Germany and China set aside differences to stress importance of cooperation in uncertain economic climate

Chinese and German ministers talked up the importance of cooperation at an economic forum on Friday despite the increasing strains between the two sides.

Demands from German businesses for a tougher stance towards Beijing and increasing concern about the Chinese telecoms giant Huawei Technologies have been a growing source of tension, but Friday’s meeting of senior bankers and policymakers saw the two sides signing agreements to strengthen cooperation amid a growing climate of economic uncertainty.

Chinese Vice-Premier Liu He, a key economic adviser to President Xi Jinping, stressed the importance of cooperation between the two countries at the event.

“Both sides promise to protect multilateralism and the principles of free trade, and resolutely support the rules-based, WTO-centred multilateral trade system,” Liu said.

“Today, there have been some signs of a slowdown in the world economy, market volatility has increased, and there is a rise in various kinds of uncertainty.

“In the face of this complicated situation, we will have a deep discussion of the macroeconomic situation and the global economic system.”

Liu added that Germany, as well as Europe generally, and China should increase cooperation in a time of increasing global economic uncertainty.

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The second China-Germany High Level Financial Dialogue saw Chinese and German officials signing several agreements on financial cooperation, including a deal to develop the offshore Chinese yuan market in Frankfurt, an agreement to deepen coordination between Chinese and German banks, as well as a letter of intent on banking supervision, according to Liu.

“China is comprehensively opening its financial system to the outside, and this offers opportunities for both sides,” he said.

German Finance Minister Olaf Scholz, who co-chaired the meeting with Liu, said that multilateralism was especially important in the face of global economic risks such as trade disputes and Britain’s exit from the European Union.

“Brexit will affect all of Europe, and the whole world,” he said.

The meeting was held increasing tensions between the two sides, as German business have become more vocal about longstanding concerns such as market access and intellectual property protection.

Huawei’s operations in the country have also come under increasing scrutiny amid rising security concerns across the Western world.

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On Thursday the German business daily Handelsblatt reported that government sources had said Germany was considering ways of tightening security requirements for its 5G networks that would exclude the Chinese tech giant.

The Federation of German Industries, which has been leading the call for Berlin and the EU to take a tougher stance towards China, last week issued a report calling for more action to help create a level playing field between German companies and their Chinese competitors, who have been accused of receiving unfair state subsidies.

“While Chinese companies enjoy relatively free access to the EU single market, this does not apply equally to foreign companies in China,” said the report, which listed 52 demands.

However, the federation told Handelsblatt that despite the growing concerns about Huawei’s role in providing 5G networks around the world, no company should be banned “without evidence”.

On Friday Scholz pledged to provide a better business environment for China in Germany, as long as the two countries abide by the principle of equal treatment.

He praised China’s progress in opening its financial markets, saying “it is important that, contrary to recent trends that we can observe elsewhere, we are seeing progress in our cooperation”.

But he again highlighted German concerns about market access, saying that in areas such as banking and insurance this cooperation had to take place “on a level playing field and in the context of reciprocity”.