German Chancellor Merkel to raise EU fears over Beijing’s new NGO law and steel production during China visit

German Chancellor Angela Merkel says she will raise concerns over a new Chinese law on non-governmental organisations and about steel production during her visit to China, which starts on Sunday. Merkel, who is making her ninth trip to China as chancellor, said in her weekly video message on Saturday that she would call for the work of political foundations and other groups “not to be too negatively influenced” by the new law. After Xi Jinping's visit to Britain, German Chancellor Angela Merkel keen to show she 'knows China best' The legislation takes effect next year and will put foreign NGOs under direct police supervision and require them to state where their money comes from and how it is spent. [Chinese steel production] is currently a difficult situation for all European [Union] member states German Chancellor Angela Merkel Merkel said in the message that she also planned to raise the issue of China’s massive steel production “because it is currently a difficult situation for all European [Union] member states”. She will be in Beijing with about 20 German company executives and preside over the fourth round of intergovernmental talks between Asia and Europe’s biggest economies. Carsten Spohr, chief executive of the German airline Lufthansa, will reportedly accompany Merkel and try to seal a joint venture with Air China, as the carrier looks for increased access to the mainland. More than 20 ministers and deputy ministers from both sides would take part in the talks, Xinhua reported. ‘Difficult to predict’: German ambassador on China’s bid for market economy status with EU Merkel – who will also visit the Liaoning provincial capital of Shenyang, which last year signed a cooperation agreement with Siemens, the German multinational conglomerate, to build an industrial production site – will arrive in Beijing after Germany has been involved in efforts to thwart a Chinese company’s bid for industrial robot maker Kuka. German industry has become quite frustrated with the business climate in China Angela Stanzel, analyst She has had to face growing pressure at home to protect Kuka, which she views as a model firm combining digital technology and Germany’s industrial strengths. Officials in Berlin are reported to have met Till Reuter, Kuka’s chief executive, to discuss alternative offers after May’s €4.6 billion (US$5.2 billion) bid by Midea, China’s biggest home appliance maker. Insa Ewert, a research fellow at the German Institute of Global and Area Studies, said Merkel would certainly want to discuss China’s steel overcapacity, even though Beijing had agreed last week to cut steel production at the strategic and economic dialogue between China and the US. “The current steel crisis affects vital parts of the German economy, especially large German steel producers such as ThyssenKrupp and Salzgitter,” she said. Germany’s Angela Merkel backs more favourable ‘market economy status’ for China – with certain conditions A recent business confidence survey by the European Union Chamber of Commerce in China found that “a significant 41 per cent of European companies are now re-evaluating their China operations” owing to the country’s slow progress in opening up its economy to foreign business. Angela Stanzel, a policy fellow for the Asia and China Programme at the European Council on Foreign Relations, said: “German industry has become quite frustrated with the business climate in China.” German businesses were particularly concerned about the future of state-owned enterprise reforms since companies in certain areas, such as the motoring industry, were required to form joint-ventures with mainland state-owned enterprises, she said. If China continues, as in recent weeks, to threaten Europeans with a trade war, rather than to try to negotiate, it can also be expected that China will fail to win Germany’s support Angela Stanzel, analyst “We are getting different kinds of messages – first the message was [China is] going to reform ... but then not even half of these announcements that [China] made in 2012 were implemented,” Stanzel said, referring to the plans for reforming China’s state-owned enterprises announced at China’s 18th Party Congress in 2012. For China, one of the main goals of Merkel’s trip will be to get her to back its push for the coveted World Trade Organisation market economy status. In May EU lawmakers overwhelmingly rejected any loosening of the bloc’s trade defences against China without reforms of its economy, including a reduction in state influence over business. The EU will discuss whether to grant China market economy status in December – something Beijing says is its right 15 years after joining the WTO. On her visit to China last year, Merkel said Germany backed, in general, China’s claim for market economy status, but it still “has to do some homework”. China’s overcapacity problems complicate EU vote on market economy status: business group Beijing has been actively lobbying for support to try to change the opinion of EU lawmakers, following the May vote, before the December deadline. However, Stanzel warned that China’s aggressive lobbying might lead to adverse effect. Neither side wants trade ties to be affected by the [issue of] market economy status. China and Germany have established a basis for deep cooperation and strong mutual trust, [so] the two sides will be able to have open and honest discussions Cui Hongjian, analyst “If China continues, as in recent weeks, to threaten Europeans with a trade war, rather than to try to negotiate, it can also be expected that China will fail to win Germany’s support,” she said. Wu Yikang, chairman of the Shanghai Institute for European Studies, said: “China has high hopes about Germany as it has the most authoritative voice in the European Union.” Merkel was expected to explain Germany’s stance on the issue during her visit, Wu said. Cui Hongjian, director of European studies at the China Institute of International Studies, said: “Neither side wants trade ties to be affected by the [issue of] market economy status. “China and Germany have established a basis for deep cooperation and strong mutual trust, [so] the two sides will be able to have open and honest discussions.” Concerns have also have arisen over whether the EU will become a more active player in the South China Sea after the French Defence Minister Jean-Yves Le Drian’s recent call for European navies to have a “regular and visible” presence in the area, which is an essential trade route to Germany and other European countries. China steel industry body sees tougher times ahead However, Alexandr Burilkov, another research fellow at the German institute, said Berlin was unlikely to follow France’s call. “The Germans have always been sceptical about French adventurism, and are loath to upset economic cooperation for an issue that Berlin believes can be ultimately resolved peacefully between all parties,” he said. “Furthermore, there is little support elsewhere in the EU for anything more than a token commitment,” he added. Ewert said a range of other issues would also be discussed during Merkel’s visit, including issues of cybersecurity and industrial espionage, as well as enhancing cooperation in technological innovation under Germany’s Industry 4.0 strategy and the Chinese version of Made in China 2025 strategy. Stanzel said that the Group of 20 agenda, intellectual property rights and how Germany companies would participate in China’s “One Belt, One Road” initiative were also likely to be touched upon. Both Wu and Cui said joint investment by China and Germany in Africa might also be discussed. Additional reporting Associated Press and Bloomberg