Merkel Visit

Germany and China Talk Honestly

Merkel-Xi Jinping guido bergmann-dpa-DISTORTED
Chancellor Angela Merkel met with a number of Chinese officials, including President Xi Jinping.
  • Why it matters

    Why it matters

    China is one of Germany’s most important trading partner and it is important both countries manage to thrash out issues that hamper cooperation.

  • Facts

    Facts

    • Chancellor Angela Merkel is on her ninth visit to China.
    • This visit has been marked by frank, open debate that would previously have been considered undiplomatic.
    • China is calling for market economy status that will give it easier access to European markets.
  • Audio

    Audio

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The talks between Germany and China have been unprecedented in their frankness.  Chancellor Angela Merkel and the German business sector spoke openly in Beijing about what they perceive are difficulties in dealing with China. So is Chinese Premier  Li Keqiang.

There is no need to worry that these frank exchanges could harm relations between the two countries. Quite the contrary: This new sincerity signals progress.

Usually Ms. Merkel’s China trips follow a set pattern. In The Great Hall of the People in Beijing, the chancellor and her Chinese hosts shower each other with fulsome praise. Criticism is articulated – if at all – tentatively and with care to maintain a spirit of harmony. Nothing should be allowed to stand in the way of the much-trumpeted partnership between Beijing and Berlin. All smiles and handshakes and then on to the next port of call.

But Ms. Merkel’s ninth visit to Beijing was different. Shortly after her arrival in the Chinese capital, the chancellor was awarded an honorary doctorate. Germany’s head of government made use of her thank-you speech to admonish the lack of access to markets and legal safeguards in China. An ill-mannered guest?  No, just a chancellor who knows what she wants.

Germany has benefited more than just about any country in the world, from free trade. The same now applies to China.

This display of German self-confidence is shared by the chairmen and entrepreneurs accompanying Ms. Merkel.  At a forum with Chinese bosses, Ms. Merkel and Mr. Li, these leading lights of the German business sector took the opportunity to launch a no-holds-barred attack on the world’s second largest economy, specifying their problems:  compulsory joint ventures, Internet blocking and a lack of market access.

The Chinese replies were just as clear as the criticism. Premier Li countered that Europe should finally recognize China’s status as a market economy; that this had been promised to the People’s Republic when it joined the World Trade Organisation 15 years ago, and it was Ms. Merkel’s obligation to deliver. And a lack of market access was a problem shared by Chinese companies in Europe too.

This could turn out to be a positive turning point in German- Chinese relations. Germany and China have now told each other with unprecedented clarity what they want. That’s something they can work with. It can be the basis for real solutions.

And there are also signs in Beijing of what such solutions could look like. Ms. Merkel did not dodge the question about market economy status. It is clear to the German government that it cannot deny Beijing’s wish in the long-term.

However, Ms. Merkel made it clear that the question must ultimately be decided by Brussels. And besides, the steel industry has every reason to worry about cheap steel from China, which has triggered ruinous price cuts on the global market. There would have to be long-term provisions made to protect European companies. What Ms. Merkel was describing was a kind of “market economy light” for Beijing.

The chancellor also pointed to a new way of dealing with market restrictions. China’s banks would like to become more involved in Europe. But the current system includes a catalog of demands mostly favoring European and North American banks.  China’s state banks call it a restriction of the market and want more access.

Ms. Merkel said access could only be granted if it is reciprocated.  After all, Europe’s banks are largely excluded from China‘s financial market.

That is a pragmatic approach. Europe and China are also practising “reciprocity” with regard to visa regulations, and this is a word Ms. Merkel used repeatedly in Beijing. This is the right way. Because in the long term it can only lead to a further bilateral opening of markets.

It would be wrong, on the other hand, to apply restrictions to the Chinese offer to take over the robot manufacturer Kuka. There is no way Germany could win a protectionist race against China.

Germany has benefited more than just about any country in the world, from free trade. The same applies to China. The economy of the People’s Republic is now experiencing slower growth than in recent years. But the growth story of the most heavily populated country in the world is not over by a long way.

And that is why Germany should take a clear position – there is a great deal at stake. German products have an outstanding reputation with Chinese consumers.  And in future, consumers in the Far East should also be able to benefit more from German services. And for that to happen, a number of obstacles have to be dismantled. So this frank discussion should continue for many years to come. 

To contact the author: scheuer@handelsblatt.com

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