China and Germany pledge to work at defusing EU-Sino trade tensions

Chinese premier Li Keqiang and German chancellor Angela Merkel have pledged to work together to defuse growing tensions between the European Union and China over trade issues.

Mr Li, who is on the final stop of his first trip as Chinese leader, also said Beijing was prepared to continue to stand by to support the ailing economy in the EU, but stressed Germany’s key role in ensuring the euro zone’s woes are resolved. Describing Sino-German ties as “very, very important”, Mr Li said: “We earnestly hope that the EU resolves these temporary difficulties, and we hope that the euro area can remain stable.”

The trip has included the signing of 17 bilateral agreements covering cooperation between companies including Volkswagen and SAIC Motor Corp, Weichai Power Co and Kion group. The EU is China's second-biggest business partner after the US, with a trade volume of about €430 billion last year. Germany has very close trade links with China, and has a lot to lose should a trade war start. Germany's biggest car maker, Volkswagen, manufactures 2.3 million cars at 12 plants in China, and plans to boost its production in China by more than 70 per cent over the next five years.

“By intensifying our cooperation with Germany, we also want to deepen our ties and cooperation with the EU,” Mr Li said. “In no way do I mean that Germany can substitute for the EU. I mean that Germany is a very important country.”

Speaking to reporters as he stood alongside Ms Merkel, he said a strong euro was “also a good thing for China’s own development – and good for the whole world”.

Ms Merkel said Germany would work hard so that “issues we currently have, for example in the areas of solar energy and telecommunications, will be addressed through as many talks as possible and won’t lead to conflict, leading to mutual tariffs.

“We don’t believe that this will help us,” she told reporters. Ms Merkel indicated after meeting Mr Li on Sunday that Germany would work to avoid a trade war by using its economic clout to block the European Union from levying punitive tariffs on Chinese products such as solar panels and phone equipment.

Mr Li said that Beijing was also ready to make reforms to address criticisms that EU companies do not get level playing fields when dealing with Chinese companies.

DPA news agency quoted him as saying: “China will not deviate from promoting reforms and opening to the outside.”