This paper will analyze the current economic and political the EU — China relations, in particularly, three main components of the economic Sino — EU relations (trade, technology transfer and investment policy). It will be described the impact of the Eurozone crisis and the new Chinese leadership on the current EU-China cooperation.
Key words:the Comprehensive Strategic Partnership, MES (market economy status), arm embargo, Sino-EU relationship.
In 2015 the EU and Chine celebrated 40th anniversary of the diplomatic ties. Initially based on the 1985 agreement on trade and economic cooperation, this relationship was consolidated by the creation of an annual High Level Economic and Trade Dialogue in 2009. This was followed by the annual High Level Strategic Dialogue on political, bilateral and global issue, shortly afterwards and was completes with the EU-China High Level People to People Dialogue in 2012. [4] Nowadays the EU and China have close economic relations. The EU and China are the biggest traders in the world. The technological transfer from the EU to China accounts almost 50 %, while technological transfer from Japan to China is about 8 %. But despite all this achievements there are still unresolved problems like not full market economy status of China and arm embargo. So, the question is can the partnership be maintained despite the increasing problems?
The trade and economic cooperation are the basis of the Sino-EU relation. At the present time, the EU and China are the biggest traders in the world. From 2004 the EU is the number one trade partner for the China while the China remains number two trade partner for the EU. In 1994 the trade volume was 32 billion, in 2010 the trade volume was 576 billion and in the last year it was over 600 billion. Thus, we can see rapidly development in the trade relations.
The EU imports from China are dominated by industrial and consumer goods: machinery and equipment, footwear and clothing, furniture and lamps, and toys. The EU export to China is concentrated on machinery and equipment, motor vehicles, aircraft, and chemicals.
Despite the obvious benefits from both sides, there are still obstacles in the economic relations. The first obstacle is the common investment policy. The EU share of total Foreign Direct Investment (FDI) inflows into China is steady at around a fifth. This makes the EU one of the top five providers to China. [4] At the same time Chinese investments in Europe are rising, but from an even lower base. [3] But there is still no common investment policy between China and the EU, there are only bilateral negotiations between China and member-states. The common agreement can be decided only in the frameworks of the European Council, and it should be approval by every member-state (while each of them has they own interest). Then, it has to be approval by the European Parliament, but the European Parliament has its precondition. BIT (bilateral investment treaty) can be approved if China respect human rights and the scope of the rule of law, otherwise it will not be approved (the Lisbon Treaty gives that power to the EU Parliament). And that is why there is kind of uncertainty. Thus, China has bilateral cooperation with all member-states, but not with the EU. And as we see, the procedure is very long and complicated.
The next obstacle on the way of comprehensive partnership is a full market economy status. A decision to grant China MES (market economy status) can only be made if China meets five specified criteria that determine what a market economy is. The two most important of these are: does the government influence on the operative decisions of firms or are they made in response to market signals? And does the legacy of the command economy, in terms of public ownership, barter trade and so on, affect firms’ operations? And according to the US Department of Commerce and the EU Commission the companies in China do not working under market economy. [6]
But, in 2008 the EU gave status of full market economy to Russian Federation and to Ukraine. China considers that Russian economy cannot be called as market economy. And China questioned why Russian and not China? In China it was considered as a discrimination of China. Later, the European Commission explained it to China as a mistake which was made and they do not want to repeat the same mistake.
And another one important obstacle is the arm embargo. On 26 June 1989, in Madrid, the European Council of ministers, due to suppression of the demonstration in Beijing by the Chinese government, decided that would become part of a set of the EU-wide diplomatic and economic sanctions intended to signal disapproval of Chinese sanctions. And again arm embargo is regarded as European discrimination of China. The EU embargo is perceived by the Chinese authorities as a humiliation, because they are treated in the same way as Sudan or Zimbabwe. For instance, in 2008 the EU lifted an arm embargo on Libya. Thus, why did the EU lift the arm embargo on Libya but did not on China? On the European side, it is considered as an instrument for putting pressure on China in relation to human rights and the scope of the rule of law. [1]
Another important issue for the development of the Chinese economy is technology transfer. Technology transfer stands out as one of the most important benefits of FDI (foreign direct investment) as it contributes majorly to the economic growth of the country. As a developing economy, China’s impressive growth rate in recent years can be attributed to technology transfer from developed economies. In addition, technology transfer benefits the EU as well in terms of ‘access to the huge Chinese market…new, attractive opportunities in terms of business interests and exploitation of its competitive advantages in the high technology.’ [7]
50 % of the technologies are coming from the EU, at the same time only 8 % are coming from Japan. Also now there is the hi-tech cooperation the EU with China. For instance, China in 2003 joined as an investment partner the EU’s own satellite navigation project, Galileo. [2]
Also, there are close relations in the issues concerning the agriculture and biotechnology, sustainable urbanization, environmental and climate change, peaceful uses of nuclear energy and renewable energy, SME cooperation, research infrastructures and exchange of young scientists. In 2013 The EU–China Comprehensive Strategic Partnership was launched to develop and create opportunities for businesses and contributing to international security, environmental protection and academic exchanges.
