China and Germany vow to deepen ties at Li-Merkel summit

Berlin (AFP) - China and Germany vowed to build up already massive business ties at their third summit this year in Berlin Friday, amid tougher times for Asia and Europe's biggest economies.

Chancellor Angela Merkel rolled out the red carpet for Chinese Premier Li Keqiang, who kicked off a week-long Europe tour in Germany, joined by his entire cabinet and some 130 business leaders.

After a welcome with full military honours and a joint cabinet session, they oversaw the signing of government agreements and business contracts worth over 2 billion euros ($2.5 billion).

Li hailed Germany as the "locomotive for cooperation between China and Europe" at a joint press conference and stressed that it was the only country he had visited twice since taking office this year.

Merkel praised the "very intensive cooperation ... not just in classical areas" such as trade and investment but also in a variety of fields such as health, education, food production, the rule of law and human rights.

The visit came at a sensitive time as China grapples with Hong Kong's resurgent pro-democracy protests and the host country gears up to celebrate a quarter-century since the 1989 fall of the Berlin Wall ended communism in East Germany.

But neither side allowed differences over civil rights to spoil the day, part of a high-frequency diplomacy that saw Merkel visit China in July, her seventh official trip there, after Chinese President Xi Jinping visited Berlin in March.

Merkel said she hoped pro-democracy demonstrations in the former British colony of Hong Kong would stay peaceful and that "in a free exchange of ideas, solutions will be found that satisfy the population of Hong Kong".

Li highlighted the "high level of autonomy" Hong Kong had enjoyed since its 1997 handover and said he was sure its leaders could "maintain the prosperity of the city and safeguard social stability" while "protecting residents from injury and property damage".

He stressed Beijing's position that the situation in Hong Kong is an "internal affair of China".

- Economic headwinds -

After a meeting of 14 Chinese ministers and 12 German cabinet members, both sides hailed the "innovation partnership" between the economies that had a trade volume of around 140 billion euros last year, but which both now face gloomier forecasts.

Germany's top think tanks Thursday slashed to just 1.3 percent their 2014 growth prediction for the eurozone's traditional economic engine, which has revved up trade with China to make up for lost business with its ailing neighbours.

China, which in its wildest boom years enjoyed annual double-digit growth, now expects GDP to expand by about 7.5 percent this year, said Li, citing the weak world economy and the turbulence of multiple global crises.

Merkel said that "given the difficult situation of the world economy we're seeing now, it's a sign of stability that the German-Chinese ... cooperation is developing very well, that we're getting to know each other better, that we can talk very openly."

Part of that dialogue touched on complaints by foreign companies operating in China of unfair market access, including being blocked from public tenders and having to form local joint ventures to set up shop.

Investor concern has also grown since Beijing has started cracking down on alleged malpractice by major firms. Last month it fined an affiliate of German carmaker Volkswagen more than $40.5 million for price-fixing.

Li vowed Beijing was taking steps to further "liberalise trade and investment", while Merkel said both sides must ensure "fair market access in both countries".

Among the agreements signed, Volkswagen, which has been in China since the 1980s, extended its joint venture with China FAW Group Corp until 2041.

Deutsche Telekom announced a joint venture with China Mobile to build a digital network for cars on Chinese roads.

And, in addition to the bilateral agreements, European aviation giant Airbus signed a deal for 70 A320 aircraft, worth $6.6 billion at list prices, with China Aviation Supplies Holding Company.

The Chinese premier on Saturday addresses a business forum in the northern port city of Hamburg, where some 500 Chinese companies have offices.

He then travels to Russia, which is engaged in a bitter standoff with the West over the Ukraine conflict, before meeting Western leaders at an Asia-Europe Meeting in Italy on October 16-17.