Further opportunities and good prospects for the development of cooperation between China and Germany in 2019

Last year witnessed frequent top-level exchanges between China and Germany including Chancellor Angela Merkel's visit to China in May, Premier Li Keqiang's visit to Germany in July and President Frank-Walter Steinmeier's visit to China in December.

Since the 1970s, especially over the last two decades, the two countries have developed close economic and trade relations. In 2017, the bilateral trade totaled $180.6 billion, 2.6 times that of 2005. Today, China is Germany's third-largest export market and the second-largest source of imports, while Germany is China's largest trading partner in the European Union. The two-way investment between the two countries in 2016 reached $5.09 billion, compared to $1.57 billion in 2005.

China and Germany have now formed a three-level framework for cooperation and exchanges, consisting of their central governments and local authorities, NGOs and enterprises. The two central governments have fine-tuned various policies and strategies and cut barriers to iron out the kinks in their economic and trade cooperation; local governments and NGOs act as major players in implementation and as supportive mechanisms, while cooperation among companies has greatly improved their overall competitiveness, which in turn bolsters the economic and trade ties between the two countries.

Although economic and trade cooperation between China and Germany has achieved remarkable results, there is still huge room for further development.

In 2017, China and Germany ranked second and fourth in the world respectively in terms of GDP. The combined GDP stood at $15.92 trillion, accounting for almost 20 percent of the world's total. At present, however, the cooperation between China and Germany is highly concentrated in heavy industry, indicating remarkable potential for future growth and economic cooperation.

In fact, the two trade partners are complementary in many areas. China has a vast domestic market and abundant natural and economic resources, which will generate huge development potential and strong demand. However, its domestic production capacity cannot meet the growing demand.

Germany, as an advanced industrial country, has rich technological accumulation, particularly in terms of automobile and machinery manufacturing. Yet with a limited population and relatively small market scale, Germany is challenged with insufficient domestic demand.

In this regard, cooperation will help both countries solve their demand-supply imbalance. Both can coordinate their strategies in industries and manufacturing, and what's more, conduct even more extensive cooperation within the framework of the Belt and Road Initiative.

From the global perspective, the rising anti-globalization trend has pulled China and Germany closer than ever before. The "America First" policy touted by the US administration has dealt a heavy blow to major economies, while Germany bears the brunt of the US protectionism against the European Union. Many German companies were picked by the US government and had to seek other markets. On the other hand, the trade conflicts between China and the United States forced Chinese companies to turn to other countries such as Germany for cooperation.

This year, the two nations are expected to expand their cooperation to light industry, the internet and creative industries. For the traditional cooperative areas such as machinery and automobiles, more innovative mechanisms and more specific agendas will be adopted in a bid to generate higher efficiency.

Their cooperation mode is likely to have adjustment. Previously, in most joint ventures, such as Beijing Benz and BMW Brilliance, China contributed capital and Germany technologies. However, the dynamics have been shifting. In certain areas in which China has performed well, it will also be an exporter of technology. More Chinese companies have been making a splash in German market, and that trend will become more discernible in future.

So far most cooperation between the two countries has been carried out either in China or in Germany, seldom in a third country. As the Belt and Road Initiative is advanced, the cooperation between the two nations will be able to transcend their own borders, venturing into other countries participating in the initiative. This is expected to further unlock the potential in their bilateral cooperation.

The author is a researcher at the German Studies Center and associate professor of the School of Economics & Management at Tongji University. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.