Merkel in China

'We Need to Trade as Equal Partners'

Der Voith-Vorstandsvorsitzende Hubert Lienhard, aufgenommen am Freitag (27.08.2010) in Heidenheim. Foto: Marijan Murat dpa/lsw [ Rechtehinweis: Verwendung weltweit, usage worldwide ]
Head of Voith, Hubert Lienhard, is going to Beijing with Chancellor Merkel.
  • Why it matters

    Why it matters

    If tensions between China and Europe go unchecked, there is the risk of a trade war developing, which would damage both countries.

  • Facts

    Facts

    • Trade issues will top Chancellor Angela Merkel’s agenda when she travels to Beijing on Sunday.
    • China makes up 50 percent of global steel production, and is similarly a big player in the paper market.
    • The European Commission has to decide by December whether to grant China market economy status, which could trigger an increase in Chinese exports at dumping prices.
  • Audio

    Audio

  • Pdf

 

This weekend Hubert Lienhard, head of the technology company Voith and chairman of German industry’s Asia-Pacific Committee, will be a member of the trade delegation traveling with Chancellor Angela Merkel to Beijing.

Voith, which is based in Heindeheim in southwestern Germany, has over 20,000 employees and an annual turnover of €4 billion, making it one of the biggest family-owned companies in Europe.

Ahead of the closely watched two-day trip that starts on June 12, Mr. Leinhard said he was well aware of the growing tensions between China and its international trading partners. Speaking to Handelsblatt in an interview, he outlined clear goals for Germany.

“We need to be able to trade as equal partners,” he said, adding that Germans should be able to take part in tenders of public agencies.

While he agreed that “the Chinese government has set a lot in motion,” he pointed to unfair restrictions, for example, in trade and banking. “Also the requirement that the auto sector has to undertake joint ventures with Chinese firms does not fit to our times… A further opening, for example, of the auto sector would attract more investors and China would profit from a new impulse towards modernization.”

This week, Germany’s economics minister, Sigmar Gabriel, called for a level playing field in international trade, drawing a distinction between open markets and what he called “a state-capitalist interventionist market,” a clear reference to China.

“What we can’t do is sacrifice German companies and German jobs on the altar of open markets when in reality there isn’t a level playing field. Open markets require the same rules of the game,” Mr. Gabriel, who is also vice chancellor and leader of the center-left Social Democrats, told reporters on Wednesday.

“China needs to be aware of its own significance and to behave responsibly.”

Hubert Lienhard, CEO, Voith

Ms. Merkel’s Beijing trip also takes place against a background of China’s strong steel exports, which global rivals say are being dumped cut-price on international markets after a slowdown in demand at home. German industry representatives argue that China’s steel industry has a vast surplus capacity propped up by the government, support which is unavailable to German rivals.

The same goes for makers of aluminium, textiles and other products. European firms have warned that the export prices of many Chinese goods are so low that they amount to illegal dumping at rates not possible under the laws of supply and demand.

In response, Europe’s hard-pressed steel industry has been urging governments to take countermeasures and wants to stop the E.U. from granting China its coveted market economy status, which would clear the way for an even greater volume of Chinese exports to Europe.

Such trade issues will be on Ms. Merkel’s agenda. And the clock is ticking. The European Commission, the E.U. executive body, has to decide by December whether to grant China market economy status.

Given the criticism of China’s so-called dumping practices, Mr. Leinhard emphasized that China needs to grow into its dominant position within the international economy.

 

ARCHIV - Bundeskanzlerin Angela Merkel (CDU) besucht am 30.10.2015 in Hefei (China) gemeinsam mit dem chinesischen Ministerpräsidenten die Deutsche Hochschule an der Universität Hefei und steht unter der Abbildung der chinesischen und der deutschen Flagge. Foto: Soeren Stache/dpa (zu dpa "Der schwierige Partner China und die hartleibige Kanzlerin" vom 10.06.2016) +++(c) dpa - Bildfunk+++
Chancellor Merkel was in China back in November. This weekend’s trip is her eighth since taking office. Source: DPA

 

“China needs to be aware of its own significance and to behave responsibly,” he said, adding that in 2001 China accounted for 4 percent of global economic output, whereas today it makes up 13 percent. “That’s a completely new dimension. Now if they have overcapacity they can’t just dump the goods on global markets.”

China makes up 50 percent of global steel production, and is similarly a big player in the paper market.

If the European Union grants China market economy status, many industry players fear there would be an influx of Chinese exports in Europe, which would threaten producers and jobs at home.

“If German steelmakers, as part of the value-added chain, run into difficulties, there would be fatal consequences for German industry. We have to do everything we can to avoid that,” Mr. Leinhard said.

And meanwhile, many industry players have complained about Chinese protectionism at home while a growing list of Chinese investors snap up stakes in German companies. Around €20 billion flowed into Europe for joint ventures or complete takeovers in 2015, and the shopping spree is being extended into this year.

Earlier this week, Shanghai Yiqian Trading Company said it would buy Frankfurt Hahn airport, while the robotic firm Kuka has been targeted by Chinese company Midea.

Mr. Leinhard’s company Voith is a major shareholder in Kuka. There have been concerns in Germany about the deal, with reports that the Berlin government would prefer a European buyer.

 

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Mr. Leinhard has not yet indicated if Voith would back the Midea bid, saying recently that the Kuka management’s positive response to the bid was “premature,” and that Voith would make a decision once it had the examined offer. Its 25.1 percent stake in Kuka allows it to block strategic decisions.

Speaking to Handelsblatt, Mr. Leinhard argued that in general fears about a dilution of German technological know-how as a result of Chinese takeovers of German firms are unfounded.

“The fears have simply not played out,” he said. “To the contrary, Chinese investors have often behaved responsibly and with a long-term view. They also open a door into the Chinese market. Fears that Chinese companies just wanted access to know-how have not been borne out… Germany is dominated by mid-sized family businesses. Every business owner can decide for themselves if they want a Chinese partner on board or not.”

But the fact remains that Ms. Merkel, who has already traveled to China eight times, will face heightened tensions on this visit.

“Ever since China joined the World Trade Organization in 2001 things have moved in the right direction. That is reflected in the fast increase of foreign direct investments in China,” Mr. Leinhard said. “But we are still far removed from the goal that foreign and local companies are treated completely equally.”

 

Klaus Stratmann is a political correspondent based in Berlin. Siobhán Dowling, an editor at Handelsblatt Global Edition, contributed to this article.  To contact the author: stratmann@handelsblatt.com

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