China Trade Fight
Merkel Visits Beijing as Western Pressure on China Grows

Chancellor Angela Merkel is in Beijing this week, talking up stronger ties with China. But, as the Associated Press reports, her visit comes at a challenging time for Europe-China relations:

Speaking to visiting German Chancellor Angela Merkel, Li appeared eager to counter criticisms that a glut of Chinese steel exports is overwhelming producers in overseas markets including Germany, Britain and the United States.

“We don’t deny that there are many difficulties between Germany and China, for instance, the wide concern over China’s steel overcapacity,” Li said. “But steel overcapacity is a problem of the world, not only China. The world’s market is decreasing.”

It wasn’t known if Li made any specific commitments in his talks with Merkel, which came amid concerns over trade and the ability of German companies and foreign non-governmental organizations to operate in China.

Chinese officials keep promising to do something about overcapacity, yet they continue to pursue policies which only add to the problem. Merkel may be smiling for the cameras, but she’s under a lot of pressure at home from manufacturers to get tougher on China. U.S. Steel Corporation recently obtained permission to pursue a ban on imports of artificially-inexpensive Chinese steel, and European companies have been calling for similar measures at home.

Meanwhile, Germany’s economy minister asked the EU to consider instituting a rule that would block Chinese investors from buying up German firms who own critical proprietary technology. Reuters:

A recent series of bids for German engineering firms has prompted Berlin to think about whether it needs to do more to protect technologies that are crucial for the online development of industry, one of its economic priorities.

“Should it remain the case that government agencies are only allowed to conduct preliminary investigations into investment in areas deemed relevant for security and defense?” Gabriel wrote in a guest article for magazine WirtschaftsWoche.

“In my opinion, it’s not enough,” he said.

The U.S. has a review process meant to ensure that foreign takeovers do not threaten security, but the EU does not. Particularly given China’s weak intellectual property protections, there are serious concerns that Chinese buyers might not keep critical information safe from hostile governments and companies.

Around the world, the backlash to China’s rise continues to grow. Yet Beijing has been reluctant to pursue policies which would assuage international fears. With the country’s domestic economy looking increasingly fragile and the South China Sea heating up, tensions between China and the West look set to escalate even more this summer.

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