Trade disputes loom over Merkel's China visit

[BEIJING] Tensions over trade and Chinese investment in a German robotics firm dominated Chancellor Angela Merkel's visit to Beijing Monday, with differences about steel and China's future market status on display.

China has been pressing the European Union to grant it "market economy" status this year, making it harder for the bloc to levy anti-dumping tariffs even as Beijing is accused of selling excess steel cheaply on world markets at the cost of European jobs.

European lawmakers in Strasbourg last month voted overwhelmingly against issuing the designation, concerned that doing so would cost Europe jobs in key industries such as steel.

At a press conference with Ms Merkel, Chinese Premier Li Keqiang repeated Beijing's view that the EU must grant it market economy status according to accession rules when it joined the World Trade Organisation in 2001.

"Before the end of this year... the agreement should receive appropriate enforcement," said Mr Li, adding: "We don't want a trade war."

"Steel overproduction is a global problem, not just a Chinese problem," he said, adding China imported large amounts of steel from Germany and was cutting its own domestic capacity.

"I hope people don't point fingers at China".

Ms Merkel responded that Germany was "very clear about promises made in 2001", adding that it was better to have "a situation in which anti-dumping tarriffs are not necessary," according to a translation of her remarks.

China posted a 2.4 per cent year-on-year increase in steel exports in May, swelling the supply glut that has left industry in Europe and elsewhere in turmoil.

Beijing says reducing overcapacity and excess inventory and cutting borrowing are top priorities in its economic reform drive, with the ailing steel industry a key target.

But foreign governments say they have seen little movement towards implementing the promises.

The EU, the second-biggest steel producer, has launched a dumping probe into Chinese steel. Angry manufacturers urge it to copy the US in introducing tough tariffs.

The trip is Ms Merkel's ninth to China as chancellor and comes as Chinese appliance giant Midea tries to increase its stake in German robotics firm Kuka from 13.5 per cent to more than 30 per cent.

Kuka describes itself as one of the world's leading manufacturers of industrial robots and automated systems for manufacturing.

Berlin last week denied reports it was blocking what has been described as a Chinese takeover bid for the firm.

"We are looking into a solution which can satisfy both sides," Ms Merkel told reporters in Beijing, adding: "There will be a good solution." In remarks Sunday the chancellor sought to reassure Chinese investors that Germany was open for business.

Her country has invested around 60 billion euros (S$91.74 billion) in China, she said, adding that "what we have is reciprocity".

"Of course, Chinese companies will come to the German market too." Ms Merkel also took the opportunity of her meeting with Li to prod her hosts on the sensitive issue of disputed claims in the South China Sea.

Beijing has stirred regional opposition by rapidly building artificial islands capable of hosting military hardware, despite partial counter-claims by several Southeast Asian states.

It opposes attempts to solve the dispute through international bodies, insisting that all talks be bilateral.

In rare direct comments on the dispute, Ms Merkel said that "a variety of mechanisms, including multilateral ones, should be used to avoid new tensions emerging".

AFP