Merkel seals deals, strengthens trade

Agreements signed on aviation, auto and telecom sectors; Berlin to be granted yuan exchange quota

German Chancellor Angela Merkel has brought fresh impetus to collaboration between her country and China, signing deals in fields including finance and manufacturing during a visit to China from July 6 to July 8.

It was her seventh visit to China since she took office in 2005. In March, President Xi Jinping visited Germany, and in October, Premier Li Keqiang will lead a delegation of ministers to Germany to take part in the third China-Germany inter-governmental consultation.

Political ties between China and Germany were strengthened by meetings between Merkel and Chinese leaders including Xi and Li. Merkel, accompanied by 22 politicians and business people from companies including Airbus, Deutsche Bank, Lufthansa, Siemens and Volkswagen, also promoted bilateral economic cooperation.

She and Li took part in the inauguration of the German-Chinese Advisory Economic Committee, and she held talks with Zhang Dejiang, chairman of the Standing Committee of the National People's Congress.

In her meeting with Li, Merkel was told Berlin will be granted an 80 billion yuan ($12.9 billion; 9.5 billion euros) quota under the Renminbi Qualified Foreign Institutional Investors plan to accelerate the internationalization of the Chinese currency, reinforcing Frankfurt's status as a yuan clearing center in Europe.

Apart from Frankfurt, China has also approved London joining the RQFII plan in October, granting investors the right to use the yuan to buy up to 80 billion yuan worth of stocks, bonds and money market instruments from the Chinese mainland. In March, Paris was granted the same quota.

Luxembourg is asking Beijing for the same treatment after it signed an agreement with China's central bank for yuan clearing arrangements late last month.

"European cities are competing for offshore yuan centers to take a lead in the market in renminbi internationalization," said Jia Xiudong, a senior research fellow at the China Institute of International Studies.

"Chinese leaders are likely to take Frankfurt as a core center for renminbi clearing services in continental Europe, while establishing secondary yuan clearing sites in other European cities, because the huge volume of trade produces high demand for German companies to settle accounts in renminbi in collaboration with their Chinese counterparts."

Firm ties between China and Germany also offer a solid political guarantee for such an offshore yuan center, he said.

Germany is Europe's largest investor in China, with investment growing 43 percent last year. Chinese investment in Germany was worth $830 million last year, an increase of 29 percent from 2012.

Meeting Xi, Merkel said Germany would improve its investment environment and attract more Chinese investors.

In the first five months of the year, Germany's direct investment in China was worth $810 million, or 30 percent of the $2.69 billion investment in China by all members of the European Union, the Ministry of Commerce said.

Two-way trade between the countries was worth $161 billion last year, almost one-third of total China-EU trade. China is Germany's largest trading partner in the Asia-Pacific region.

Apart from financial deals, Merkel also sealed deals on aviation, motor vehicles and telecommunications, among which Volkswagen expects to establish two plants in Qingdao and Tianjin with an investment of $2.7 billion, while the European multinational Airbus Group will sell 123 helicopters to Chinese companies for general aviation.

In addition, Air China and Lufthansa are in talks that could lead the German and Chinese airlines to form a revenue-sharing joint venture.

The two countries are also paying more attention to work together on innovation, particularly given that a cooperation program between China and Germany program billed as the year of innovation will take place next year.

During Merkel's visit, Beijing and Berlin agreed that China would take part as a partner country next year at CeBIT, the world's leading expo for information technology, in Hanover.

The two countries plan a joint pilot project concerning Passive House, an energy-efficient method of construction, in Qingdao.

In an interview before Merkel's three-day visit to China, German ambassador to China Michael Clauss told China Daily that urbanization and environmental protection will be a huge sector for future bilateral cooperation.

"If China would like to upgrade its economic structure, it will need more high technologies, to which Germany can contribute. Besides, Germany also has rich experience in this field."

In March, during the Two Sessions, China's annual top meetings of legislative and political advisory bodies, China's new generation of leadership again talked of the importance of continuing economic reform and upgrading industries with higher energy efficiency.

"Advanced technologies and know-how from German companies are attractive for Chinese enterprises," said Zhao Junjie, a researcher on Europe with the Chinese Academy of Social Sciences.

"For German companies, China means a huge potential market. Reminbi account settlement will ease trading between Chinese and Germany companies.

"China's new round of economic reform and the continuing process of urbanization can bring new opportunities for German companies. Neither of them would like to lag behind."

According to published reports, Norbert Barthle, a member of the Bundestag who belongs to the joint ruling party the CDU, said: "If our industries do not establish a foothold here (in China), we will not have any chance to have a place in world markets in the long run. The most orders come from here (China)."

In addition to discussing economics, Merkel also talked about people-to-people exchanges between the two countries.

Before arriving in Beijing, she visited Chengdu, capital of southwestern Sichuan province, where she visited a project that cares for migrant workers' children.

In Beijing, she delivered a keynote speech to students at Tsinghua University after visiting the Temple of Heaven and meeting German and Chinese students together with Li to formally conclude the German-Chinese Language Year of 2013-14.

zhouwa@chinadaily.com.cn

(China Daily European Weekly 07/11/2014 page3)