Merz's visit to China has pragmatically aligned Germany's approach to the new geoeconomic and geopolitical realities

Spanish Prime Minister Pedro Sanchez concluded an official visit to China on April 15, his fourth trip in four years. German Chancellor Friedrich Merz officially visited China in February. Canada's Prime Minister Mark Carney paid an official visit to China in January. French President Emmanuel Macron visited China in December, and the Finnish Prime Minister Petteri Orpo and United Kingdom Prime Minister Keir Starmer followed suit later in January. All those visits were very successful for the countries involved, heralding new phases of a more pragmatic and respectful exchange after some challenging years.

All the visits were firmly motivated by new geoeconomic and geopolitical conditions that are driving the European Union to strive for a renewed identity, economic strength and geopolitical power. The challenges are coming from both global change toward multipolarity and the United States' erratic tactics. There was no automatism in turn of those major Western countries toward China, but it was certainly "in the air". China always kept the door open, including the signaling of increasing visa-free entries.

Germany's relationship with China needed some update, as there was sometimes a clear lack of diplomacy from the German side in recent years. There were narratives of "superior values" and of a hostile rivalry. This was in the face of Germany's particularly weak economic standing recently, with slow growth, and its slide in international competitiveness rankings and the World Bank's purchasing power based GDP rankings. Specifically, Germany is experiencing problems of weak domestic investment, or rather large outgoing investment. So, some turn was definitely "in the air".

The European Commission did not provide supportive background for Merz's visit. Rather than exercising some self-restraint, there was intensified discussion about renewed "decoupling". However, this is a severe misjudgment of the global productivity relations and the reality of the global value-added chains. Some of the EU political circles enthusiastically applauded US Secretary of State Marco Rubio's speech at the Munich Security Conference, showing that some in the EU still hope to remain under the protective umbrella of the US.

Actually, some in the EU are stuck in the world of "decoupling" and limiting relations with China regardless of the complex geopolitical reality.

But this time, Germany turned to pragmatism. Merz was accompanied by the largest delegation of corporate CEOs in a German representative's visit ever. Their stances in support of reengagement with China were clear. Merz apparently listened to their objective views about China. And his approach appeared to change toward equal footing, open-mindedness, pragmatism and willingness to reestablish confident dialogue to discuss all issues of future win-win cooperation between Germany and China.

It is hoped that the domestic "credit" Merz has earned with his visit will hold, for a while at least, until the next constructive steps are taken and the synergies between the two sides deepen. It appears that many enjoy the new easing of frictions, and willingness to build trust and commitment.

Friendly rhetoric during Merz's visit was backed up by substantial content: Merz embraced a comprehensive strategic partnership. China has ordered 120 Airbus aircraft. There will be Chinese imports of pork and chicken from Germany. The concrete outcomes were substantive and strategic for dealing with the issues in the two countries' relations.

There are still misleading narratives dominating media and politics in Germany, the EU and the West in general. These include misconceptions of Chinese "overcapacity", "State subsidies","price dumping" and "unfair competition". But they don't stand up to scrutiny.

Germany is in fact suffering from the destruction of its natural Eurasian geoeconomic partnership, with cheap Russian energy in exchange for German industrial products, which was the basis of Germany's post-World War II success. For geopolitical reasons, these assets of its postwar rise have been destroyed in recent years.

Now Germany has one of the highest energy costs among all industrialized countries. The country is also divided: While some of its elites are still hostile to and suspicious of China, its corporate economy, from big corporations to medium-sized enterprises, is investing abroad, particularly in China.

They need the joint ventures with Chinese partners, the abundant potential of China's complete value chains and regional clusters, the advice, supplies and services of the many young cutting-edge Chinese startups and unicorns, the high skills available in the country, its modern and efficient infrastructure and the high-quality private and public services available.

And it is no longer only about "Made in China for China", but "Made in China for the World". Products of German companies and joint ventures made in China compete with products made in Germany in third markets, and in the last instance even in their home market. A growing proportion of Chinese exports to Germany are exports of German companies or joint ventures in China.

German companies make money in China and after investment some of the profits are transferred back home and support the German public budget with corporate taxes. Even as they are forced to go "friendshoring" and transfer assembly lines to other countries, international productivity and value-added structures cannot easily be distorted by political will and declaration. When, for instance, India or Vietnam gets assigned more assembly from Western corporations, their imports of supplies from China usually increase proportionally.

Trade and investment issues have no chance of being solved other than by open strategic cooperation, including addressing issues of the international division of labor. If Germany wants to regain its old economic strength and get on a level playing field, it has to open further toward China's market and take part in the Belt and Road Initiative and other global initiatives proposed by China. Eastern parts of the EU, including Hungary, Greece and Austria, have already been participants in the BRI for some years. Germany may be some years away from that, but it could be a prime template of future win-win cooperation between Germany and China, as well as the EU and China.

The author is an emeritus professor at the Department of Economics at University of Bremen, Germany.

The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.