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Courting China

September 01, 2012

ON the face of it, German Chancellor Angela Merkel and Egypt’s new President Mohammed Morsi have little in common. True, both are leaders of key regional powers.

But apart from that, Merkel, the daughter of a German Protestant pastor and the Islamist Mr Morsi, are unlikely to share a common vision of the world around them. Except when it comes to the importance of courting China.

Both leaders have been in Beijing this week to forge stronger ties with the world’s most dynamic economy, hoping some of the vibrancy of China will brush off on their own countries.Chancellor Merkel is no stranger to Beijing. Her determination to build ever-stronger relations with China is top news in Europe where most of the 26 other EU countries and the European Commission are watching the growing German-China friendship with a mixture of admiration and envy — as well as strong unease.

Coming only weeks before the EU-China summit in Brussels on Sept 20, Merkel’s visit to China — along with her top ministers and executives of some 20 German companies in the auto, chemical, energy, commodities and other industries — is being carefully scrutinised in Brussels and other EU capitals for signs that Germany may have decided to put its relations with Beijing ahead of its EU membership.

This is of course nonsense — and the fact that such sentiments are being openly voiced by EU officials is clearly a sign of Europe’s current insecurity about its future. The unease in Brussels also reflects the fact that while the EU-China relationship remains lacklustre and largely ritualistic, Germany and China are forging ahead with important new economic partnerships and alliances.

Certainly, Germany is looking for bilateral economic benefits. But the most striking deal announced during Merkel’s visit to Beijing was China’s commitment to buy 50 planes worth $3.5bn from Airbus, a Europe-wide consortium.

The deal with Airbus is the first significant agreement between China and Europe since their dispute earlier this year over the EU’s Emissions Trading Scheme (ETS) which will impose a carbon tax on airlines starting in 2013.

Last February, Chinese aviation authorities stopped all Chinese airlines from paying the taxes imposed by the EU’s ETS, prompting Airbus and eight other leading European airlines and aviation companies to write to European political leaders urging the EU to stop escalating the dispute.

The German visit was also about reassuring China about the future of the eurozone. With Beijing holding billions of dollars in European bonds and given the importance of the European market for Chinese exports, China’s concerns about Europe are understandable. The German leader assured her Chinese hosts of the “absolute political will” of eurozone countries to stabilise the currency and thanked China “that it has accompanied this process with a confidence that helps us to recover our credibility”.

The Chinese are not that easily convinced, however. Big Chinese investors were forced to take substantial losses on the Greek bonds they held earlier this year when Athens pushed through a debt restructuring backed by its European partners, including Berlin. German officials now acknowledge that this hit Chinese confidence in the currency bloc.

Germany and China are a perfect economic fit: German firms produce the high-quality machinery and equipment Chinese counterparts need to produce their goods. China is a giant, growing market for German cars and other manufactured wares at a time when demand from European trade partners is drying up.

Her recent trip to Beijing is the sixth to China since Merkel took office in 2005. She was in Beijing as recently as February, then hosted Chinese premier Wen Jiabao at the Hanover trade fair in April.

President Morsi’s first official trip to China — his first outside the Middle East — is equally, if not more, interesting. In talks in Beijing before he attended the Non-Aligned Movement summit in Iran, Mr Morsi secured Chinese credit for development and met with China’s President Hu Jintao, underscoring the fact that Cairo and others in the region view Beijing as a critical partner.

The visit is especially significant because China’s cautious stance on the Arab Spring — mixed with concerns of contagion at home — have not gone down too well with many people in the Arab world. Beijing has made no secret of its reluctance to support the Arab revolutions and remains opposed to stronger action on Syria. It vetoed with Russia UN 2Security Council resolutions targeting the Syrian regime in February and in July, defying calls for action by a number of Middle Eastern nations. China has long held that it won’t support plans that it sees as meddling in other countries’ affairs.

As such, there is relief in Bejing that the region’s new leaders like Mr Morsi are not turning their back on China. How can they? Egypt’s economy has been largely flattened by political unrest, and Cairo is eager to attract much-needed investment to create jobs for its restless youth. Cairo is also eager to attract Chinese tourists and sell more goods to China.

Much to Washington’s unease, China has deepened military and security ties across the Middle East in recent years, with many of its companies seeking business opportunities across the region. Beijing remains heavily reliant on Middle East oil to fuel its economic growth. Ms Merkel and Mr Morsi are certainly still interested in maintaining their ‘special’ ties with the US. But in a rapidly changing world, where jobs and money are as important as hard security issues, China’s magnetic pull can no longer be doubted.

The writer is Dawn’s correspondent in Brussels.