Montag, 23.10.2017 04:15 Uhr

EU–China Economic Relations to 2025

Verantwortlicher Autor: Carlo Marino Rome, 15.09.2017, 08:47 Uhr
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Rome [ENA] The 19th Summit between the European Union and the People's Republic of China held in Brussels on June 2017 has brought a number of significant advancements to the bilateral relationship, as well as offering fresh impetus to a partnership that has a global impact. The EU and China will face a continuous challenge in how to deal with the global context, and with the US.

EU–China cooperation must be perceived as a crucial factor to wider global governance cooperation and reform. This has to involve working with the US, which will remain the EU’s main strategic global partner for a long time in the future. China is in the midst of a complex economic transition. Structural changes under way in its economy and slower rates of growth are creating new challenges for European and Chinese businesses operating there.

The impact of new technologies and innovation is expected to increase disorder to existing business models involving also new economic opportunities. In this scenario, differences over the role of the state in their respective economies suggest improbable convergence in the foreseeable future of the European and Chinese economic models. Significant differences between the political and economic systems of the EU and China add to the challenges of deepening their bilateral economic ties.

The European Union (EU) and China have much in common. Their GDPs (€14.72 trillion and €9.75 trillion, respectively, in 2015) rank number two and number three in the world, behind the United States (€16.64 trillion). They are two of the most externally-integrated economies in the world, with annual international trade in goods and services of €15 trillion (€5 trillion if only trade external to the EU is considered) and €4.75 trillion, respectively, in 2015. Their annual bilateral trade in goods and services stood at €580 billion in 2015, with each being the other’s largest source of imports and second-largest export destination.

Both EU and Chinese leaders have confidence in effective rules-based multilateralism as the core of global governance. The two are also not security competitors. At the present time the United States is stepping back from playing a leadership role in backing more open global markets and there are deep concerns across the world about the negative impacts of globalization on income inequality. This overall shift makes it a particularly critical moment for the EU and China to ponder how to deepen the full range of their bilateral economic relationship by increasing trade and investment, encouraging cooperation in the areas of climate change, energy and the environment, and global governance, cooperating in science, technology and so on.

These endeavors can be mutually beneficial. They help to sustain economic growth, create jobs and improve levels of social welfare not only within their own societies but also globally. However, beyond trade in goods, many areas of economic relations remain under-developed, including trade in services, levels of foreign investment, cooperation on industrial and technological innovation, and financial market integration. Chinese imports of services developed at an average annual rate of more than 25 per cent between 2010 and 2015, and the EU’s trade surplus in services with China has been growing at an average annual rate of 37 per cent since 2010, reaching €11 billion in 2015.

Current stocks of the cumulative direct investments of the EU and China in each other do not reveal their overall weight in the global economy or the extent of their trade. In 2015, the stock of EU foreign direct investment (FDI) in mainland China (not including Hong Kong) amounted to €168 billion, and investment stock from mainland China in the EU was only €35 billion (€115 billion including Hong Kong), even though Chinese investment flows into the EU have grown substantially in recent years. This contrasts with the stock of EU FDI in the US of €2.6 trillion and US FDI stock in the EU of €2.4 trillion.

The low stocks to date show that there is opportunity for an enormous increase in the coming years and decades in investment in both directions. Finally, bilateral coordination between the EU and China on significant issues for global governance, from deeper trade relations and financial cooperation to climate change policies, are a significant strategic advantage and contribute to the strengthening of the G20, the WTO, the UN and other appropriate multilateral bodies. This is likely to guarantee that the benefits of this deeper bilateral cooperation can realize their full potential and sustainability over time.

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