Welcome to the 74th issue of the CEEasia Briefing.
In this issue, we dissect the following topics:
- German Chancellor Friedrich Merz’s trip to China
- French President Emmanuel Macron’s visit to India
- South Korean automotive parts investment in Slovakia
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1. German Chancellor Friedrich Merz’s trip to China
What’s going on? Following visits by Canadian Prime Minister Mark Carney and UK Prime Minister Keir Starmer, German Chancellor Friedrich Merz became the third G7 leader to visit China since the beginning of 2026, with French President Emmanuel Macron having concluded his own trip at the end of 2025. Prior to the visit, some analysts seemed to expect greater deliverables from a chancellor who, since his election in May last year, has talked about de-risking and European unity, thereby drawing comparisons with the more dovish approaches of his predecessors. Contrary to these expectations, Merz’s inaugural trip, which took place between 25 and 26 February, was marked by contradictory messaging that sought to link calls for supply chain diversification with those for a deeper German-Chinese strategic partnership, a term that has not been used in German political discourse on China for some time.
Going deeper… While a less hawkish tone was to be expected during the chancellor’s first visit, the seeming willingness to cozy up to Beijing by downplaying long-term strategic risks in exchange for short-term economic benefits was still surprising, especially considering the negative consequences of the second China shock on the German economy, something the chancellor has himself acknowledged on multiple occasions. Indeed, several analysts have pointed out not only the change in German tone on China since Merz’s election, but also the relatively greater leeway for substantive changes to Germany’s China policy given the CDU’s control of both the foreign and economic ministries.
Nonetheless… The visit, which included nearly 30 business representatives, was marked not only by a seeming prioritization of the interests of a few MNCs with a substantial presence in China over smaller Mittelstand companies, but also by what some have described as a “Germany First” approach. The latter came at the expense of the European unity Merz had previously appealed to, including during his speech at the Munich Security Conference, where he, alongside other European and G7 leaders, criticized the “America First” approach of US President Donald Trump. Indeed, the increasingly unilateral position of the US administration and its many divergences from European positions on several global issues have arguably played a major role in shaping Merz’s talking points, prompting hedging strategies similar to those seen in Canada, the UK, and other middle powers, which are thinking in an increasingly neo-realist fashion.
At the same time… While Beijing’s increasing willingness to weaponize raw material supply chains poses similar challenges for all countries dependent on China, Chinese overcapacity exports are significantly more damaging to the manufacturing-based German economy than to the service-based economies of the UK and Canada, the latter of which is also supported by a strong natural resource sector. This distinction is critical, especially as Chinese exports are increasingly dominated by low-cost, high-quality products in the automotive, machinery, and chemical sectors, which have long been the backbone of Germany’s economic growth. Several scholars also point out that even nominally German companies that derive their profits from the Chinese market (i.e., the very companies that continue to hold sway over German foreign policy) diverge from broadly defined German national interests.
2. French President Emmanuel Macron’s visit to India
What’s going on? French President Emmanuel Macron paid a three-day visit to India in mid-February to meet with Prime Minister Narendra Modi and finalize details of joint air defence cooperation. India and France will jointly produce Rafale fighter jets and helicopters, with further possibilities to expand the cooperation on submarines.
Going deeper… The Defence Acquisition Council of India’s Ministry of Defence approved the acquisition of 114 more Rafale jets for the Indian Air Force for around $40 billion, besides other planes and missiles. So far, India has purchased 36 Rafales for its air force and ordered another 26 marine versions of the jet for the navy. Details of the deal, including plans for co-production by a yet-to-be-identified joint venture partner, would be published after technical and commercial negotiations. India demands at least 90 jets to be jointly produced in India under its Atmanirbhar Bharat (self-reliance) policy. In addition to Rafale jets, the Indian Navy operates six French Scorpene submarines and plans to order more. President Macron and Prime Minister Modi also announced the first H125 helicopter assembly line in India operated by a joint venture between Airbus and Tata Advanced Systems, as well as a plan to jointly produce HAMMER missiles in India, by France’s Safran and India’s state-owned Bharat Electronics.
Moreover… At a time of heightened global security situation and trade wars, India and France are deepening their partnership not only in defence. During President Macron’s visit, both sides signed 21 agreements covering defense, artificial intelligence, energy, and critical technologies, elevating their cooperation to a “Special Global Strategic Partnership.”
