Merz Bets on Xi for Ukraine Peace as Germany Arrests China Spy Couple

Germany's May 20 ran through Beijing in three different ways: a Chancellor's appeal, a counter-espionage arrest, and a sovereign equity move on a tank manufacturer.

Chancellor Friedrich Merz, speaking at a joint press conference in Berlin with Swiss President Guy Parmelin, said Germany was placing its hope for movement on the Ukraine war in Vladimir Putin's Beijing visit. "We do not expect fundamental changes in the strategic relations between Russia and China at this time," Merz said. "However, we place hope in this visit that President Xi will influence Putin to bring an end to this war in Ukraine, which he cannot win and which, on the contrary, is accompanied by heavy human losses for Russia." Merz called for serious negotiations involving Ukraine, Russia, the United States and Europeans, arguing that "durable peace can only be achieved together" — and stressed that continued military equipment, supplies and civilian humanitarian aid to Ukraine "remains a top priority" until then. The chancellor's remarks landed against the backdrop of Putin's arrival in China on May 19 and the joint Xi–Putin declaration on "a multipolar world order and a new type of international relations."

On the same day, the Federal Prosecutor's Office announced the arrest of a married German couple in Munich on suspicion of working for a Chinese intelligence service. The suspects, named only as Xuejun C. and Hua S. under German naming rules, are accused of building contacts with university researchers and industry insiders to obtain high-tech information with military applications. The case is the latest in a string of Chinese-intelligence prosecutions Germany has brought in the past 18 months, and adds a counter-espionage frame to the chancellor's diplomatic outreach.

The defence-industrial track moved in parallel. Sources in government circles told Reuters, dpa and AFP that the federal government has agreed to acquire a 40% stake in Franco-German defence company KNDS, the maker of the Leopard 2 main battle tank, ahead of its planned IPO. The stake is expected to decline to 30% within two to three years, with France similarly reducing its holding; the transaction structure is meant to give Berlin and Paris a long-term anchor in a key European armour producer while opening the company to private capital. Defence Minister Boris Pistorius separately announced a fresh reform of the Bundeswehr's procurement system, aimed at decentralising and streamlining the BAAINBw agency in Koblenz — which has been restructured multiple times over the past 25 years without resolving the underlying speed and accountability problems that the war in Ukraine and rising European defence budgets have thrown into relief.

The day's threads connect: Berlin is simultaneously betting that Beijing will deliver leverage over Moscow, prosecuting Chinese intelligence activity on German soil, and using state equity to lock in European defence-industrial capacity for a longer confrontation. Merz's pitch to Xi sits inside a fortnight in which the U.S. has announced a withdrawal of about 5,000 troops from Germany — roughly 14% of the 36,000 stationed there — over the next six to twelve months, and NATO Secretary-General Mark Rutte said Wednesday that the cut would have "no impact" on alliance capability.