Angela Merkel’s visit to China last week is her sixth and largest foray into the Middle Kingdom, and it serves as a reminder to many of how decisive the weight of China on the world stage is becoming. Accompanied by several of her Cabinet members and the CEOs of Germany’s largest companies, the chancellor wants to do business with what will eventually be the largest trading nation in the world − a nation that is also investing increasingly in her own domestic economy. The export-import numbers reflecting German-Chinese trade are still smaller than those within Europe or with the U.S. But the direct investments are also telling, as Germany’s role as China’s largest trading partner in Europe reveals. The presence of over five thousand German companies doing business in China is testimony to the trend, as is the €25 billion flowing from Germany to China last year alone.
With a new generation of leadership about to take over in Beijing, there is every reason to be paying attention to the next step in China’s effort to balance its global economic power with its growing domestic uncertainty. The challenge for the new Chinese leadership will be in addressing the rising needs of its own population and figuring out new ways to distribute wealth to hundreds of millions of Chinese consumers. This will also require overcoming a political problem reflected in the rising wave of social unrest among those impatient with social injustice and government corruption.
Germany sees an economic opportunity in China as a super exporter. Currently, Germany enjoys a trade surplus with China given the enormous demand for German products there. This would help explain the delegation consisting of the heads of Germany’s big league companies including SAP, Thyssen Krupp, BASF, and Siemens. German exports to China have exploded during the past few years, as has the interest China has taken in the stability of the markets in Europe. Chancellor Merkel spent some of her time with Chinese Premier Wen Jiabao trying to sooth his concerns about the ongoing euro crisis. Given the Chinese focus on Merkel and Berlin as the most important player in solving the debt and euro crisis, Merkel can have a strong impact on the readiness of the Chinese to invest more in Europe.
The danger of an economic slowdown in China and in Europe is a shared concern for both Beijing and Berlin. Yet the economic interests are not the only agenda issue Merkel has to discuss with the Chinese premier. There remain angry protests from German companies about constraints on them doing business in China, as well as frictions over copyright and patent issues. Journalists complain about censures and restrictions on their work in China. The continuing clash over human rights violations in China also remains a topic, even if the chancellor chose to discuss it more behind closed doors. The references made by Berlin to a “special relationship” with China generated criticism in the media just as journalists complained to Merkel during her visit about Chinese government intimidation and threats directed at them.