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Cablegate: Merkel in China Seeks Resolve in Handing Financial

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P 051355Z NOV 08
FM AMEMBASSY BERLIN
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RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 0472
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 0555
RUEHKO/AMEMBASSY TOKYO PRIORITY 1593
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RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 BERLIN 001511

SENSITIVE

DEPARTMENT FOR EEB (NELSON), EEB/OMA (SAKAUE, WHITTINGTON),
DRL/ILCSR AND EUR/CE; LABOR FOR ILAB (BRUMFIELD); TREASURY
FOR ICN (KOHLER), IMB (MURDEN, MONROE, CARNES)
SIPDIS

E.O. 12958: N/A
TAGS: PREL PGOV PHUM EFIN ECON CH GM IN PK
SUBJECT: MERKEL IN CHINA SEEKS RESOLVE IN HANDING FINANCIAL
CRISIS

1. (SBU) Summary: Much of Chancellor Merkel's October 23-25
visit to Beijing to attend the Asia-Europe Meeting (ASEM)
focused on the financial crisis, according to Chancellery
advisors Ludger Siemes (Bilateral Relations to the Near and
Middle East, Africa, Asia and Latin America) and Petra
Sigmund (European Political Relations to the EU member
states, EU Foreign Relations), during a briefing to the
diplomatic community November 3. Merkel's overarching
message with her interlocutors, Siemes and Sigmund said, was
to stress the need for the G-20 to produce results at the
November 15 summit in Washington. Merkel also had bilateral
meetings with Chinese leaders, and met with leaders of
Chinese civil society. She also met with Chinese business
leaders, accompanied by a delegation of German business
representatives. Siemes highlighted the positive nature of
Merkel's talks with Chinese leaders after a strain in
relations engendered by the Chancellor's 2007 private meeting
with the Dalai Lama. On the margins of ASEM, Merkel had
bilateral meetings with the prime ministers of India and
Japan, which also focused on the financial crisis, and with
Pakistan, which focused on Pakistan's domestic situation and
its fight against terrorism. End summary.

Merkel Received Well in China
-----------------------------

2. (SBU) Siemes noted that Chancellor Merkel was surprised
and touched with the efforts the Chinese leadership made to
accommodate and welcome her, including with military honors.
He noted that this was Merkel's third visit to China during
her term as Chancellor and underlined the importance she
places on the bilateral relationship. Merkel's talks with
Chinese Prime Minister Wen Jaibao and President Hu Jintao on
October 23 and 24, respectively, highlighted the strength of
the Sino-German economic relationship, Siemes said, adding
that he would characterize the discussions with Wen and Hu as
open and frank. He noted that China and Germany reached USD
100 billion in trade this year, two years earlier than
forecast. Siemes downplayed the rift between China and
Germany that erupted after Merkel's October 2007 private
meeting with the Dalai Lama in Berlin. Siemes said that
there had never been a "halt" in Sino-German engagement, that
Merkel had spoken twice with Hu in 2008. Siemes said that
Merkel also stressed Germany's "one China" policy, but also
underlined the need for China to engage in dialogue with the
Dalai Lama and address the situation in Tibet and with the
Muslim Uighur minority. With regard to human rights issues,
Siemes said that the Chinese listened, but did not change
their position.

3. (SBU) Siemes noted that Merkel also met separately with a
group of civil society representatives and that Merkel was
particularly interested in how China had faced the challenges
over the past year, including with Tibet, natural disaster,
and world attention on the Olympics. Participants
highlighted China's new sense of self-confidence and
modernity, including in rural areas.

Merkel Seeks Action on Financial Crisis
---------------------------------------

4. (SBU) In her meetings with Wen and Hu, Merkel spoke at
length about the financial crisis, according to Siemes,
focusing on the November 15 fiancial summit in Washington and
the need to discuss a framework of regulation, the role of
the IMF, and specific goals during those talks. Merkel
stressed the importance of leaving the Washington talks with
a mandate for action. Siemes said that the Chinese
leadership was open to this view and that President Hu
"entered into a discussion on this issue." However, Siemes
also characterized the Chinese vision of the crisis as
"opaque," and said that they did not see the crisis as
affecting them directly. Siemes said that the Chinese
indicated they would likely give the domestic market some
stimulus.

5. (SBU) Merkel made the same pitch in bilats with Japanese
Prime Minister Aso and Indian Prime Minister Singh. In her
meeting with Aso, her first with the Japanese Prime Minister,
Siemes said that Aso expressed concern about the strength of

BERLIN 00001511 002 OF 002


the Yen compared to the dollar. Merkel and Singh agreed on
the need for results in Washington and both agreed that it
was not advisable for world leaders to engage in a series of
talks on the financial crisis, but favored focusing on
resolving issues during the November 15 meeting.

6. (SBU) Discussions of the financial crisis also dominated
the 7th Annual ASEM summit, according to Sigmund, with
participants agreeing on the need for reforms, including with
regard to accounting standards, something which Merkel has
proposed. Sigmund said ASEM participants also agreed (1) to
counter protectionism; (2) to finish the Doha round; (3) not
to overreact to the financial crisis, including with
over-regulation; and (4) on the importance of continuing to
address the major global problems of hunger and climate
change. Sigmund noted that Merkel has already formulated the
principles for reform that she will bring to Washington.

Concern Over Pakistan
---------------------

7. (SBU) In Merkel's meeting with Singh, Siemes said, Merkel
asked Singh about his impression of the new government in
Pakistan. Siemes said that Singh expressed concern about
Pakistan's stability, noting that Pakistan is in a difficult
economic situation. Singh underlined India's interest in
seeing a strong and stable Pakistan. In Merkel's meeting
with the Pakistani Prime Minister -- her first meeting with
Gilani -- Merkel stressed the need for stability in Pakistan.
Gilani discussed Pakistan's efforts to combat terrorism --
including through dialogue with more moderate figures -- and
through economic development, especially on the border with
Afghanistan. Gilani provided Merkel with a "wish list"
regarding enhanced German-Pakistani engagement, which
included increased economic development assistance and
support for Pakistan in its talks with the IMF. The wish
list also called for an enhanced political dialogue between
Germany and Pakistan, and increased cultural exchanges.


KOENIG

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