Dr. Pshtiwan FarajFor more than a decade, Europe debated the rise of China largely as a problem created in Beijing. China subsidised industries, expanded manufacturing capacity, entered European markets with increasingly competitive products and accumulated technological capabilities at extraordinary speed. Yet this explanation leaves out an important part of the story: Europe, and Germany in particular, was not simply a passive observer of China's industrial rise. German companies invested heavily in China, transferred technology and production expertise, defended commercial access to the Chinese market and, at critical moments, resisted stronger European measures designed to protect European industry.
The result is one of the defining paradoxes of contemporary global political economy. Germany pursued a commercially rational strategy that generated enormous benefits for German industry for decades, but the same strategy also contributed to the emergence of the industrial competitor now putting pressure on Europe's manufacturing base. The question is therefore not simply whether China "cheated" its way to industrial dominance. It is whether European economic policy underestimated the geopolitical consequences of deep economic interdependence.
This question matters far beyond Germany and China. The emerging competition between major industrial powers is changing the meaning of economic security, strategic autonomy, technology transfer, supply-chain resilience and foreign investment. For countries such as Iraq and the Kurdistan Region, which are seeking investment, infrastructure, technology and economic diversification, the German experience offers an important lesson: foreign capital can accelerate development, but it can also create dependencies that eventually become strategic vulnerabilities.
The German-China bargain
The foundations of this relationship were established when Germany increasingly viewed China not primarily as a geopolitical competitor but as an indispensable commercial market. During the Merkel era, German industry became deeply integrated with the Chinese economy. Volkswagen, BMW and Mercedes-Benz developed enormous exposure to Chinese consumers, while German machinery, chemicals, engineering and industrial equipment became important components of China's manufacturing ecosystem.
The political consequences became visible as early as 2013, when the European Union considered anti-dumping tariffs on Chinese solar panels. Germany opposed stronger measures, reflecting concerns that confrontation with Beijing could provoke retaliation against German companies. The immediate calculation was understandable: protect access to one of the world's most important markets and avoid a trade conflict that could damage German exporters.
But the longer-term consequence was more complicated.
According to the source analysis, 98 percent of solar panels imported by the European Union in 2024 came from China. The solar-panel episode therefore illustrates a broader transformation: a European industry that once possessed significant technological and manufacturing capabilities increasingly found itself competing against an industrial system operating on a vastly greater scale.
The automotive sector provides an even more consequential example. The European automotive industry exports millions of vehicles annually, supports millions of jobs and remains central to Europe's manufacturing model. Yet Chinese manufacturers have increasingly moved from being suppliers of inexpensive products to becoming serious competitors in electric vehicles, batteries and related technologies.
Germany's dependence on China therefore became a strategic vulnerability precisely because it was initially an economic success.
This is the central lesson of economic interdependence. Interdependence is beneficial when both sides retain comparable capabilities and alternatives. It becomes dangerous when one side becomes structurally dependent on a relationship while the other side uses that relationship to acquire capabilities that reduce its dependence.
From capital to capability
The most important part of the German-China relationship was not simply the amount of German money invested in China. It was what German companies brought with that capital.
Germany possesses one of the world's most sophisticated industrial ecosystems. Its competitive advantage was built over generations through mechanical engineering, automotive manufacturing, industrial automation, chemicals, precision production, supplier networks and specialised technical knowledge.
Chinese industrial development did not occur solely because Beijing provided subsidies or because Chinese labour was inexpensive. China also benefited from interaction with Western industrial companies, joint ventures, acquisitions and the gradual localisation of production and technical knowledge.
The acquisition of KUKA illustrates the strategic dimension of this process. The German robotics company was a pioneer of industrial automation and had accumulated decades of engineering expertise. In 2016, Chinese appliance manufacturer Midea acquired a controlling stake in KUKA in a transaction worth around €4.5 billion.