But, how we can speak about strategic partnership if “it is not strategic in a strict sense of the word”? Regrettably, despite some consensus between China and the EU on several issues there are many differences that cannot be under valuated. [1]
According to Dr. Xinning Song, there is no common strategic interest. From the EU side it is important to improve China. It needs to upgrade China in order to force China become an open society with respect to human rights and the power of law. Even, when we talk about partnership, it is clear why the EU still put the money in China. In 2006–2007 there was debate: “should the EU continue funding?” and the answer was yes. Despite the fact, that China doesn’t need money, it is necessary to continue funding to keep a good profile of the EU in China in order to push China for changes.
Also, we can see a high expectation from the both sides about cooperation. For instants, Dr. Xinning Song does not support the Comprehensive Strategic Partnership due to lack of common understanding. If we look at the government statement from both sides of the European Union and China, they talk more about self-interest, they call it mutual interest, how important The EU for China and how important China for the EU. What is missing is the common strategy interest. Because the mutual benefit does not mean the mutual interest. So the question remains: what kind of common interest that fits to each other?
In order to understand the future trend in the EU-China cooperation, it is necessary analyze the impact of the EU crisis and new Chinese leadership on the current relations. According to Dr. Xinning Song the EU crisis has both the positive and negative impact, and the positive impact is bigger in terms of China relations. If we look at negative consequences one of them is trade. Especially in 2009 the trade volume decreased about 20 %, it was influenced by the world financial crisis. But from 2010 there was the new wave of the EU crisis. And in 2011–2013 there was no decrease or increase. And only in 2014 the EU-China trade volume increased in 10 % (beyond 600 billion).
In 2010 The EU — China trade volume accounted about 16 % of Chinese total foreign trade. Last year the EU-China foreign trade volume accounted 13 % of Chinese total foreign trade. So, the position of the EU in the Chinese foreign trade is changed. It’s the main tendency for the last year, and it is affected by the crisis.
The second element affected by the crisis is investment. Due to the crisis the EU investments to China decreased, but China investment to the EU is increased. So in 2012- 2013 there is more Chinese FDI to Europe, than European FDI to China. And it is debatable question is it positive trend or not. And the answer depends on how to look at it. There is more interdependence in the investments with the EU and China. The discussion in China is should China rescue Europe? While in Europe people think that China is buying Europe.
Another aspect is national reserves of China. The European Crisis means that the EU needs more money. The China has 4 trillion from the reserves. And now in order to secure its national reserves China keeps 30 % in euro. These are not official figures, but according to the European resources the amount of euro in the Chinese reserves is 30 % (more than 1 trillion of reserve in euro). And this is the good shift in the relations.
From perspectives of the economic issue the EU and China has strong interdependence and they need stronger cooperation, than at the same time it’s the understanding what is the common thing. The new Chinese leadership significantly influences on the EU-China ties. We can seethe strong willingness to work further with the EU. China argues that it needs to work more closely with the Union. The feature of the new leadership is recentralization, and the recentralization also refers to the foreign policy. The approach of the Xi Jinping is more pragmatic, focusing on what the EU and China can do together and they don’t talk anymore about comprehensive strategic partnership. In 2013 there was the first EU-China summit with the Chinese new leadership. Most of the issues they focus are the domestic issues: environment, urbanization, new energy issue etc. In 2014 the new paper about strategic partnership with the EU was signed, the EU-China partnership was defined as a political partnership for peace, growth, reforms and civilization.
Thus, the main obstacle in the EU-China cooperation remains still (arm embargo, not full market economy status, lack of Bilateral Investment Treaty with the EU are the most substantial). Due to these problems in the relation, for now we cannot speak about partnership. There is misunderstanding and over expectation from both China and EU sides. There is a gap between reality and their prospects, and it is very important to keep dialogue between the two sides since there are misunderstandings. [5]
But still there are positive shits in China–EU relations. It is mutual economic interdependence boosted by the euro crisis; it is cultural cooperation and global cooperation related to the environmental issues, cyberterrorism, peaceful use of the nuclear power and etc. And another positive trend can be seeing in the face of the new Chinese leadership, who tends toward close cooperation with the EU.
References:
- China and the European Union: Future directions by Jose Maria Beneyto, Xinning Song, Chun Ding., 2013, Fundacion Universitaria San Pablo
- EUobserver. EU wants more co-operation with China in space. By Valentina POP, Brussels, 5.APR 2011 [web site]: https://euobserver.com/china/32122
- European trade policy [Web site]: http://ec.europa.eu/trade/policy/countries-and-regions/countries/china/
- Factsheet/Memo. The EU-China Comprehensive Strategic partnership. Brussels, 30 June 2015
- How to look at China-EU relations? By Xuefei Chen [web site]: http://en.people.cn/90001/90780/6778822.html
- Market economy status for China is a disaster for Europe by Robert Scott — 30 September 2015 [web site]: www.cityam.com/225466/market-economy-status-china-disaster-europe
- The EU and World Economy by prof. A. Inotai — March 2013, College of Europe, Brugge
