German Chancellor Angela Merkel is set to embark on a three-day trip to China in a bid to enhance bilateral trade ties and mutual trust. DW examines the state of economic and political relations between the two nations.
Merkel’s visit – from October 28 to 30 – comes at a time of faltering growth in China, with the East Asian country’s economy expanding at 6.9 percent in the third quarter of this year – it’s slowest pace in over two decades.
The increased volatility in Chinese stock markets in recent months and sputtering exports also highlight the weakness afflicting the world’s second-biggest economy.
China’s current economic slowdown gives Germany reason for concern as the two nations have close economic ties. China is Germany’s third most important trading partner, with bilateral trade amounting to over 150 billion euros ($165.8 billion) in 2014.
However, in the first half of this year, trade volumes between the two sides fell 11.8 percent, according to the EU statistics agency Eurostat.
Economy on top of agenda
“It’s not only Chinese businesses that are affected by the slowdown, but also German and European firms,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China.
Wuttke also pointed to the growing pessimism among German companies operating in China, given the multitude of problems the country faced in recent months.
“First, it was the devaluation of the Chinese currency, the renminbi, in August, followed by the stock market turmoil. Even the auto industry recorded poor sales in the second and third quarters,” Wuttke told DW.
The expert believes China’s growth is likely to weaken further in the coming years. This is why, he says, the economy will be on top of Merkel’s agenda during the upcoming trip. “The Chinese slowdown is a de facto crisis. It will have an impact on some sectors such as the German automotive industry.”
However, Shen Ling, an economist at the East China University of Science and Technology, is not in favor of labeling the current economic situation in China as a crisis. He pointed out that despite China’s slowing economy, its 6.9 percent expansion is still far higher than growth rates recorded in most other major economies.
The expert told DW that China is in the midst of an economic transformation, with Chinese policymakers striving to rebalance the country from being an export-reliant economy to one driven by domestic consumption. “While this restructuring is leading to a slowdown, it also presents big opportunities for Germany,” he said.
The falling bilateral trade volumes are only temporary, believes Shen. He argues that China’s demand for high-tech goods will only increase in the coming years, and that Germany is well placed to meet this demand.
Analyst Wuttke, however, stressed that the Chinese government should carry out the promised structural reforms, instead of merely focus on short-term fixes such as pouring money into certain preferred economic sectors or huge construction projects.
During her trip, Chancellor Merkel may call on the Chinese leadership to implement the much-needed economic reforms.
Despite some areas of disagreement, Sino-German ties are currently enjoying their best period ever, said Eberhard Sandschneider, a China expert at the German Council on Foreign Relations.
A major irritant
One of the major irritants in the bilateral relationship is China’s poor record on human rights. The issue is expected to figure in Merkel’s talks with Chinese President Xi Jinping, Sandschneider told DW, noting that “it is part of the strategic dialogue between the two sides.”
“Although economic issues are the main focus of Merkel’s visit, that doesn’t mean other topics will disappear from the agenda.”
However, that’s exactly what happened when Xi recently toured the UK, as the spotlight remained on business deals worth billions of dollars rather than on human rights.
There could be pressure on Merkel not to raise the issue during the visit, said Sebastian Heilmann, Director of the Berlin-based Mercator Institute for China Studies (MERICS). “The Chinese government will want the same kind of treatment from Merkel as it recently received from the British government in London,” noted Heilmann.
And if Merkel criticizes China’s poor human rights situation, then Beijing may no longer want to be a patient listener, the expert said. “There could be a changing of the guard, with London becoming China’s most important partner in Europe,” said the MERICS analyst.
However, Wuttke says Germany need not worry about such a development. “The Chinese are very pragmatic. They see that Germany is the EU’s largest economy and a major exporter of high-tech products. China will therefore continue to strive for better relations with Germany,” he said.