Merkel woos China as Trump poses new trade challenge

Chinasaid on Thursday it would "open its door wider" to German businesses, helping to visit Chancellor AngelaMerkeldefend free commerce and counterbalance tradethreats from US President DonaldTrumpthat are testing transatlantic ties.

Germany andChina, two exporting nations that run largetradesurpluses with the United States, have found themselves inTrump's firing line and are scrambling to preserve the rules-based multilateral order on which their prosperity rests.

Merkelfaces a delicate balancing act on theChinatrip, her 11th since becoming chancellor in 2005, as she seeks to show Chinese-German solidarity over freetradeand the Iran nuclear deal without harming German ties with long-term ally Washington.

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In the latest US trademove that has alarmed Beijing and Berlin alike, theTrumpadministration announced on Wednesday a national security investigation on into car and truck imports that could potentially lead to tariffs.

The announcement hurt share prices of both European and Asian carmakers.Chinavowed to protect its interests.

European countries are also concerned that their exporters could be hurt ifChinainstructs importers to buy more US goods to easetradedisputes with theTrumpadministration.China has already signalled to state companies to buy more U.S. oil and soybeans,tradesources told Reuters.

Premier Li Keqiang, in a joint media appearance withMerkelat Beijing's Great Hall of the People, saidChinaand Germany both upheld global freetrade and stressed the huge potential for cooperation between them.

Though the two countries had problems, they could be overcome, Li said. "China's door is open. You can say it will open even wider," Li said, standing next toMerkeland stressing "friendly relations" with Germany.

Trump's "America First"tradepolicy, his administration's professed disdain for the WorldTradeOrganisation, as well as his withdrawal from the Iran nuclear deal, have pushedChinaand Germany into closer alignment, German officials say.

However,Merkel's government also shares many of theTrumpadministration's concerns about Chinese business practices, including what many Western countries have complained are state-backed efforts to pressure foreign companies into giving uptradesecrets.

Li saidChinawould protect the interests of German firms investing inChinaand adjust its rules if needed.

"If they come across any problems during their investment, especially when it comes to legal protections, I can clearly tell you thatChinais striding forward to being a country with rule of law," Li said.

German companies have complained for years about barriers to the Chinese market and the theft of intellectual property.

MerkelwelcomedChina's recent announcements that it would further open its financial sector to foreign participation and reduce Chinese joint venture requirements in sectors such as automobiles, a mainstay of German investment in the world's second-largest economy.

But German industry said it was now up toChinato deliver on its promises of greater openness.

"Chinamust rigorously reduce the asymmetries in market access," said Hubert Lienhard, head of the Asia Pacific Committee of German Industry (APA).

Germany andChinashould work on a "multilateral global system",Merkelsaid, stressing her attachment to the rules-based global framework thatTrumpis challenging.

Trumphas also pushed Europe to work more closely withChinaby pulling out of a 2015 deal between world powers and Iran under which international sanctions against Tehran were lifted in return for Iran accepting curbs on its nuclear programme.

European countries, Russia andChina, which were parties to the deal, are searching for a way to salvage it by continuing to offer economic benefits to Iran in return for its compliance.

Merkel, who personally lobbiedTrumpnot to pull out of the pact but was rebuffed, said Germany andChinawere "united in the view that we do not want to put this agreement in doubt".

European companies could reduce their business with Iran if they risk US sanctions for trading there,Merkelsaid, adding with a nod toChina: "Of course, this creates the possibility for others to then get more into Iran."