Wen Pledges to Back Euro, Signs Deals With Germany

By OWEN FLETCHER

BEIJING—Europe remains a key market for China's foreign-reserve investments, Chinese Premier Wen Jiabao said after meeting German Chancellor Angela Merkel, adding that China will keep its macroeconomic policies stable in the second half.

Mr. Wen's comments, carried by the state-run Xinhua news agency, echo other recent statements by China's government reaffirming the euro's importance. The remarks come amid concern that Europe's debt troubles could lead China to scale back investment of its foreign-exchange reserves—the biggest in the world, at nearly $2.5 trillion—in euro-denominated assets. In May, the State Administration of Foreign Exchange, which manages China's reserves, issued a similar statement.

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Chinese Prime Minister Wen and German Chancellor Merkel inspect a military honor guard in Beijing Friday.
.Mr. Wen's remarks come a day after China said its economic growth slowed in the second quarter compared with the first. Some economists have expressed concern the country's growth could slow further due to reduced demand caused by the euro-zone debt crisis.

Mr. Wen also said China will maintain the "continuity and stability" of its macroeconomic policies in the second half of this year and that the slowdown in the second quarter was due to "active regulation and control" by the government.

Earlier Friday, Mr. Wen and Ms. Merkel met in Beijing to oversee the signing of 10 agreements covering environmental issues and industry cooperation, including a $3.5 billion agreement on the research and development of steam and gas turbines between Siemens AG and Shanghai Electric Group Co., Xinhua reported.

China and Germany also signed a €124 million ($160 million) pact to encourage emissions reductions and energy saving by businesses, Xinhua said.

Germany's Daimler AG signed a deal with China's Beiqi Foton Motor Co. to establish a 50-50 truck joint venture, according to a statement by Daimler. It said the joint venture had been approved by the Chinese government.

Speaking at a joint news briefing with Ms. Merkel on Friday, Mr. Wen reiterated China's hopes for Europe's economic recovery.

"As a responsible long-term investor, we stick to the principle of a diversified portfolio" for the investment of foreign-exchange reserves, Mr. Wen said, adding China hopes to see Europe's recovery "at an early date."

"Major efforts will be made to handle the relationship between maintaining steady and fast growth, restructuring the economy and managing well inflation expectations," Mr. Wen said.

Xinhua cited Ms. Merkel as saying, "China has shown its faith in the euro," adding that "we are committed to strengthening the currency."

Xinhua cited Ms. Merkel as saying she applauded China's move last month to make the yuan exchange rate more flexible and said she called for the elimination of trade barriers.

Mr. Wen said, "Neither China nor Germany is pursuing trade surpluses. We hope to see balanced and sustainable bilateral trade." He also reiterated China's stance that it will maintain an active fiscal policy and a moderately loose monetary policy in the second half.

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