Sino-German ties can act as a stabilizer

In the intricate tapestry of the global economy, few threads are as tightly interwoven as the partnership between China and Germany. For decades, this relationship has stood as a definitive "win-win" situation, validating the fundamental insights of Adam Smith, referred to as the "father of modern economics", regarding the mutual benefits of the division of labor. However, as we stand at the dawn of a green industrial revolution, this proven foundation is being tested by geopolitical tensions and the rising tide of protectionism.

At this critical juncture, it is vital to recognize that the Sino-German relationship is no longer just about trade balances or corporate profits; it has become a cornerstone of global political stability. A balanced global structure in the 21st century depends on a multipolar world where no single power dictates the terms of engagement. For such a multipolar order to remain stable, a strong, sovereign Europe — with a robust German economic heart — can play a constructive role.

The historical success of Sino-German relations is rooted in complementary strengths. German expertise was helpful in China's rapid industrialization, particularly in the automotive and chemical sectors. Through direct investments and joint ventures, German companies did more than just provide capital; they transferred technology and established high industrial standards. In return, Germany found in China its most dynamic growth market.

This access allowed German industrial giants and the Mittelstand (small — and medium-sized enterprises) alike to scale their operations, funding the research and development that keeps German engineering at the global forefront. Today, this tradition continues with massive projects such as German multinational chemical major BASF's new Verbund site in Zhanjiang, Guangdong province — a 10-billion-euro ($11.77 billion) investment that represents the company's largest single project to date. This deep integration demonstrates that when the world's second — and third-largest economies cooperate, they can create stabilizing effects for the entire global supply chain.

The most promising frontier for future cooperation lies in renewable energy and green technology. Through strategic and visionary industrial policy, China has emerged as the world's undisputed leader in battery technology, solar energy and electric vehicles. This is not merely a domestic achievement; it is a vital contribution to global climate policy.

By driving down the costs of green technology through massive scale and innovation, China has made the global energy transition affordable for other nations, including Germany. Recognizing this, German automakers have shifted from a strategy of "exporting to China" to "developing in China". Volkswagen, for instance, is intensifying its "In China, for China" approach, collaborating with local innovators such as Xpeng to co-create the next generation of smart, software-driven electric cars.

Despite these clear synergies, the shadow of protectionism is lengthening. Citing concerns over subsidies, the European Commission decided to impose anti-subsidy duties of up to 35.3 percent on Chinese-made EVs. Beyond the economic cost, such implicit or explicit trade barriers carry a heavy geopolitical price. A move toward "decoupling" or aggressive protectionism threatens to fragment the world into rival economic blocs. Such a bipolar world is inherently less stable and more prone to conflict. True competitiveness is built through open competition and cooperation, not behind the walls of trade barriers.

To ensure a balanced future, the flow of investment must become a two-way street. Just as German technology which was once helpful for China, Chinese expertise in battery chemistry and digital systems is now essential for the transformation of German industry. Several "lighthouse projects" demonstrate how Chinese capital is revitalizing the German industrial landscape: CATL in Thuringia: The world's leading battery manufacturer has invested approximately 1.8 billion euros in its plant near Erfurt, creating up to 2,000 high-tech jobs. Gotion High-Tech in G?ttingen: By transforming a former Bosch plant into a modern battery facility, Gotion is securing industrial jobs through technological renewal.

These investments do more than create jobs; they anchor Germany at the center of the European battery supply chain, ensuring that Europe remains a formidable and independent industrial power.

Economic relations of this magnitude require more than just contracts; they require trust, the essential currency that makes the system of deep trade integration work. It is now of paramount importance for both Beijing and Berlin to prioritize the restoration of this confidence.

For the global order to remain balanced, Europe must not be forced to choose sides in a zero-sum game. Instead, by maintaining a strong partnership with China, Germany and Europe can act as a stabilizing third pole. This requires moving away from the rhetoric of confrontation toward concrete actions that ensure fair market access, the protection of intellectual property, and a transparent investment environment.

The alternative to cooperation is a zero-sum game where both sides eventually lose. If the bridge between China and Germany is dismantled, the global energy transition will slow down, innovation will suffer, and the world will become more polarized and dangerous.

A "win-win" constellation is only possible through the free and fair exchange of goods, capital and services. As two leading industrial nations, China and Germany have a shared responsibility to prove that competition and cooperation can coexist. By choosing the path of partnership, they can ensure that their economic synergy remains a stabilizing force and a driver of progress for a balanced and prosperous 21st century.

The author is a professor of economics at University of Würzburg, a former member of the German Council of Economic Experts and a member of the pension commission appointed by the German government.

The views don't necessarily reflect those of China Daily.

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