Arms, Cars Top Schröder’s China Trip

On his sixth visit in as many years, the German leader was expected to tap into China’s booming market by bringing home a raft of business deals, including an expected order for Airbus jets, and a boost for the German car industry.

Recognizing that China is one of the country’s top trading partners – according to China’s Ministry of Commerce, bilateral trade reached $43.6 billion ($58.6 billion) in the first 10 months of the year – German government sources said they hoped the economy would benefit significantly from growing trade with the Asian giant.

With an annual growth rate of nine percent, China is an impressively strong market, and one many German companies are eager to get a piece of. From carmakers such as DaimlerChrysler, BMW and Volkswagen to electronics giant Siemens, many have invested a good deal in the country by opening up factories and hope that the investments will pay off with strong dividends in the future.

As a result, a delegation of 50 top-notch industrial leaders are accompanying the chancellor and pinpointing ways Germany can improve its economic ties to the vast Chinese market.

Trains, planes and automobiles

The chancellor seems to have taken their advice to heart.

“China’s economy is growing in a very dynamic way," Schröder told reporters at the inauguration of a production site for DaimlerChrysler AG on Monday. "Everybody can see that. One of the core parts of this growth is the automotive industry.”

The carmaker, which is one of the leading German companies in China, is expecting to sell 50,000 cars annually in the People’s Republic over the next five to 10 years and will start rolling out the first of a planed 80,00 Chinese-made Mercedes starting next year.

Volkswagen AG, which has been turning out cars in the country for several years, is considered China’s largest single carmaker. On Tuesday Schröder will open the Wolfsburg-based company’s third factory in China – a billion-euro investment – in the north eastern industrial city of Changchun.

But cars aren’t the only German product in demand in China. The head of industrial conglomerate Siemens, Heinrich von Pierer, is expected to announce an order by China for 180 locomotives worth up to €360 million.

Aircraft manufacturer Airbus, meanwhile is set to unveil a deal worth up to €1 billion to supply 23 of its A319 and A330 jets to Chinese airlines. A purchase order for the European consortium’s future A380 super-jumbo planes, however, still has not been completely worked out.

The Wall Street Journal reported last week that Beijing was holding up the deal because of the European Union’s refusal to lift a 15-year-old ban on arms sales to China. But Chinese Vice Foreign Minister Zhang Yesui last week dismissed such reports, saying China still needed the planes for its developing tourism industry.

Arms embargo

The question of lifting the EU arms embargo to China, however, still has not been decided, despite strong lobbying by Germany and France to have it removed.

The ban, slapped on Beijing in the wake of the 1989 Tiananmen Square massacre, has been a key issue in recent political negotiations between China and the European bloc. On Wednesday a China-EU summit will take place in The Hague, and many are expecting the embargo to be the key focus of discussion.

Chancellor Schröder told Xinhua news agency his government would “strive for a consensus to be reached as early as possible” on lifting the sanction. While the German leader has made no secret out of his opposition to the ban, the German parliament voted at the end of October for the embargo to be kept in place. The European parliament in Strasbourg also voted against revoking it in mid-November.

Human rights record to blame

Several EU members have cited China’s poor human rights record as a chief concern in lifting the arms embargo and China has sought to enlist Schröder and French President Jacques Chirac’s help to allay those fears.

In the past, Schröder has pressed for the lifting of the ban in discussions with other EU leaders, and Chirac, who was in China in October, referred to the embargo as a “relic” of the past and said it was high-time the EU voted to remove it.

"This is a very solemn, serious political issue," Chinese foreign ministry spokeswoman Zhang Qiyue said Thursday. "We think it's for the EU to make an early and appropriate decision. It's not for the Chinese side to make any concessions."

The ban is “incompatible with the reality of our strategic partnership” and resolving the issue will benefit the development of China-EU relations, Zhang added.

China, which is unable to purchase advanced weapons from the United States, wants to buy them from Europe, and countries such as France and Germany are believed to want to benefit from the likely lucrative trade.