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China-Germany summit in Berlin

October 9, 2014

German Chancellor Angela Merkel meets Chinese Prime Minister Li Keqiang in Berlin today amid concerns over Europe's faltering economy and an economic slowdown in China.

https://p.dw.com/p/1DSmj

Chinese Prime Minister Li Keqiang has arrived in Germany for high-level consultations amidst a mixed background of flourishing trade between the two economic powerhouses but gloomy forecasts for their growth.

Li, the head of China's Communist Party-controlled government and the country's second-most senior official, will hold talks with German Chancellor Angela Merkel on Friday and reportedly sign a number of agreements. The two leaders will also preside over a joint meeting of their cabinets.

Bilateral trade between the two countries has jumped nearly 12-fold in recent years, according to official data. But elation over the Sino-German trade boom has been dampened by a slowdown in the Chinese economy and warnings that Germany is teetering on the brink of recession.

"The Chinese economy is now not strong enough to offset stagnation in the eurozone," said Carsten Brzeski, an economist with ING Bank.

Domestic demand in China has slipped. Imports dropped 3 percent in August over July and as a result Germany no longer looks like it will be able to prop up the eurozone economy like it did when it led the Continent out of the 2009 recession.

On Thursday, Germany's Federal Statistics Office marked the sharpest monthly drop in exports in five years. There have also been declines in industrial production, factory orders and business confidence.

What seemed years ago to be an insatiable Chinese demand for high-end products from Germany has since slowed as China no longer registers the whopping, double-digit growth rates it once did.

The International Monetary Fund even forecast this week growth in China could slow to 7.1 percent by next year.

The current round of talks bears the motto, "Innovation Partnership," and both countries are eager to find areas where more cooperation would be mutually advantageous. China knows it needs German know-how to remain competitive in the long run, and German companies would profit handsomely from expanding into underdeveloped economic sectors in China.

"Both countries have clearly defined common aspects for the sake of their own interests," said Björn Conrad, an analyst at the Berlin-based Mercator Institute for Chinese Studies.

China is still Germany's third-largest trading partner. In 2013, bilateral trade topped 140 billion euros ($178.1 billion) - up from 12 billion euros in 1993. Outside Europe, China was the second most important market for German exports, behind the United States. And some only expect that number to go up.

"We are counting on 2014 being a record year for bilateral trade," China's ambassador to Germany, Shi Mingde, said earlier this month.

But Shi also voiced concern over falling European demand for goods produced in China as geopolitical tensions around the world have unnerved investors and caused business confidence to drop. Pro-democracy demonstrations in Hong Kong, the ongoing conflict in Ukraine, rapid advances by Islamic State militants in Iraq and Syria and the outbreak of the deadly Ebola virus have spoiled appetites for loans and investment the world over.

"We don't want the entire EU to dip into a recession," Shi said. "At the moment, we're feeling lower demand from Europe - that's a problem for us."

While Li and Merkel convene in Berlin, around 550 business leaders will gather in the northern German port city of Hamburg for the sixth biennial "China meets Europe" summit, where Li will also make a speech.

More Chinese companies are based there than in any other German or European city and perhaps nowhere else are the effects of Germany's slowing mercantile relationship with China more apparent.

This month, a German court postponed a ruling on deepening the channels leading to Hamburg's ports - a major blow to a city eager to accommodate a new generation of Chinese container ships.

cjc/uhe (dpa, Reuters, AP, AFP)

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