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Hard facts of friendship

June 22, 2013

US PRESIDENT Barack Obama and Chinese Premier Li Keqiang have little in common. The first is the leader of the “free world”, albeit with feet of clay, with security services which snoop on American and foreign citizens, drones that kill and maim hundreds even as he preaches human rights to the rest of the world.

The latter is the second most important man in the Chinese Communist Party who talks eloquently of the “Chinese dream” and bringing peace and prosperity to millions and yet clamps down hard on dissidents and human rights activists.

And yet in the space of a few weeks, both Obama and Li have tread the red carpet in Berlin, basking in the warm embrace of German Chancellor Angela Merkel and boasting of their “special relationship” with Germany.

Of the two, America certainly has stronger bonds with Berlin and a special place in German hearts. History ties the two countries together and there was visible personal chemistry between Obama and Merkel when they met in Berlin last week.

But make no mistake: Germany may cherish its special alliance with the US and remain a firm promoter of the transatlantic alliance. China, however, looms equally large — perhaps even larger — over German foreign and security policy. America and Germany are linked by history, sentiment and emotion. China and Germany have a “special relationship” based on trade, business and investments.

German policymakers know that their country’s future is inextricably tied up with the US. Not surprisingly, therefore, Berlin is an enthusiastic backer of the Transatlantic Trade and Investment Partnership designed to create an EU-US free trade area which will help promote growth and jobs on both sides of the Atlantic.

German business knows, however, that the economic future of their country — and their companies — depends on the economic success of China and other Asian countries.

Significantly, while the rest of Europe takes the US-German friendship for granted, the increasing warmth in Germany-China ties is making the European Union (EU) very nervous.

Policymakers in Brussels complain that the German friendship with China is undermining the EU-China relationship and that Berlin should let the EU take the lead in dealing with Beijing. No such criticism is levelled at Berlin’s ties with Washington.

Berlin’s opposition to the recent EU decision to impose anti-dumping duties on Chinese exports of solar panels to Europe has focused additional attention on the German-China relationship — and the EU’s wariness of the growing ties between the two economic giants.

During Premier Li Keqiang’s recent visit to Berlin, Merkel pledged to negotiate an acceptable settlement to the solar-panel dispute.

Merkel said Germany would do everything it could to prevent the trade dispute from escalating to the point where the European Commission imposed import duties on Chinese panel makers.

“Germany will do what it can so that there are no permanent import duties and we’ll try to clear things up as quickly as possible,” Merkel told reporters after a meeting with Li in Berlin. “We don’t believe that this will help us so we want to use the next six months intensively.”

Li, standing next to Merkel at the briefing that followed the signing of a range of business agreements, said a trade dispute between the EU and China would harm both sides and benefit neither. He said China was interested in both a two-way dialogue and consultation on how to resolve the issue.

The reasons for the warmth in China-German ties is simple: Germany is China’s number-one trade partner in the EU: nearly half of all EU exports to China come from Germany; nearly a quarter of EU imports from China go to Germany. The increase in trade between China and Germany during the last decade — and, in particular, in German exports to China — has exceeded all expectations.

In fact, China is now the second-largest market for German exports outside the EU and is poised to overtake the United States as the largest this year, if growth continues. At present, there is an almost perfect symbiosis between the Chinese and German economies: China needs technology and Germany needs markets. In particular, Chinese consumers want high-end German products such as cars and Chinese companies want German machinery.

Chinese officials say they see Germany as having a stronger “real economy” — and therefore see it as more useful to them — than other member states such as the United Kingdom that have largely abandoned manufacturing. In particular, Germany is involved in industries that China regards as strategically important such as automobiles, renewables and high-technology.

Above all, however, the Chinese see Germany as the country that can help them move to the next stage of their economic development. In its twelfth Five-Year Plan, China is committed to increasing domestic consumption, develop strategic industries shielded from foreign competition, and increase spending on research and development in order to stimulate indigenous innovation.

Germany can provide all this and more.

Environmental technologies, renewable energy, modern information and biotechnology are all sectors where German companies with their know-how and experience are in a strong position. Consumer goods and modernising healthcare are also sectors where German companies see market demand as China’s middle class grows rapidly and purchasing power strengthens.

In a survey of 2,500 companies in Germany by the Association of German Chambers of Industry and Commerce in April, China was ranked as investors’ top destination, especially for those from the automotive, high-tech and machinery industries.

Given such ties, it is no surprise that many in Europe describe Germany as an “Asian power” whose links with Asia and especially with China are almost on a par with its economic engagement with the EU.

The writer is Dawn’s correspondent in Brussels.