Merkel heads to China as trouble brews at home

German Chancellor Angela Merkel is heading to China Wednesday to bolster the country’s trade ties with China, leaving a growing storm behind at home over her stance on Europe’s migrant crisis.

Merkel’s mission to China comes hot on the heels of a trade boon for the U.K. last week after Chinese President Xi Jinping’s state visit to the country in which $62 billion worth of deals were sealed. French President Francois Hollande will also travel to China on Sunday for a two-day state visit.

Germany is China’s largest European Union trading partner, with German foreign direct investment in China totaling 48 billion euros, according to the German Chamber of Commerce. In 2014, bilateral trade reached a record high of 154 billion euros ($235.5 billion).

Unsurprisingly for a country known for its car production, autos account for one third of German exports to China and it’s no accident that Merkel is taking the embattled new chief executive of scandal-hit Volkswagen, as well as around 20 other German execs, on the trade visit.

With the stakes high for Germany in terms of trade relations, Europe’s largest economy is keeping a firm eye on China and watching its well-reported slowdown with concern. The visit comes at a time when things are not so rosy for Merkel back home either as she faces growing voter dissatisfaction over her handling of the European migration crisis.

Problems at home

As thousands of migrants reached Europe this summer with many fleeing civil war in Syria, Merkel surprised many by opening up Germany’s borders in order to let thousands of asylum seekers into the country.

The move was a hard test for European solidarity and a number of countries in the eastern bloc criticized Germany’s move, which made their countries conduits for thousands of migrants trying to reach more prosperous northern Europe.

While many German voters were initially supportive of Merkel’s stance, the tide could now be turning. Germany’s government also appears to have been overwhelmed by the number of people arriving (the country expects to receive 800,000 people this year) and local authorities are under increasing pressure.

Earlier this week, the chancellor tried to reassure Germans that the country can cope with the influx. “There are very, very many asylum applicants, but there are 80 million of us,” she told residents of Nuremberg, Bavaria, on Monday, according to local media.

“We can and will manage this integration” she said, although she conceded the country’s refugee policy was “far from perfect.” Voters are becoming less supportive of her accommodating stance and Merkel, a former favorite of the German electorate, has seen her popularity rating fall to a four-year low.


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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam