China and Germany ink $15bn deals

29 June 2011 Last updated at 04:35 GMT China has been looking to foster stronger ties with its key trading partners China and Germany have signed trade deals worth $15bn (?9bn) following meetings between the two country's leaders in the German capital Berlin.

Chinese Premier Wen Jiabao and German Chancellor Angela Merkel also targeted an increase of bilateral trade to 200bn euros ($284bn; ?178bn) over the next five years.

Germany is by far China's biggest trading partner in the European Union.

China and Germany are the two biggest exporters in the world.

Premier Wen said the focus of the meeting was to "boost the growth potential of bilateral trade... and to once again double our bilateral trade volume in five years".

The deals include an agreement between Airbus and China Aviation Supplies for delivery of 88 A320 planes with a list price of $7.5bn.

'Helping hand' Premier Wen's Europe trip comes at a time when many countries in the region are facing sovereign debt problems.

As countries like Greece struggle to pay back debt and restructure their finances, China has offered some reprieve to the region's economies.

"China has expressed support for Europe at various times," he said.

"In other words, when Europe is in difficulty we will extend a helping hand from afar," he added.

However, the Chinese premier did not give details of the amount of debt it may purchase or which countries' debt it may look at.

"We will, according to need, definitely purchase certain amounts of sovereign debt," Premier Wen said.

China has vast amounts of cash available, with its foreign exchange reserves at a record high of more than $3trn.

"The exchange reserves put China in a strong position to help Europe," said Duncan Innes-Ker, of the Economist Intelligence Unit.

Diversifying exposure

However, analysts said that China's support for countries in the middle of the European debt crisis was also driven by its own ambitions.

About a quarter of China's foreign exchange reserves are invested in euro-denominated assets, according to various estimates.

"It has a strong interest in the euro not collapsing as a result of the current crisis," said Mr Innes-Ker.

"It is willing to take risks to achieve its long-term goal that the euro serves as an alternative to the dollar as a reserve currency," he added.

Mr Innes-Ker said that the longer China maintains the link between the yuan and the US dollar, the more its economy will be affected by US monetary policy.

"China's dependence and exposure to the US dollar creates issues for its own economy to the extent that it's a hostage to US monetary policy," he said.

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China and Germany in trade talks

28 June 2011 Last updated at 10:10 GMT German Chancellor Angela Merkel hosted a formal dinner for Mr Wen in Berlin Chinese and German leaders are meeting for trade talks in the German capital Berlin, with the Chinese seeking new investment by hi-tech companies.

Chinese Premier Wen Jiabao arrived on Monday evening on the final leg of his European tour, and is meeting German Chancellor Angela Merkel.

Germany is by far China's biggest trading partner in the EU.

Mrs Merkel predicted bilateral trade would rise to 200bn euros (?178bn; $284bn) from 130bn over five years.

While China eyes more sophisticated markets, German firms do not want to lose know-how to Chinese competition.

Both sides are now starting to understand how they can benefit from each other, the BBC's Stephen Evans reports from Berlin.

Some German companies are keen to manufacture in China and realise that this will involve some transfer of technology, while remaining cautious about what trade secrets to hold back.

China has been increasing its holdings of bonds denominated in euros. Were these loans to eurozone governments to change, the crisis in the eurozone would get worse, our correspondent says.

'Respect our choices'

Mr Wen's visit began with an informal dinner hosted by Mrs Merkel at a lakeside villa on Monday.

The German leader insisted she would not play down human rights concerns for the sake of trade.

"We have different opinions on certain issues but I am confident we can discuss them," she said at the dinner.

Speaking to German and Chinese business leaders at his hotel on Tuesday, Mr Wen said he would not accept lectures from European partners.

"China respects the political system and the development model chosen by the citizens of the EU," he said.

"In exchange, we expect from the EU respect of our sovereignty, our territorial integrity and the autonomous choices of the Chinese people."

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