Abstract: Payment Transactions and the Financing of Business between the Federal Republic of Germany and the People's Republic of China from 1949 to 1978

Fei He

Abstract

The Chinese Revolution of 1949 almost severed business connections between mainland China and the Federal Republic of Germany. For the next several decades, the Cold War kept the world divided and made the chance for economic relations between the newly founded People’s Republic of China and West Germany nearly impossible. However, these two nations were very interested in trading with each other: the People’s Republic of China needed German industrial products to fulfil their domestic economic plans, especially after the Sino-Soviet split in 1960 ended Soviet industrial support. In addition, German companies and the German government wanted to expand their international markets and the large population of the People’s Republic of China had great potential as future consumers. The problem lay in a trade embargo put in place by the United States soon after the Chinese Revolution that disallowed trading by Americans and their allied countries with communist nations. After the Sino-Soviet split, West Germany had to consider the interests of the United States as well as the Soviet Union, due to Soviet control of
the German Democratic Republic. Under international pressure from the two super powers, how could West Germany and the People’s Republic of China become trading partners? In spite of the complicated political situation, these two countries were able to begin and maintain an important trading relationship. By the end of the 1960s, West Germany even became the third biggest trading partner of the People’s Republic of China. This paper will explain how this
occurred despite the international political barriers by examining their terms of payment and currency exchange, an essential piece of trading relationships but one that was very difficult and limited during the Cold War.