Trade war won't be an option for China and Germany

German Chancellor Angela Merkel and Chinese Premier Li Keqiang during a signing ceremony at the Great Hall of the People in Beijing on Monday.

China does not want a trade war with Europe, Premier Li Keqiang said on Monday at a news briefing with German Chancellor Angela Merkel, who said she was sure a solution could be found to tensions over Beijing's status in the World Trade Organisation.
As both sides appeared to play down simmering differences between China and European powers, Airbus Helicopters finalised an agreement to build an assembly line on a Sino-German business bark in China and sell 100 helicopters to a Chinese consortium.
Daimler and its Chinese partner, Baic Motor, also pledged to jointly invest four billion yuan ($608 million) to expand engine production.
Beijing sees Germany, China's largest trading partner in the European Union, as influential in the 28-member bloc's debate on the politically sensitive issue of its market economy status.
The European Commission is set to accept a change to China's trade status at the WTO by treating it as an economy controlled by the market, not the state. That would make it easier for Beijing to export into the bloc. But the Commission also wants to enhance the bloc's ability to defend itself against cheap China's heavily-subsidised goods. Reluctance in Europe to give up a method to defend against cheap Chinese imports has set up a looming dispute at the WTO and the prospect of broader trade friction.
"China has already fulfilled its obligations on joining the WTO. What's needed now is for the other parties to fulfil the matching obligations they had promised," Li said. "We don't want to fight a trade war because this will benefit nobody."
Banking tensions
Merkel, who on Sunday began her ninth trip to China since taking office, said: "It does not help us to emotionalise the whole subject. I am convinced that we can find a solution on the lines of what was promised 15 years ago."
The chancellor linked market access for Chinese banks in Germany to a liberalisation of the sector in China.
"We will certainly pay even more heed to reciprocity in the financial sector than in classic industry," she said, adding that German banks were currently restricted by a 20 per cent limit on the size of stakes they can buy in Chinese banks.
"In the banking sector, we are at the start of a cooperation," Merkel said. Li said there were informal barriers in Europe for Chinese banks, which were disadvantaged compared to those based in Europe and the US. "We need to talk more about how both sides will be treated equally," he said.
Merkel said during a trip to China last year that Germany favoured granting China market economy status in principle but that Beijing still had work to do, including further opening its public procurement markets.
European commissioners are expected to debate the issue in late June or July, at a time of heightened trade tension after global rivals accused China of dumping cheap steel exports after a slowdown in demand at home.
Li said unilateral trade protection measures wouldn't help resolve the problem and that low-end steel was not something China wanted to produce or sell and was committed to phasing out.
Merkel has also stressed the need for a level playing field for foreign firms amid growing pressure from industry to confront China more forcefully, and to step up protection for businesses from Chinese cyber-attacks.
"Germany has always presented itself as an open investment market," Merkel said. "We expect reciprocity also from the Chinese side."
Foreign critics accuse China of not following through on its reform agenda and of introducing new regulations that further restrict market access.
"The facts prove that China's market is open. We will be even more open," Li said. "We will take even more steps based on the principles of treating everyone equally, fairness and transparency."