China policy

The Sino-German relationship developed soundly throughout Merkel's first two terms as German chancellor. Upholding the principle of pragmatism, Merkel has shelved minor differences that may thwart the development of bilateral ties, focusing instead on issues of common concern. She has promoted the comprehensive strategic cooperation between the two countries by strengthening economic and trade ties.

Merkel's tactics, in large part, are attributable to the ever increasing interdependence and connectivity between the European economic powerhouse and China. Since her second term, Sino-German economic and trade exchanges have continuously expanded. The growing economic ties have become an "engine" and "stabilizer" in pushing bilateral relations forward.

The volume of bilateral trade has reached a new high. Two-way trading volume of goods exceeded $150 billion last year, amounting to around one third of the total between China and the EU. That number is expected to double over the next five years. With the trade gap between the two continually decreasing, their trade trends have become more balanced.

The Sino-German two-way investment is also growing. For the German side, in addition to large enterprises, a growing number of SMEs have entered the Chinese market. Thus far, SMEs have accounted for over half of German investment in China. In the meantime, China's investment in Germany has maintained an annual growth of over 25 percent, even though it remains a net recipient of German capital.

The internationalization of the Chinese currency, the yuan, has made progress in Germany as well. The two governments encourage enterprises of both countries to use the yuan and the euro in bilateral trade and investment. Some German financial institutions are planning to issue yuan-denominated financial products. Frankfurt is actively seeking to become a major offshore yuan trading hub in Europe.

Effective cooperation mechanisms are the guarantees of a stable Sino-German relationship. In recent years, the two countries have established a series of dialogue mechanisms in various fields and at different levels. The major highlight is the China-Germany inter-government consultation mechanism established in 2011. Under the framework, in addition to the billions of euros in economic and trade contracts, the two countries also reached consensus in the fields of politics, culture, science and technology. China is the eighth country worldwide and the third outside of Europe to establish such a mechanism with Germany.

Also in 2011, the first round of China-Germany ministerial-level strategic dialogue was held in Beijing. Under the arrangement, the two sides maintained good communication on strategic issues and major international challenges. Moreover, the two governments have also established dozens of other dialogue mechanisms including those concerning human rights, the rule of law, environment and high technologies. They provide a guarantee for the smooth development of bilateral cooperation at the political level.

The latest election victory for Merkel, who unleashed the huge potential of reciprocal cooperation between China and Germany, promises a favorable climate for accelerated development of bilateral ties. With the maturity of Merkel's China policy, cooperation between the two large economies will continue to advance in a strategic fashion.

Germany is undertaking an energy transformation, investing heavily in clean energy development. It is pushing on China to join a club it has initiated to group countries interested in leading the clean energy transition, hoping to deepen bilateral cooperation in the field.

The Sino-German relationship has been positioned as a partnership of global responsibility. Under this framework, the two countries are committed to promoting comprehensive strategic cooperation and playing an active role in assuming global responsibility. There is a broad space for them to coordinate in the areas of climate change, environmental protection, food security, poverty eradication, as well as international peacekeeping and other fields concerning global governance.

The author is an assistant researcher at the China Institutes of Contemporary International Relations

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