Bilateral ties must reach new heights

Discussions between Merkel and Chinese leadership to hinge on economic, trade and investment cooperation

Chancellor Angela Merkel visits China for the ninth time this month, bringing with her the German cabinet for the fourth round of the German-Chinese government consultations. This is a unique format and the flagship of our partnership.

In consultations with the top political leadership with China, Germany wants to consult on a wide range of political, economic and societal issues. This no doubt will happen again in a spirit of partnership. China and Germany are anchors of stability and each other's most important partners in their respective global regions. Despite different political systems, our approaches to a large number of international issues are similar. Achieving consensus, not shying away from disagreements but preventing them from spinning out of control has been a hallmark of our relationship. In the present global situation, this sober approach could help avoid dividing the world into rival camps.

After a spate of forceful statements on the future course of economic reform in China last May, it seems that economic development has climbed firmly to the top of China's agenda. This is why I expect economic, trade and investment cooperation between Germany and China to occupy a large portion of the chancellor and her cabinet's discussions. This is China's wish and in Germany's interest.

When you look at trade in 2015, a difficult year for China, one is struck by the remarkable resilience of the Germany-China economic relationship. According to German and European statistics, our trade volume in 2015 remained basically unchanged at 163 billion euros ($185 billion). On the investment side, things are even brighter: Germany's investment in China, already the biggest from Europe at around 60 billion euros, continued to climb. Reliable aggregate data is hard to come by, but fresh direct investment into companies in China climbed to 4 billion euros. Chinese investment in Germany is heavily concentrated in the high-tech sector and, on top of greenfield investments, is targeting more and more companies for acquisitions, such as the leading robotics company Kuka, which just received a takeover offer by Chinese consumer products company Midea. Unlike in other countries, Chinese investment in luxury real estate and other nonproductive areas in Germany is limited. Some studies talk about Chinese investments in the range of 2 billion euros. However, as there are no registration requirements for foreign takeovers of midsized companies, we do not have very reliable data. The actual figure might be much higher.

Resilient trade figures in a challenging environment and growing investment in both directions, especially in areas which are crucial to China's plans to upgrading its industries through a digital revolution: Could anyone wish for more? I expect this to come up during our leaders' discussions. In order to sustain and even accelerate present dynamics, there are some questions that need to be addressed.

Our high trade volume can only be maintained because a decrease in German exports was offset by a steep increase in imports from China. This can partly be explained by difficulties in the Chinese industrial sector in 2015, which depressed demand. Another explanation could be that German goods have become less competitive in China and Chinese goods have caught up. Chinese goods are undoubtedly getting more and more competitive. However, in the same year, German exports to the highly competitive United States increased by almost 20 percent. To the equally highly competitive midsized economies of South Korea, Singapore, Hong Kong and Taiwan, they increased by almost 10 percent. This indicates that we have to talk about a further opening of markets. Fortunately, the German-Chinese trade relationship has been balanced over the years. In trade, it is not just a slogan but a truth based on hard facts and figures that Germany and China work for mutual benefit. Rebalancing is possible and we must build further trust.

We also need a more in-depth discussion about lowering barriers to investment. China has not opened its investment sector to German businesses wider in recent years. At the same time, it has lowered domestic barriers to outward investment by Chinese companies. The German investment market has remained open. The lure of the huge Chinese market is a powerful incentive but not a panacea. We must both work hard to make sure that investment keeps flowing, hopefully with a sustained upward trend. Openness, mutual trust and robust legal frameworks based on international laws have their rewards. German investments in the US jumped to around $20 billion. If we both intensify our efforts to achieve tangible progress on lowering the number of government and administrative licenses, more rigorous implementation of laws and reducing the parts of the economy closed to foreign investment, our economic relationship will have the potential to be second to none.

China will again put the issue of its market economy status and implementation of commitments in its WTO accession protocol high on the agenda. This is an EU matter, in which Germany, as the EU's largest member state, has an important stake. Currently the issue is at risk of being emotionalized. Solutions can be found if all sides accelerate their efforts. Addressing asymmetries in trade and investment would certainly help to put the issue back on a rational track. Compromises are rational choices, as emotional responses breed confrontation. In the current global economic climate, which is shaky at best, trade conflicts between the world's top two traders are the last thing we need. Germany will do its utmost to avoid them. With a little help from our friends and strategic partners, this should be feasible.

The writer is the German ambassador to China. The views do not necessarily reflect those of China Daily.

(China Daily 06/13/2016 page5)