Beijing wants to establish its own currency as the global reserve currency

Photo Gallery: Germany's Diplomatic Offensive in Beijing

German Chancellor Angela Merkel and much of her cabinet are headed to Beijing on Thursday for a two-day diplomatic offensive. China has quickly become one of Germany’s key partners, but several heated disagreements remained to be solved.

The quality of the relationship between two world leaders isn’t revealed in official appearances, military parades and festive dinners that have been planned down the very last detail. Instead, it is reflected in the small gestures and conversations that take place on the sidelines of the main events, especially when unexpected problems arise.

That was the case in February, when German Chancellor Angela Merkel was last in China. The Chinese authorities had prevented human rights attorney Mo Shaoping from attending Merkel’s reception at the German Embassy in Beijing. Merkel could have scored points with voters back home by issuing in sharp protest. But it would have also complicated her foreign-policy mission.

Instead, the chancellor took Chinese Prime Minister Wen Jiabao aside during the dinner and suggested that he consider how much damage China was doing — especially to its reputation — by barring Mo from the event. In fact, she said, the incident was already dominating coverage of her trip in the German press.

Wen could have bridled at Merkel’s attempt to intervene in China’s internal affairs, as Chinese politicians tend to do in response to reproaches from the West. Instead, he listened quietly to what Merkel had to say, and she got the impression that he at least understood her argument.

Such quiet crisis diplomacy shows how far the German-Chinese relationship has come in recent years. Almost unnoticed by the general public, German foreign policy has undergone a remarkable transformation. China is no longer seen as merely a market for German goods and supplier of cheap products. For the German government, Beijing is now one of its most important political partners outside the Western alliance. Conversely, the Chinese leadership sees Merkel as its central point of contact in Europe.

Just how close the relationship between the two countries has become will be evident this Thursday, when Merkel travels to Beijing for two days of intergovernmental consultations accompanied by nine cabinet ministers and two parliamentary state secretaries. It’s an important political gesture seeing that the German cabinet only meets regularly with select partners. China does not have a similar arrangement with any other country.

Merkel’s shift toward China isn’t just a result of close economic integration between two of the world’s largest exporting nations. Germany does not buy more goods from any country. Germany ships 6 percent of its exports to China, or almost twice as much as it did only three years ago. China is one of the most important markets for machine-builders and automakers. The Chinese, for their part, need German know-how to continue modernizing their country.

Chancellor Merkel and Prime Minister Wen in February: Merkel's view of China...China also has an interest in the survival of the euro. In the long term, Beijing wants to establish its own currency, the renminbi, as the global reserve currency, next to the US dollar. It needs the euro to break the dominant position of the American currency in the long run. Thus, for as long as the Germans support the euro, the Chinese will also do so. They recently promised, without further ado, to contribute an additional $40 billion (€32 billion) to the coffers of the International Monetary Fund (IMF).

In fact, Merkel reportedly plans to directly ask China for aid in combating the ongoing euro debt crisis in Europe. Senior government officials say she will bring up the issue of whether the Chinese would like to directly purchase sovereign bonds of Spain and Italy, the two major ailing euro-zone countries, arguing that their high yields makes them an attractive investment.

Berlin’s interest in China, however, goes well beyond economic relations. Since China is one of the five veto powers on the United Nations Security Council, Beijing plays a decisive role in the central issues that, besides the euro crisis, are currently important for German foreign policy.


Spiegel has the full article

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