In the literature on international relations, the dialectic between economic dependence and geopolitical tensions is recognized as one of the fundamental dynamics of interstate interactions. In this regard, bilateral relations between China and Germany reached a clear breaking point in 2025 due to structural disagreements over rare earth element (REE) export restrictions. During the G20 Leaders’ Summit hosted by South Africa on November 22-23, 2025, the meeting between Chinese Premier Li Qiang and German Chancellor Friedrich Merz stands out as a concrete reflection of China’s “restructuring” initiative.
While economic interdependence is seen as a factor reducing conflict in the liberal institutionalism school, from a realist perspective, this dependence becomes a strategic tool in asymmetric power relations. REE in the China-Germany axis represents the concrete manifestation of this dilemma. China controls 70% of global REE production and 90% of processing, and these elements are indispensable inputs for critical technologies such as electric vehicles, wind turbines, and semiconductors. [i] The export licensing regime that came into effect in April 2025 was designed as a retaliatory measure against the Trump administration’s tariffs, imposing an additional 34% customs duty, targeting the defense and advanced semiconductor sectors.[ii][iii] This regime has created a perception of global double standards in global supply chains by covering not only Chinese-origin raw materials but also products manufactured using Chinese equipment.
In this regard, multilateral platforms such as the G20 facilitate the search for compromise through “soft power” by placing bilateral tensions within an institutional framework. China’s initiative in Johannesburg reflects a practical synthesis of this theoretical dilemma. It is an attempt to balance economic pragmatism with normative criticism.[iv]
Despite China-Germany trade volume exceeding €250 billion in 2025, it was overshadowed by supply disruptions caused by REE restrictions. In May 2025, a 74% drop in China’s REE magnet exports directly impacted the German automotive sector (Volkswagen, BMW), causing delays in production lines. [v]China’s extension of the list in October 2025 to include five additional elements, such as holmium and erbium, slowed down the defense and artificial intelligence (AI)-focused licensing area. It prompted European Commission President Ursula von der Leyen to threaten to use all channels of sanctions.
The Li Qiang-Merz meeting on the sidelines of the G20 was positioned as a response to these tensions. According to Chinese state media, Li called for rational and pragmatic policies, proposing strategic cooperation in the fields of new energy, smart manufacturing, and biotechnology, and requested that Germany refrain from intervention and pressure.[vi]
Future scenarios are shaped around three main possibilities:
• First, the pragmatic compromise scenario: EU investments could increase if China relaxes its licensing regime. This is supported by China’s commitment to Germany to provide reliable REE supplies. For example, the German Finance Minister stated in his announcement in Singapore that China had made a clear commitment. This scenario offers a framework in which economic reciprocity reduces conflict, as predicted by liberal institutionalism.[vii]
• Second scenario, escalation: Regional tensions could turn REE into a weapon again. China’s tightening of export controls in October 2025 has been interpreted as a warning to the West. This covers licensing requirements for mining and processing technologies. This situation could trigger a “hybrid war” dynamic in which geopolitical risks are intertwined with economic tools.[viii]
• Third scenario, sectoral diversity in investment: The 26 projects announced by the G7 in Toronto (mineral agreements with Malaysia, Australia, and Thailand) could reduce the EU’s dependence on China by 50%. Germany’s rethinking of its China policy targets the vulnerabilities exposed by trade bottlenecks. It may encourage German companies to develop alternative supply chains, even though they cannot abandon China.[ix]
The restructuring initiative in China-Germany relations serves as a critical laboratory where economic pragmatism encounters normative obstacles and transforms each other within the institutional framework provided by the G20. China’s cooperation offers in strategic sectors (new energy vehicles, artificial intelligence, biotechnology, quantum technologies) have the potential to stabilize global supply chains in the short term, while paradoxically accelerating the EU’s de-risking agenda in the medium and long term. This is because the pragmatic partnership proposed by China is a concrete manifestation of the tension between dependence and distrust, which Amitav Acharya defines as the fundamental characteristic of a multipolar world.[x]
The multipolar system of the 21st century has replaced the post-Cold War unipolar American hegemony with a structure where multiple orders coexist. In this new order, no actor can write global rules alone, but no actor can completely reject the existing rules either. China’s G20 diplomacy towards Germany is an example of a strategy that is neither full acceptance nor full rejection. Rather than abandoning Western-centric institutions (the World Trade Organization, G20, International Monetary Fund), China is attempting to transform them from within and reinterpret them according to its own interests.
