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China-EU economic, trade relation progresses through friction

Author  :  Cui Hongjian     Source  :    Chinese Social Sciences Today     2020-07-20

As the closest tie between China and Europe, the economic and trade relationship serves to push forward the two sides’ general relations. As the international economic order is now changing profoundly, the ChinaEurope economic and trade relationship faces a major test.

The economic and trade relationship is the earliest and most mature area established between China and Europe. From its value 45 years ago in 1975, the volume of China-EU trade in goods has multiplied more than 250 times, and the EU has maintained its position as China’s largest trading partner for 16 consecutive years between 2004 and 2019. China-EU mutual investment started from scratch, and the EU has become China’s main source of foreign investment, and China’s investment in Europe has also increased rapidly since 2009. It was also just this year that China and Europe began financial cooperation in the fields of currency exchange, RMB transaction and liquidation.

Due to different starting points, stages of development and economic structures, China-EU economic and trade relationship grew by continuously exchanging according to mutual needs and seeking common ground while preserving differences. From the early European “antidumping” against Chinese textiles to the China-European photovoltaic product dispute that was once close to the edge of a “trade war,” and from Europe’s upgrading of its trade protection system to expanding market access to investment, the development of economic and trade relations between China and Europe has been accompanied by friction and disagreement. However, growing common interests and deeper interdependence can always help both sides face up to problems rationally and to find solutions, bridge differences and promote interests through dialogue, consultation and negotiation. This is the important experience which ensures the past achievements and future prospects of China-EU economic and trade relationship.

In recent years, China-EU relations, especially the economic and trade relationship, have undergone new changes, which now face unprecedented challenges.

First of all, the China-EU trade relationship needs to break through several bottlenecks and tap its true potential. In recent years, the two sides have both faced the pressure of a slower economy and insufficient effective demand. European measures to upgrade its trade protection system and delay China-EU free trade negotiations have also limited the room for bilateral relations to grow. While China-EU trade continues to expand, it does so at a slower pace and with increased volatility. Impacted by the COVID-19 pandemic, China-EU trade dropped by more than 10% in the first quarter of this year, and the trade volume was surpassed by that between China and ASEAN. If the two sides cannot improve the policy environment, optimize the trade structure and meet the real potential for trade, the trade relationship which has a significant market impact, will be damaged as a result.

Second, China-EU investment relations and industrial cooperation face protectionist shocks, requiring urgent measures to enhance mutual trust and update rules. Since the European side has not adapted to the changes in China’s internal and external policies of recent years, some European enterprises in China face more fierce competition, and their investment confidence in China has declined. Parts of their investments have even been transferred. The shortage of medical equipment and medicines during the pandemic has further amplified the dilemma faced by China-EU investment and industrial cooperation.

At a time when China-EU economic and trade relations have made great progress and face great challenges, innovation is needed in ideas, mechanisms and policies. This is the need to enhance the well-being and common interest of people on both sides as well as the necessity to maintain the overall development of China-EU relations and the longterm stability of globalization.

First of all, China and Europe should actively adapt to the changes in the bilateral trade, investment and industrial structure, and they should make “equity and fairness” the principle of the current economic and trade relations between the two. It is also necessary to outline the key and priority areas of cooperation and formulate practical and sustainable targets.

Second, the two sides need to explore new areas of cooperation and stop depending on traditional trade and investment models. At the same time, they should focus on tapping the cooperative potential of service trade, third-party investment, green industry, digital industry and other emerging industries. Currently, the strategy of the China-EU Free Trade Zone, the comparative study of China-EU third-party cooperation, and the trend of European emerging industries are all urgent research topics.

 

Cui Hongjian is director of the Department for European studies at the China Institute of International Studies.

Editor: Yu Hui

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