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China and Germany: a new trading bloc?

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As the USA slides further into an economic mess of its own making, China is looking afield to retain its growth. The Spiegel reports on last week’s happenings:

The Chinese delegation that visited Berlin on Monday and Tuesday, where they took part in the two countries’ first joint cabinet meeting, received a warm welcome. Merkel, borrowing the same words used by her guest, said that the visit of Chinese Premier Wen Jiabao marked a “new chapter” in the strategic partnership between the two countries.

Human rights activists who had been pushing Merkel to be tough on China’s track record were likely disappointed by the visit. Although the German chancellor talked of her pleasure at the release of the artist Ai Weiwei and other political prisoners and called for “transparent” legal proceedings, the focus of the meeting was very much on trade.

Merkel said that the two countries want to increase their annual bilateral trade volume to €200 billion ($284 billion) by 2015, up from last year’s total of just over €130 billion. Wen expressed the hope that Germany and China might even double their trade volume within the next five years.

The euro crisis was a further topic discussed at the summit. With roughly 26 percent of its currency reserves invested in euro-denominated assets, China has a major interest in seeing the currency remain stable. “If Europe has problems, we will lend a helping hand,” Wen Jiabao said. If necessary, he added, China would buy up an appropriate amount of the sovereign bonds of euro-zone countries. Merkel, in turn, assured him that “we will take care of solidarity and solidity in the euro zone.”

The volume of bilateral trade between these giants approaches the total foreign trade volume of India!

China has successfully diversified its holdings so that more than a quarter of its currency holdings are in Euro. It is clearly eager to buy further into the Euro, but it is not clear that the EU economies want that now.

On a different topic, it is not impossible that the release of dissidents in China was engineered to ensure a smoother political climate to the meeting.


Written by Arhopala Bazaloides

June 29, 2011 at 7:05 pm

Posted in business, China, Germany

Tagged with , ,

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