China and Germany ink $15bn deals

29 June 2011 Last updated at 04:35 GMT China has been looking to foster stronger ties with its key trading partners China and Germany have signed trade deals worth $15bn (?9bn) following meetings between the two country's leaders in the German capital Berlin.

Chinese Premier Wen Jiabao and German Chancellor Angela Merkel also targeted an increase of bilateral trade to 200bn euros ($284bn; ?178bn) over the next five years.

Germany is by far China's biggest trading partner in the European Union.

China and Germany are the two biggest exporters in the world.

Premier Wen said the focus of the meeting was to "boost the growth potential of bilateral trade... and to once again double our bilateral trade volume in five years".

The deals include an agreement between Airbus and China Aviation Supplies for delivery of 88 A320 planes with a list price of $7.5bn.

'Helping hand' Premier Wen's Europe trip comes at a time when many countries in the region are facing sovereign debt problems.

As countries like Greece struggle to pay back debt and restructure their finances, China has offered some reprieve to the region's economies.

"China has expressed support for Europe at various times," he said.

"In other words, when Europe is in difficulty we will extend a helping hand from afar," he added.

However, the Chinese premier did not give details of the amount of debt it may purchase or which countries' debt it may look at.

"We will, according to need, definitely purchase certain amounts of sovereign debt," Premier Wen said.

China has vast amounts of cash available, with its foreign exchange reserves at a record high of more than $3trn.

"The exchange reserves put China in a strong position to help Europe," said Duncan Innes-Ker, of the Economist Intelligence Unit.

Diversifying exposure

However, analysts said that China's support for countries in the middle of the European debt crisis was also driven by its own ambitions.

About a quarter of China's foreign exchange reserves are invested in euro-denominated assets, according to various estimates.

"It has a strong interest in the euro not collapsing as a result of the current crisis," said Mr Innes-Ker.

"It is willing to take risks to achieve its long-term goal that the euro serves as an alternative to the dollar as a reserve currency," he added.

Mr Innes-Ker said that the longer China maintains the link between the yuan and the US dollar, the more its economy will be affected by US monetary policy.

"China's dependence and exposure to the US dollar creates issues for its own economy to the extent that it's a hostage to US monetary policy," he said.

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Public sector pay deals 'at zero'

2 June 2011 Last updated at 08:18 GMT Across the whole economy the median pay settlement is 2.5%, the research suggests Public sector pay settlements were running at zero in the three months to April, for the first time since records began in the 1960s, research suggests.

The median pay settlement in the private sector rose to 3% from 2.5% in the three months to March, research group Incomes Data Services (IDS) said.

The public sector pay freeze was announced last year by the government as it tried to reduce the UK's deficit.

The TUC said the government was making public sector workers a "scapegoat".

The median figure is the one at which half of workers are getting a higher settlement and half are getting a lower one.

Bank of England policymakers will study the figures closely.

Some members have indicated that they are more likely to vote for a rise in interest rates if there is evidence that high inflation, currently at 4.5%, is leading to bigger wage increases.

'Key month'

IDS, which monitors annual pay settlements, said the increase in the private sector median reflected a rise in manufacturing pay awards.

"April is a key month for public sector pay reviews and the latest figures begin to show the effects of government policy on public sector pay," IDS said.

But it added that the median for the whole economy remains at 2.5%, despite the addition of the freezes in the public sector.

IDS said that some sectors in particular were starting to offer pay rises.

"There is a little bit of a return to normality in the private sector," Ken Mulkearn, editor of the IDS report, told the BBC.

"Industries like the car industry and parts of the utilities industry are leading the way on settlements, so they're good areas to work in terms of pay rises at the moment."

TUC general secretary Brendan Barber said while it was encouraging to see private sector pay awards increase, they were still running significantly below inflation, and the public sector was still feeling the real pain.

"By forcing through pay cuts and seeking to increase pension contributions on top of heavy job losses, the government is making public servants the scapegoat for a financial crisis they played no part in causing," he said.

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