Germany’s position in this process provides one of the most striking confirmations of the thesis that medium-sized powers play a critical role in a multipolar system. Germany is neither a hegemonic actor like the US nor a power fully engaged with the Global South like India or Brazil. However, China’s asymmetric economic dependence is pushing Germany into a position of forced accommodation. The existential dependence of giant German companies such as Volkswagen, BMW, and Siemens on the Chinese market is forcing the government to partially abandon its normative principles.
As a result, China’s G20 diplomacy towards Germany reveals one of the most complex equations of the multipolar world. Economic interdependence neither automatically guarantees peace nor makes conflict inevitable. What is decisive at the critical juncture is how the actors manage this dependence and which normative framework they can make dominant. Germany faces a historic opportunity: either to become further entangled in China’s asymmetric dependency network or to become one of the architects of a multifaceted yet functional global order. This choice has implications not only for Germany but for the geopolitical architecture of the entire 21st century.
[i] “Why is China restricting rare earth exports and how will the EU respond?”, Euronews, https://www.euronews.com/business/2025/10/27/why-is-china-restricting-rare-earth-exports-and-how-will-the-eu-respond, (Date Accessed: 24.11.2025).
[ii]“Çin, nadir toprak kontrolleri ve çip soruşturmalarını sonlandırıyor”, Bloomberg HT, https://www.bloomberght.com/cin-nadir-toprak-kontrolleri-ve-cip-sirketi-sorusturmalarini-sonlandiriyor-3760593, (Date Accessed: 24.11.2025).
[iii] “China expands rare earths restrictions, targets defense and chips users”, Reuters, https://www.reuters.com/world/china/china-tightens-rare-earth-export-controls-2025-10-09/, (Date Accessed: 24.11.2025).
[iv] “China Courts Germany to Ease Rare-Earth Strains and Boost Strategic Ties”, Modern Diplomacy, https://moderndiplomacy.eu/2025/11/24/china-courts-germany-to-ease-rare-earth-strains-and-boost-strategic-ties/, (Date Accessed: 24.11.2025).
[v] “Çin ve Almanya’dan ortak ekonomi mesajı”, Ekonomim, https://www.ekonomim.com/kuresel-ekonomi/cin-ve-almanyadan-ortak-ekonomi-mesaji-haberi-856166, (Date Accessed: 24.11.2025).
[vi] “China pitches closer ties to Germany in strategic industries to ease rare earth strains”, Reuters, https://www.reuters.com/world/china/chinas-premier-pitches-german-chancellor-closer-collaboration-strategic-2025-11-24/, (Date Accessed: 24.11.2025).
[vii] “Germany says China promised ‘reliable’ rare earth supply”, EURACTIVE, https://www.euractiv.com/news/germany-says-china-promised-reliable-rare-earth-supply/, (Date Accessed: 24.11.2025).
[viii] “China’s new restrictions on rare earth exports send a stark warning to the West”, Chatham House, https://www.chathamhouse.org/2025/10/chinas-new-restrictions-rare-earth-exports-send-stark-warning-west, (Date Accessed: 24.11.2025).
[ix] “China is accelerating reconciliation with Germany, pushing for economic and technological cooperation to resolve the rare earth and chip conflict.”, MB, https://en.moneyandbanking.co.th/2025/210643/, (Date Accessed: 24.11.2025).
[x] Acharya, A. (2017). After liberal hegemony: The advent of a multiplex world order. Ethics & international affairs, 31(3), 271-285.