KUKA did not create China's robotics industry by itself. China had already invested heavily in robotics, engineering education and domestic industrial capacity. But acquiring a leading German industrial technology company gave Chinese industry access to accumulated knowledge, engineering experience, production systems and international industrial relationships much more rapidly than developing all of those capabilities independently.
That distinction is crucial.
Technology transfer does not always occur through the simple physical movement of machines or patents. It can occur through employees, suppliers, joint ventures, management systems, production standards, engineering relationships and accumulated organisational knowledge.
Germany therefore contributed something more valuable than capital to China's rise: industrial capability.
The paradox of strategic dependence
The German experience exposes a broader contradiction in globalisation.
For decades, economic policy assumed that commercial integration would create mutual dependence and therefore mutual stability. The assumption was that countries heavily invested in one another would have stronger incentives to avoid conflict.
That logic worked to a significant degree.
But the same interdependence also produced asymmetries.
Germany became increasingly dependent on the Chinese market, while China became increasingly capable of producing the goods that Germany and other European economies had historically specialised in. The relationship therefore evolved from complementary economic integration toward more direct technological and industrial competition.
This is why the debate over China's rise cannot be reduced to protectionism versus free trade. The deeper issue is the relationship between trade and power.
Trade creates wealth. Technology creates capability. Industrial capability creates strategic power.
Once industrial policy becomes connected to national security, the distinction between economic policy and foreign policy becomes increasingly difficult to maintain.
This is also why Berlin's earlier caution toward Huawei mattered. Germany resisted pressure for a straightforward exclusion of the Chinese telecommunications company from its 5G infrastructure. Beijing understood the importance of German economic interests and the influence of German industrial companies.
The broader pattern was clear: commercial interests repeatedly constrained Germany's willingness to confront China strategically.
Europe is now paying for yesterday's calculation
The European response is changing.
The EU eventually imposed additional duties on Chinese electric vehicles in 2024, despite German opposition. By 2026, Chancellor Friedrich Merz was publicly arguing that Europe could support free trade without being naive and had become more willing to describe Chinese industrial overcapacity as a strategic problem.
This represents an important change in Berlin's calculation.
But recognising a problem after industrial capabilities have already shifted is very different from preventing the problem in the first place.
Europe cannot simply reconstruct the industrial ecosystem it once possessed by imposing tariffs. Nor can it reverse decades of commercial integration with China without imposing substantial costs on European consumers and companies.
The challenge is therefore more complicated than decoupling.
Europe needs strategic diversification rather than complete economic separation. It must protect critical technologies and industries while maintaining the trade relationships necessary for economic growth. This is the logic behind the growing emphasis on de-risking, supply-chain resilience, industrial policy and strategic autonomy.
The emerging international system is already moving in this direction. The broader geopolitical transformation is increasingly defined by competition over critical technologies, energy systems, supply chains, strategic minerals, infrastructure and industrial capacity.
For Europe, strategic autonomy therefore requires something more fundamental than political declarations. It requires productive capacity.
A continent that cannot manufacture essential technologies will struggle to exercise strategic independence regardless of how sophisticated its diplomacy becomes.
What does this mean for Iraq?
The German experience has direct relevance for Iraq because Baghdad is increasingly attempting to attract competing sources of foreign investment, technology and infrastructure.
China has become one of Iraq's most important economic partners, particularly in energy and infrastructure, while Western companies remain important sources of technology and investment. Iraq's challenge is not to choose between China and the West but to prevent dependence on any single external economic power.
This is particularly important as Iraq attempts to diversify beyond crude oil.
Infrastructure, electricity, telecommunications, industrial development, transport corridors and energy systems are not politically neutral. They create long-term relationships between countries and companies. A foreign company that builds strategic infrastructure can become part of a country's economic architecture for decades.
Iraq's emerging Development Road demonstrates this logic. The proposed corridor linking the Gulf, Iraq, Türkiye and Europe could transform the country's geography into a source of economic leverage rather than relying almost exclusively on oil exports.
But the same principle applies: infrastructure should generate Iraqi capability, not merely Iraqi dependence.
