Bloomberg: Germany studies China's economic weak spots

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, Bloomberg reports, citing sources familiar with the matter.

The sources said the German government is informally mapping China’s weaknesses by analysing trade flows, supply chains and company-level data.

The exercise is aimed at identifying where China remains dependent on German and European technology, specialised 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 specialised 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 defence 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 weaponises 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 specialised 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 specialised 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.

By Bakhtiyar Abbasov