisticated machines to China, it continues to operate a large installed base of older-generation systems that require maintenance, spare parts and technical support.
Another sector Germany is looking at is advanced patented medical products, something China depends on, particularly as its population ages. Experts say, however, that this would be among the most politically and ethically sensitive options because it could directly affect patients.
German officials, speaking on the condition of anonymity, stressed the work should not be viewed as a hostile policy toward China and said Berlin remains committed to economic cooperation. The objective is simply to be prepared because other countries are doing the same and to ensure Germany can negotiate with Beijing from a position of strength if necessary. Berlin’s goal is to establish greater reciprocity with China, one official said.
A spokesperson from Trumpf said the company doesn’t supply strategically significant products to China, while a spokesperson from Carl Zeiss said the firm is in regular contact with German and European authorities and cooperation is guided by legal requirements. Spokespeople from Wacker Chemie and K+S said they hadn’t been contacted by the government on this matter.
The rest of the companies cited either didn’t respond to a request for comment on the German government’s assessment on Chinese dependencies or declined to comment on details of the talks with officials.
Other significant sectors outside high technology that employ millions of Chinese workers include steel, chemicals, plastics, textiles, toys and household appliances, according to Tobias Gehrke, a senior policy fellow at the European Council on Foreign Relations researching China’s vulnerabilities. A disruption in these industries could quickly become politically sensitive for Beijing by affecting employment, local economies and social stability - issues closely watched by China’s leadership.
“China plays foul by handing out massive subsidies and preventing a currency appreciation, but we want to remain fair,” said Juergen Matthes, head of international economic policy at the German Economic Institute. “The point isn’t to use all these instruments. It’s to preserve them as game theory options, because otherwise you’ve already lost before negotiations even begin.”
A cautious political approach to interventionist policies has long been central to Germany’s market-driven, export-oriented economic model. Yet Merz and Vice Chancellor Lars Klingbeil have noticeably hardened their rhetoric toward China in recent weeks, reflecting a broader shift in Berlin toward economic security and strategic resilience.
Klingbeil has floated mandatory joint ventures for non-European companies to ensure technology transfer - a strategy China itself has used for decades to extract know-how from foreign companies seeking access to its market. A reform package introduced by the coalition in early July included such a push and other measures aimed at strengthening Germany’s economic sovereignty and resilience.
“The objective is not to cut China off from technology forever,” Tordoir said in an interview. “The objective is to show that Germany has teeth, to remind Beijing that China also has critical dependencies on Europe.”
The German government is informally mapping China’s weaknesses by analyzing trade flows, supply chains and company-level data, according to people familiar with the matter. The exercise is aimed at identifying where China remains dependent on German and European technology, specialized components and industrial know-how and where Beijing could face pressure in a potential economic confrontation.
Initial findings include the German companies Trumpf SE and Carl Zeiss AG, key suppliers of technologies used by ASML Holding NV to manufacture machines that make advanced semiconductors, as potential vulnerabilities in China’s supply chain, said the people, who requested anonymity because of the highly sensitive nature of the assessment. The report may also include semiconductor firms such as Siltronic AG, Aixtron SE and SUSS MicroTec SE, whose highly specialized technologies occupy critical positions across the supply chain.
Chancellor Friedrich Merz has recently hardened his stance on China, concluding that Germany risks being caught between the strategic rivalry of the US and China unless it develops greater resilience and leverage of its own. EU leaders last month tasked the European Commission, which handles trade matters for the bloc, with presenting a slate of new trade defense measures to confront what they deem to be an unsustainable deficit with China that exceeds €1 billion ($1.1 billion) a day.
“Yes, there are dependencies, but these dependencies are mutual. That also applies to issues such as rare earths,” Merz said this month when asked how to deal with China. “We can only withstand unfair competition if we defend ourselves against it.”
The effort to prepare contingency measures in case China again weaponizes critical raw materials, as it did last year in the case involving Nexperia, forms part of 34 non-public measures formulated in Germany’s national security council aimed at strengthening resilience and reducing strategic dependencies, according to one of the people.
The vulnerabilities are concentrated in highly specialized products, intermediate goods and services that Chinese companies are still unable to replicate. While China has caught up dramatically in sectors such as automobiles and industrial machinery over the past decade and now competes with German firms on quality, it remains dependent in niche, technology-intensive areas requiring highly specialized know-how.
In many of those sectors, Germany’s most powerful lever would not only be halting exports of machinery and components but also suspending maintenance and servicing of equipment already operating in China, the people said.
Germany is having confidential exchanges with companies, including ones about country-specific risks, according to a government official when asked to comment on the new assessment. The official added that Germany’s policy on China hasn’t changed and there is no plan for mandatory data collection from companies.
One of the most important sectors in the assessment is the semiconductor industry, which underpins virtually every modern electronic device and has become central to the global race for technological leadership in artificial intelligence. While Netherlands-based ASML is already barred from exporting its most sophisticated machines to China, it continues to operate a large installed base of older-generation systems that require maintenance, spare parts and technical support.
Another sector Germany is looking at is advanced patented medical products, something China depends on, particularly as its population ages. Experts say, however, that this would be among the most politically and ethically sensitive options because it could directly affect patients.
German officials, speaking on the condition of anonymity, stressed the work should not be viewed as a hostile policy toward China and said Berlin remains committed to economic cooperation. The objective is simply to be prepared because other countries are doing the same and to ensure Germany can negotiate with Beijing from a position of strength if necessary. Berlin’s goal is to establish greater reciprocity with China, one official said.
A spokesperson from Trumpf said the company doesn’t supply strategically significant products to China, while a spokesperson from Carl Zeiss said the firm is in regular contact with German and European authorities and cooperation is guided by legal requirements. Spokespeople from Wacker Chemie and K+S said they hadn’t been contacted by the government on this matter.
The rest of the companies cited either didn’t respond to a request for comment on the German government’s assessment on Chinese dependencies or declined to comment on details of the talks with officials.
Other significant sectors outside high technology that employ millions of Chinese workers include steel, chemicals, plastics, textiles, toys and household appliances, according to Tobias Gehrke, a senior policy fellow at the European Council on Foreign Relations researching China’s vulnerabilities. A disruption in these industries could quickly become politically sensitive for Beijing by affecting employment, local economies and social stability - issues closely watched by China’s leadership.
“China plays foul by handing out massive subsidies and preventing a currency appreciation, but we want to remain fair,” said Juergen Matthes, head of international economic policy at the German Economic Institute. “The point isn’t to use all these instruments. It’s to preserve them as game theory options, because otherwise you’ve already lost before negotiations even begin.”
A cautious political approach to interventionist policies has long been central to Germany’s market-driven, export-oriented economic model. Yet Merz and Vice Chancellor Lars Klingbeil have noticeably hardened their rhetoric toward China in recent weeks, reflecting a broader shift in Berlin toward economic security and strategic resilience.
Klingbeil has floated mandatory joint ventures for non-European companies to ensure technology transfer - a strategy China itself has used for decades to extract know-how from foreign companies seeking access to its market. A reform package introduced by the coalition in early July included such a push and other measures aimed at strengthening Germany’s economic sovereignty and resilience.
“The objective is not to cut China off from technology forever,” Tordoir said in an interview. “The objective is to show that Germany has teeth, to remind Beijing that China also has critical dependencies on Europe.”