Centre for European Reform: The risk for Berlin, which already struggled to adjust when China’s surplus jumped from 2 to 5 per cent of GDP from 2022 to 2025, is acute. Much of the demand generated by Germany’s fiscal expansion, after relaxing the debt brake, could leak straight into Chinese imports and throttle Germany’s recovery. Global car, machinery and chemicals production could concentrate further in China, eroding innovation in traditional manufacturing centres and increasing China’s ability to coerce Berlin by threatening to throttle supply the way it did for rare earth minerals.
For a long time, Berlin struggled to see the problem clearly. As the world’s archetypal surplus economy, Germany saw itself as part of a coalition of exporting nations and resisted scrutiny of policies underpinning large trade surpluses. But China’s surplus now dwarfs Germany’s. French diplomats have put China’s imbalanced growth model at the top of the G7 agenda and called for the EU to more strongly defend its home market…