Chinese and German companies signed deals worth billions of dollars to make trucks and power equipment Friday as the prime ministers declared their countries' economies had recovered from last year's global recession. German Chancellor Angela Merkel brought the heads of major German corporations with her on a four-day visit to China, underscoring the robust business ties between the two export powerhouses. Merkel and Chinese Premier Wen Jiabao have met frequently in recent years and agreed to work together to guide a recovery from the global economic crisis. “China and Germany have passed a testing period of crisis and turbulence,” Wen announced after he and Merkel reviewed an honor guard at a welcome ceremony at the Great Hall of the People. Among the contracts signed after their talks was a $3.5 billion deal between Siemens AG and the Shanghai Electric Power Generation Equipment Co. to develop steam and gas turbines, and a new 6.35 billion yuan ($936 million) venture between Daimler AG and Beiqi Foton Motor Co. to make heavy and light trucks, reported state-run Xinhua News Agency. The good business news continues a turnaround for Merkel, who three years ago angered China's authoritarian leadership when she welcomed a nemesis, the Tibetan spiritual leader the Dalai Lama. German business leaders complained for months afterward that they were meeting with obstacles in completing deals with Chinese companies. Despite that, the two countries' trade runs more than $100 billion a year. German companies have invested billions more in China, making multinationals like Siemens and BMW AG prominent brand names. Wen expressed optimism Friday that the European Union, China's largest trade partner, will overcome its current difficulties. “We will continue to watch Europe's economic development,” Wen said at a brief news conference. Merkel said EU member countries in September will discuss the issue of recognizing China's market status. China has said the move would help it avoid punishing anti-dumping measures. “From the point of view of the German government, China has to meet requirements in two fields,” she said. “The first is the (intellectual property rights) issue, and we have discussed this with the Chinese government for a long time. The second is the issue of free market access. We hope German companies can get equal access to the Chinese market with other companies.” Merkel later met with Chinese President Hu Jintao and visited the Central Party School where China's Communist elite are trained. One new opportunity China and Germany are exploring is clean-energy technologies, where Germany is a leader. Xinhua reported the two countries agreed to set up a 124 million euro ($159 million) fund to encourage companies to save energy and cut emissions that harm the environment. Meanwhile, China reduced its holdings of US Treasury debt in May as total foreign holdings of government debt posted a slight increase. China's holdings fell by $32.5 billion to $867.7 billion, the Treasury reported Friday. Total foreign holdings edged up $5.8 billion to $3.96 trillion. The drop in China's holdings and the weak showing overall was a surprise. Analysts expected a sizable gain because they thought foreign investors would seek the safety of US Treasury debt, responding to fears over the European debt crisis. China is the largest foreign holder of Treasury securities. The 3.6 percent drop in China's holdings in May will likely raise concerns that China could shift money away from Treasury securities. That could raise the cost of financing America's soaring budget deficits. Japan, the world's second-largest holder of Treasury securities, also cut its holdings in May, to $786.7 billion. That's a drop of 1.1 percent from April. However, the United Kingdom, the third-largest holder, posted a 9 percent increase. Its Treasury holdings rose to $350 billion. The Treasury reported that net purchases of long-term securities, covering US government debt and the debt of US companies, increased by $35.4 billion in May. That followed bigger gains of $81.5 billion in April and $141.4 billion in March. Foreign holdings of US debt are closely watched becaue they can provide signals on the direction of US interest rates. The financial crisis pushed US interest rates down significantly after foreign investors rushed to the safety of US government bonds.
