The visit by Chancellor Angela Merkel to China should be viewed as a Chinese-European summit because no leader in Europe commands the clout wielded by the German Chancellor.
Merkel has two major items on the agenda: An attempt to persuade her hosts to help beef up the financial firewall to restore investor confidence in the euro and avoid a further strain on European finances (for starters, the European Union has now discovered a new €15 billion shortfall in Greek finances).
The second issue concerns the Middle East. China, together with Russia, is a major roadblock towards the passage of stronger sanctions at the UN Security Council against Iran. China, a massive purchaser of Iranian oil. can make a significant contribution to sanctions should it take its business elsewhere.
With regards to the first issue, Merkel comes armed with the new European collective measures to prevent overspending with the proviso that only states subscribing to the agreement will able be able to apply to bailout funds (amongst EU members only Britain and the Czech Republic have refused to sign the accord).
The Chancellor declared her commitment to the euro: "Europe is growing closer together in the crisis," said Merkel. "Every country has to do its homework, but we're staying united, because a collective currency should be defended collectively."
China originally claimed that its massive foreign currency reserves represented loans from the Chinese people and they would prefer to have the money invested in domestic infrastructure. However China's Prime Minister Wen Jia Bao appeared to be shifting the Chinese position given the fact that Europe is China's largest export market and a steep decline in the value of the euro against the Chinese yuan could make Chinese exports uncompetitive.
Wen remarked: “Whether we can maintain the stability of the financial system and stable economic growth and facilitate integration not only concerns the future of Europe but also has a great impact on China,” Wen said. “China supports Europe in safeguarding the stability of the euro.”
China may now consider emulating Britain and contribute money to the International Monetary Fund to backstop that organization's efforts to shore up European finances. It may contribute directly to the European Financial Stability Facility as well.
Merkel has attempted to persuade China about Iran by raising the nuclear proliferation issue. “The question is more how China can use its influence to make Iran understand that the world should not have another nuclear power.”
China is sensitive to the issue of nuclear proliferation because it would not like Japan to acquire the bomb.
In what may be a concession to the Chinese, Merkel is scheduled to meet bishop Gan Junqiu. of the government sponsored Catholic Church. There is a continuing spat between the Vatican and Beijing over the ordination of bishops, with the pope excommunicating Chinese ordained bishops. Merkel is the leader of the Christian Democratic Union that has a substantial number of Catholics.
Perhaps as the daughter of a Protestant pastor in the former East Germany, Merkel appreciates the problems of Christianity under a communist regime.