Despite crisis, Merkel to urge China to invest in Germany

By Andreas Landwehr Feb 1, 2012, 13:11 GMT

Beijing - Germany's record exports to China may be the envy of the world, but the two countries have been finding recently that stepping up their mutual investment is easier said than done.

Chancellor Angela Merkel, whose three-day visit to China begins Thursday with meetings with Chinese political leaders, will be offering assurances that Germany is a safe bet for Chinese investors, despite the euro's sovereign-debt crisis and running fears of a recession.

Merkel is also expected to seek to open doors for German companies that are eager to invest in China but say they face barriers.

Leading business figures from both countries are expected to explore future options while attending a Sino-German economic forum in Guangzhou, Merkel's stop on Friday. There is a consensus that both sides have become more cautious than they used to be.

A scheduled change of guard in China's ruling Communist Party this autumn, with senior politicians making way for younger figures, is contributing to 'nervousness and stagnation,' according to a director, who did not want his name used, of one big German company that has invested billions of euros in China.

There is an acute shortage of leading Chinese figures boldly advocating mega-projects in tandem with foreign partners.

'Everyone is waiting to see what the new government does,' he said. The key issue is what stance the new leadership will adopt towards industry from 2013. 'Right now, most things are politically on hold,' he added.

China has seen another year of dazzling economic growth despite the troubles of the outside world, increasing 2011 output by 9.2 per cent, but many questions hang over its long-term economic future, and those doubts have a direct impact on large-scale investment.

Whether to pour in billions of euros and wait 10 or 20 years for the investment to pay off adds up to headache for German boards.

But Chinese business boards also fret about investing in the other direction.

'The unsettled political and economic issues are increasing,' the head of worldwide consultancy firm said recently.

Merkel's key task in Beijing is to restore confidence in the eurozone, despite growing concern among Chinese politicians and business leaders that euro leaders are not on top of the problem.

China's richest man, Liang Wengen, head of the construction machinery maker Sany Heavy Industry, is one person who seems to have no worries. He has purchased a German manufacturer of concrete pumps, Putzmeister.

It is the biggest Chinese corporate takeover in Germany history.

Sany announced to the Shanghai Stock Exchange that it paid 360 million dollars for the brand, which is based near Stuttgart. Citic, a Chinese investment fund, was part of the deal with a minority stake.

When Merkel urges investment, she rather has in mind the construction of completely new Chinese-owned factories that create jobs for Germany's unemployed, but Liang Wengen's takeover of a smoothly running business certainly indicates confidence in Germany.

Before the takeover, Sany last year invested 100 million euros (130 million dollars) in its own sales, assembly and service site near the German city of Cologne. At the time, that was the biggest Chinese business investment anywhere in Europe.

Overall Chinese business investments in Germany are puny at only 1.27 billion euros, and are far outshone by German corporate investment in China totalling 17.8 billion dollars.

The German side has mainly invested in chemicals production, car manufacturing and engineering.

German-Chinese trade has held up well, soaring in the past two years. German exports to China rose 44 per cent in 2010 to 53 billion euros (70 billion dollars), and increased a further 20 per cent in 2011, according to provisional data.

Foreign businesses say they face difficulties in China and are expected to bring them up with ministry chiefs at Friday's 'round table' in Guangzhou - though the Germans insist they do not want to sound churlish.

Those issues include barriers to market access, discrimination against foreigners in tendering, compulsory technology transfers and China's lax protection of intellectual property.

An organizer said the issues cut both ways: 'The Chinese business people will have the opportunity at the meeting to describe their own problems in Germany.'

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