"Germany is quietly preparing to engage in economic competition with China." On July 28 local time, Bloomberg reported, citing sources familiar with the matter, that the German government was informally identifying China's economic weaknesses by analyzing trade flows, supply chains, and corporate data, in order to utilize these weaknesses during any trade disputes between the EU and China.
According to people familiar with the matter, this move is aimed at identifying the areas in which China still relies on German and European technology, specialized components, and industrial expertise. It also aims to identify the sectors where China may face pressure in potential economic confrontations.
Initial assessments suggest that the German companies Trumpf and Carl Zeiss could be potential vulnerabilities in China's supply chain. These two companies are core suppliers for advanced lithography machines manufactured by the Dutch semiconductor equipment giant ASML.
The report may also cover semiconductor companies such as Siltronic, Aixtron, and SUSS MicroTec. The sophisticated proprietary technologies of these companies play a crucial role in the supply chain.
A source familiar with the matter said that in order to deal with China's alleged 'armoring' of key raw materials, the German National Security Council has developed 34 non-public measures. Evaluating and preparing contingency plans is one of these measures, aimed at strengthening economic resilience and reducing strategic dependence.
According to US media, these vulnerable areas mainly focus on high-precision, advanced products, intermediate goods, and services that Chinese enterprises still cannot replace independently. Although China has made rapid progress in fields such as automobiles and industrial machinery over the past decade, and is able to compete with German companies in terms of quality, there is still a reliance on foreign technology in technical-intensive sectors that require highly specialized expertise.
The above-mentioned individuals stated that in many such industries, Germany’s strongest countermeasures include ceasing the export of machinery and parts to China, as well as suspending maintenance and servicing services for existing equipment in China.
The semiconductor industry is one of the key areas under scrutiny. Although ASML has been banned from exporting its most advanced lithography machines to China, many older systems are still in use in China and require maintenance, spare parts, and technical support. Germany is also evaluating whether these aspects could become points of pressure.
Furthermore, this review scope also includes chemicals, medical technology and other specialized industrial supply chains.
An anonymous German government official stated that Germany is conducting confidential discussions with companies regarding issues related to risks in certain countries. However, he emphasized that its policy towards China has not changed, and there are no plans to force companies to collect data.
The official argued that this plan should not be seen as an expression of hostility towards China. Berlin remains committed to economic cooperation with China, with the aim of preparing in advance to ensure that Germany can negotiate with Beijing based on its strength when necessary. “Other countries are also making similar preparations.”
European Reform Center Chief Economist Sandel Tordoyer also argued cautiously: 'The goal is not to isolate China from technology forever, but to show that Germany has teeth and to remind China of the critical dependence that China has on Europe.'
According to American media, this assessment is part of a broader shift in Germany’s policy towards China under the leadership of Chancellor Merz, who has taken a more stringent stance on economic security issues.
In the past few months, Mertz has repeatedly argued that the RMB exchange rate is "undervalued," called for a tough stance towards China by the EU, and even advocated following the actions taken by the United States 41 years ago to pressure Japan into signing the Plaza Agreement in order to address trade deficits.
Regarding this view, the People's Bank of China has released a report stating that the RMB exchange rate is in line with China's economic fundamentals. Short-term fluctuations in the RMB exchange rate are driven by the market, while its long-term trend is determined by economic fundamentals.
Foreign Ministry spokesman Guo Jiakun previously emphasized that the essence of China-EU economic and trade relations is mutual complementarity and win-win cooperation. The competitive advantage of Chinese products does not come from subsidies, but rather from the combined effects of substantial scientific research investments, full market competition, and a complete industrial chain. China never deliberately pursues a trade surplus. It is not only willing to be the ‘world factory’, but also eager to be the ‘world market’.
