Germany's Merkel meets Chinese premier amid trade worries

BEIJING, China – China recognizes European concerns about overcapacity in its steel sector, but believes that is a symptom of the falloff in global demand, Chinese Premier Li Keqiang said Monday.

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.

In talks with the U.S. earlier this month, China promised to rein in production of steel, among the bloated industries Washington and other trading partners complain are dumping exports too cheaply, hurting foreign competitors and threatening jobs.

China’s trading partners broadly believe Beijing has responded to a supply glut by encouraging low-priced exports.

China’s government announced plans this year to shrink state-owned steel and coal producers at a cost of millions of jobs. However, that project will take time, and the flood of low-cost steel has prompted protests by European steelworkers and was cited by Tata in its decision to sell its money-losing British operations that employ 20,000 people.

Washington has imposed anti-dumping tariffs and is investigating if Chinese mills are using stolen U.S. technology. The European Union has launched its own probe into possible dumping.

Despite plans for a 10 per cent overall reduction in steel production over the coming years, China’s output actually rose 1.8 per cent last month to 70.5 million tons compared to the same period last year, the National Bureau of Statistics reported Monday. Bureau spokesman Sheng Laiyun said producers had been motivated by an increase in the wholesale price, even though total production dropped in the first five months of the year by 1.4 per cent.

China is the world’s largest producer and consumer of steel.

Merkel later held talks with President Xi Jinping. Her visit comes amid growing worries among German companies over obstacles they face in doing business with China.

“It is important to have a secure juridical environment. The secure status of law is important in a large number of fields,” Merkel said in front of Li and reporters.

Li praised Merkel’s work in building bilateral relations and said government-to-government ties would help facilitate relations in various fields. “We need to have new breakthroughs in developments in certain areas,” he said.

Merkel is the latest Western leader to express concerns over a new Chinese law governing NGOs, which places their management under the national police rather than the civil affairs ministry. Foreign officials including U.S. Secretary of State John Kerry have said that could expose them to undue scrutiny and harm overall people-to-people exchanges.

Some in Germany also nurse doubts about Chinese purchases of German companies, including Chinese appliance maker Midea’s $5.2 billion takeover offer for German industrial robot maker Kuka.

Merkel arrived in China Sunday on her ninth visit as chancellor, accompanied by members of her Cabinet and a 20-member business delegation.

China was Germany’s No. 4 trading partner last year, behind the U.S., France and the Netherlands, with a total trade volume of 163 billion euros ($183 billion). China was Germany’s top source of imports and fifth biggest export destination.

While total trade volume grew 6 per cent last year, imports from China grew by 15 per cent while exports to China were down 4 per cent.

Following her arrival on Sunday, Merkel received an honorary degree from a Chinese university and delivered a speech touching on issues of rule of law and reciprocity in trade, before dining with Li at the scenic Summer Palace.

She is to visit a BMW auto plant in the northeast city of Shenyang on Tuesday before returning to Berlin.