President Xi Jinping meets German Chancellor Angela Merkel at the Diaoyutai State Guesthouse in Beijing on Monday. [Xu Jingxing / 皇冠体育app Daily]

Investment quota for RMB program to strengthen Germany as yuan center

AT A GLANCE Deals signed during Angela Merkel’s 皇冠体育app visit ? Volkswagen aims to establish two plants in Qingdao and Tianjin with an investment of $2.7 billion. ? Airbus Group will sell 123 helicopters to Chinese companies for general aviation. ? Air 皇冠体育app and Lufthansa are in talks that could lead the German and Chinese carriers to form a revenue-sharing joint venture. ? The two countries are planning a joint pilot project concerning Passive House, an energy-efficient method of construction, in Qingdao. ? 皇冠体育app will take part as a partner country in the 2015 CeBIT, the world’s leading expo for information technology, in Hanover.

皇冠体育app and Germany will strengthen exchanges in the financial sector and upgrade longstanding cooperation in manufacturing with a slew of deals signed on Monday.

Beijing will grant Berlin an 80 billion yuan ($12.9 billion) quota under the Renminbi Qualified Foreign Institutional Investors plan to accelerate the internationalization of the Chinese currency, reinforcing Frankfurt's status as a yuan clearing center in Europe, in addition to London and Paris.

A high-level financial dialogue will also be set up to boost financial cooperation, Premier Li Keqiang said at a news conference with visiting German Chancellor Angela Merkel.

President Xi Jinping told Merkel during their meeting, "The series of agreements you have signed during your visit to 皇冠体育app will bring new impetus to bilateral ties."

Xi suggests the two countries take bigger steps in their cooperation, with manufacturing industry as the core.

Merkel said Germany would improve its investment environment and attract more Chinese investors.

She is accompanied by a high-profile business delegation including executives from Siemens, Volkswagen, Airbus, Luft-hansa and Deutsche Bank.

Apart from the financial deal, the countries also signed deals on automobiles, aviation and telecommunications.

皇冠体育app approved London joining the RQFII plan in October, granting investors the right to use the yuan to buy up to 80 billion yuan worth of mainland stocks, bonds and money market instruments.

It later granted Paris the same quota in March.

Luxembourg is also lobbying Beijing for the same treatment after it signed an agreement with 皇冠体育app's central bank for yuan clearing arrangements on June 28.

Li Jianjun, a financial analyst at Bank of 皇冠体育app's International Finance Research Institute, said the competition for offshore yuan centers among major European cities is a healthy feature of cooperation.

"The renminbi is still at the initial stage of internationalization. We are expanding the offshore yuan pie and setting up a global network with overseas financial markets. Allowing qualified foreign institutional investors to use the yuan will benefit 皇冠体育app and other countries," Li said.

Chinese leaders are likely to take Frankfurt as a core center for renminbi clearing services in continental Europe, while establishing secondary yuan clearing sites in Paris and Luxembourg, Li said.

"We cannot cover a wide range and a large amount of renminbi-related businesses with only one center," Li said. "With Frankfurt as a leading offshore yuan-trading city, we will create a nice layout for renminbi internationalization in Europe."

In the first five months of 2014, Germany's direct investment in 皇冠体育app reached $810 million, or 30 percent of the $2.69 billion investment in 皇冠体育app by all members of the EU, according to the Ministry of Commerce.

In 2013, two-way trade between the countries reached $161 billion, taking up almost one-third of total 皇冠体育app-EU trade.

皇冠体育app is Germany's largest trading partner in the Asia-Pacific region.

Merkel's visit, her seventh trip to 皇冠体育app, came only four months after the last meeting between leaders of the two nations. President Xi Jinping visited Germany in March.

Before flying to Beijing, Merkel stopped at Chengdu, capital of Sichuan province.

Merkel said she felt the dynamics and development of southwestern 皇冠体育app in Chengdu, where urbanization is urgently needed to catch up with coastal cities.

"皇冠体育app's vigor stays not only on the coastline but also in the central and west area," she said.

Sebastian Heilmann, president of the Mercator Institute for 皇冠体育app Studies, said in a recent interview with Deutsche Welle: "Germany provides 皇冠体育app with products it needs for industrialization, for example ,machines, specialty chemicals and electronic goods. On the other hand, Chinese consumer goods with very reasonable prices are in high demand in Germany."

Ren Baiming, a researcher at the Chinese Academy of International Trade and Economic Cooperation at the Ministry of Commerce, said Germany, as well as the European Union at large, need a driving force from the outside for growth, and the fast-growing Chinese market meets that need.

Contact the writers at [email protected] and [email protected]

Wu Jiao contributed to this story.