The objective should therefore be technology transfer, local employment, domestic industrial capacity and Iraqi participation in the value chain.
The lesson from Germany is not that Iraq should reject Chinese investment. It is that investment should be evaluated according to what capabilities it leaves behind.
Kurdistan faces an even sharper version of the dilemma
For the Kurdistan Region, the issue is particularly important because the Region needs capital, infrastructure, technology and economic diversification while operating within a much smaller political and economic system.
China's growing interest in Kurdistan is already moving beyond conventional commercial relations. Chinese companies have become increasingly visible in energy, construction, infrastructure and telecommunications, while Chinese institutions have expanded cultural and educational engagement. The opening of Kurdish-language teaching in Beijing, for example, reflects a relationship that is gradually extending beyond oil and construction into knowledge and soft power.
That creates opportunities.
Kurdistan needs investment. It needs industrial development. It needs better infrastructure, renewable energy, technology, manufacturing and access to Asian markets. Chinese companies possess enormous industrial capacity and can potentially contribute to many of these areas.
But the German experience provides a warning against measuring investment only by its immediate financial value.
The more important question is: what strategic capability does Kurdistan acquire from the relationship?
If a foreign company builds a road, Kurdistan gains a road.
If a foreign company builds a power plant while training Kurdish engineers, developing local suppliers and transferring technical expertise, Kurdistan gains a power plant and institutional capacity.
The second model is strategically superior.
This is why economic diversification should be understood as part of strategic autonomy. Kurdistan cannot become strategically resilient merely by attracting more foreign capital. It needs to convert foreign capital into domestic capabilities.
That means universities, vocational education, industrial partnerships, technology transfer, local procurement, research cooperation and domestic entrepreneurship must become integral parts of investment policy.
The same principle applies to energy. Kurdistan's energy resources can attract investment, but energy policy should also build electricity generation, gas infrastructure, renewable capacity, technical expertise and industrial consumption.
As I have argued in the analysis of Kurdistan's energy security, the Region must increasingly treat energy as a component of national economic security rather than simply as a source of government revenue.
The real meaning of strategic autonomy
The German experience ultimately offers a broader definition of strategic autonomy.
Strategic autonomy does not mean economic isolation. Nor does it mean refusing foreign investment or choosing one geopolitical camp against another.
It means possessing enough alternatives that external partners cannot easily dictate the terms of the relationship.
For Europe, that means maintaining the industrial and technological capacity necessary to compete with China while continuing to trade with China.
For Iraq, it means attracting Chinese, European, American, Gulf and regional investment without allowing any single partner to dominate strategic infrastructure.
For Kurdistan, it means developing relationships with China, Türkiye, Europe, the United States and the Gulf while building domestic institutions capable of converting those relationships into long-term economic and political leverage.
This is precisely why Kurdistan's transition from autonomy to strategic agency matters. Autonomy provides a political framework; agency requires the capacity to use it.
The German experience shows what happens when economic success becomes dependency. Germany gained enormously from its relationship with China, but the relationship also helped create an industrial competitor whose growing strength now threatens parts of Europe's economic model.
The lesson should not be to retreat from globalisation.
It should be to understand globalisation as a strategic process.
Capital moves. Technology moves. Supply chains move. Industrial capabilities move. And when those movements accumulate over decades, they change the balance of power.
The countries that understand this will attempt to attract investment while retaining control over critical capabilities. Those that do not may discover, as Germany increasingly has, that yesterday's profitable economic relationship can become tomorrow's strategic vulnerability.
For Iraq and Kurdistan, the opportunity is still open.
The objective should not simply be to attract the next foreign investor.
It should be to ensure that every major investment leaves behind something more valuable than infrastructure: capability, knowledge, technology and strategic choice.
That is the difference between economic dependence and economic statecraft.
#Germany #China #Kurdistan #Iraq #Geopolitics #StrategicAutonomy #EconomicStatecraft #EnergySecurity #GlobalEconomy #Geoeconomics
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