This means… France has become one of India’s most important defense partners and today ranks second only to Russia. India is the largest export market for the French defense industry, accounting for roughly one-third of French arms exports in recent years, making the deals with New Delhi critical for the French defense industry. But India remains pragmatic. While it is modernizing its armed forces and buying more equipment from France, it is not abandoning Russia. Reports indicate that the Indian Air Force is considering purchasing 36–40 Sukhoi Su-57 stealth fighters from Moscow, partly because Russia is willing to offer broad technology transfer, which France, despite supporting joint production, is reluctant to share. Thus, India’s strategy is diversification. It strengthens ties with France but continues defense cooperation with Russia and other countries, pursuing a multi-alignment policy that avoids dependence on any single supplier.
3. South Korean automotive parts investment in Slovakia
What’s going on? Mobis, an automotive parts vendor from the South Korean Hyundai Motor Group, has made yet another investment in Slovakia, going against the general trend of downturn in the European automotive industry. This would be Mobis’s third investment in Slovakia over the last couple of years, with the total sum unknown for now. However, previous investments have totaled almost €250 million.
Going deeper… The latest investment will join previous Mobis involvement in the north-west of Slovakia in the Žilina region, where KIA, also of Hyundai Motor Group, produces electromobiles. The latest investment includes production of circuit boards crucial for automobile systems, with Mobis also involved in electrification and car safety systems in its other Slovak investments.
This means… Mobis’ investments in Slovakia all involve segments with high-value-added production, which likely allows Mobis to endure the downturn in the general car market across Europe. Furthermore, the latest investment will likely benefit from its proximity to the nearby KIA factory, where the automobile maker produces two electric models. Mobis serves as a crucial supplier, and, with its production closely linked to the broader cluster of car manufacturers in Central Europe, specifically Kia, it can increase its local production. Unlike simpler components, whose demand can fluctuate, these more complex ones allow the producer to think in the longer term, thus helping to counter the current downturn.
Moreover… A confluence of factors is challenging the industrial structure and the long-standing business model of Central European countries. Since their transformation from command economies to free markets in the early 1990s, the automotive industry has been the backbone of their manufacturing sectors and, by extension, their economies. With the rise of EVs and the increase in geopolitical tensions and protectionism, the V4 faces a challenge. Furthermore, East Asian EV and battery producers have surpassed their European counterparts in terms of production processes and technological expertise.
Quick takes on CEEasia developments
TAIWAN | Taiwanese STARLUX Airlines launches its first European route: a direct Prague-Taipei connection. Service starts in August 2026 with three weekly flights, serviced by an Airbus A350-900 with 306 seats and four cabin classes. STARLUX CEO Glenn Chai highlighted Prague’s popularity among Taiwanese tourists and strengthening semiconductor industry ties as key demand drivers.
SOUTH KOREA | South Korea’s DAPA agency selected Czech firm BRM AERO to supply Bristell planes for ROKAF’s early pilot training needs. BRM AERO prevailed due to its technically advanced features, cost-effective maintenance, and a reliable long-term service pledge. The deal spans 2026–2028 and includes cockpit simulators or full technical backing.
SOUTH KOREA | South Korean electronics producer Samsung has announced it will end production of TVs in Galanta, Slovakia. It previously closed another of its factories in Slovakia in 2018, with the latest phaseout planned to run until mid-2026. This will lead to more than 750 workplaces being lost. Samsung will now retain only its logistics center in Slovakia.
JAPAN | Poland has issued its largest Samurai bond, a €1.16 billion four-tranche package with maturities from three to twenty years. Steady Japanese government bond yields enabled the government to attract investors seeking higher returns than local options offered. Strong interest from Japanese and international purchasers prevailed despite geopolitical concerns, driven by competitive coupons, including 1.88% on the shortest note and 3.65% on the longest.
INDIA | India’s Sakthi Aviation and Defence Systems signed a Memorandum of Understanding with Czech manufacturer Aircraft Industries, a member of the Czech OMNIPOL Group, to set up a final assembly line for the L 410 NG 19-seater aircraft in India, thereby enabling technology transfer and strengthening the Indian aviation ecosystem. Given the aircraft’s ability to operate from short, unprepared runways, it is well-suited to connecting remote and underserved areas in India.
