“Europe must work hard to defend its influence and above all to speak with one voice to China,” Merkel told business weekly WirtschaftsWoche.
“Seen from Beijing, Europe is more like an Asian peninsula. Obviously, we see things differently,” she added.
While the Chinese and European economies were increasingly intertwined, Merkel said, there remain points of contention about strategic industries and government procurement.
Citing the example of recent German investment in microchip manufacturing, Merkel argued that “if countries like China then want to buy up what has been built with large subsidies, we have to react,” possibly by defining some industrial branches as having strategic significance for Europe.
Equally, “we are willing to allow the Chinese to take part [in bids for government contracts] in Europe, but then we want access in the other direction to their procurement,” she said.
“We have to deal with China's claims and demands in such a way that there is a harmonious development to everyone's advantage.”
At an EU summit last week, leaders failed to agree on handing more power to Brussels to control foreign investments in strategic European industries, despite a charm offensive by the recently-elected French leader.
But Merkel, who has closed ranks with Macron in a bid to revive the traditional Franco-German “motor” of the EU following Britain's decision to quit the bloc, noted that heads of government would soon discuss the idea again.
The chancellor welcomes leaders of industrialised and emerging economies to the northern port city Hamburg next week for a G20 summit.
She has been straining to unite European neighbours around free-trade and climate-friendly policies as a counterweight to United States President Donald Trump.
Chinese President Xi Jinping has sought to champion both topics since Trump took office, aiming to align more closely with Europe.
But Merkel's comments Thursday suggest there could be more frost than expected ahead of the G20 next week, when Xi joins the chancellor to unveil two pandas loaned by Beijing to Berlin zoo in a sign of friendly ties.