Source: Nicole Kirbach¸ PKF Malta
German leader Angela Merkel visited China’s premier Wen Jiabao in August 2012 to strengthen the euro.
Merkel is hoping for Chinese help in getting the euro zone out of its current woes. After all¸ China has massive foreign exchange reserves¸ currently estimated at $3.2 trillion – the world’s largest reserves. The Europeans hope that China continues investing in Europe or in EU bailout funds and companies.
During her two-day visit to China¸ Merkel advised the Chinese leader Wen that many reforms are taking place now¸ and that there is an absolute political will to turn the euro into a strong currency again. She also expressed her wish to keep Greece in the euro zone explaining that the crisis could not be solved “with a single blow.”
At the press conference held by the two leaders Won said he is pleased to see Merkel’s commitment to save the euro. He also said that China wants to continue to invest¸ but the conditions have to be right. In his opinion the Europeans were taking too long to implement the necessary steps to fight the crisis.
Among these talks during the two-day visit some agreements amounting to more than $6 billion were signed. China was prepared to invest in planes signing a $3.5 billion deal to buy 50 jets A320 from the European aircraft company Airbus and to continue final assembly in China. Moreover¸ they signed an agreement regarding their third factory in Tianjin south-eastern of Peking¸ which is the only one outside of Europe. China¸ the world’s second-largest economy¸ has a fast-growing aviation sector. The manufacturers are racing to capture orders as the country’s increasingly affluent consumers more frequently take to the air when travelling. The agreement between ICBC Leasing and Airbus was only one part of a series of agreements signed by China and Germany at the start of Merkel’s visit. ICBC Leasing is a unit of state-owned bank ICBC. Other deals took place in areas such as automobiles¸ energy¸ the environment and health. To be accurate the agreements contain climate and environment protection¸ biogas¸ efficiency of fuel. These agreements highlighted both countries’ cooperation. Beijing and Berlin also want to cooperate on a level of emergency and disaster control.
The economic relations between the two countries have evolved spectacularly. Today China is one of Germany’s closest economic partners and is interested in German technology. But there is also a dilemma. On the one hand¸ China needs the euro as a counterweight to the US dollar and Europe as a market for its goods. On the other hand¸ the Chinese leadership can’t risk too much in supporting the euro¸ because it already has enough issues since it has invested the bulk of its foreign exchange reserves in US government bonds.
Relations between Merkel and Beijing were not always so friendly. In 2007¸ Chinese leaders were angry when Merkel received the Dalai Lama in Berlin¸ a clear show of support for suppressed Tibet. Some in China also had high hopes for Merkel¸ and not just among dissidents. There are many in both the Communist Party and the Beijing government who hope to see democratic reforms in China. Moral support from the West is fundamental.
Up till now with each visit to China¸ Merkel’s soft-spoken approach becomes even softer. Merkel seems to have become almost completely domesticate