· Web viewsteel industry held various activities to attempt to link “solution for Chinese excessive steel production capacity’s impact to European steel industry” with China’s

Outlook, opportunities and challenges for the development of China-

EU Growth Partnership

Cui Hongjian

I. Developing the “Four Major Partnerships” is a firm common

consensus of China and EU

During the visit to the EU headquarters in April 2014, Chinese President

Xi Jinping stressed to consider China-EU relationship at a strategic level,

combine the “two forces, two markets and two civilizations” to jointly

forge the “partnerships for peace, growth, reform and civilization” (Four

Major Partnerships, FMPs), to inject new vitality for China-EU

cooperation and make greater contribution to the world’s development

and prosperity. President Xi’s proposal was inscribed into Joint

Statement on Deepening the EU-China Comprehensive Strategic

Partnership for Mutual Benefit which was published after the China-

PAGE \* MERGEFORMAT 2

EU Summit and become the firm common understanding of both sides.

The FMPs indicates China emphasizes on the EU at a strategic level,

firmly supports the European integration process and that China is willing

to continue expanding and deepening a comprehensive strategic

partnership with the EU.

II. Basis and objective of China-EU Growth Partnership

development

Economic and trade cooperation between China and EU is the basis and

ballast for China-EU comprehensive strategic partnership. Therefore,

China-EU Growth Partnership (CEGP) plays an irreplaceable basic role

among the FMP. The realistic basis for CEGP is that, on the one hand,

China, in spite of its great leap in comprehensive strength, is still a

developing country with obvious problems of imbalanced, inconsistent

and unsustainable development. China is devoted to comprehensively

deepening domestic reform and striving to realize the target of building a


moderately prosperous society in all aspects, and insisting on expanding

opening-up to the world, taking the path of peaceful development and

boosting the development of an opening global economy. One the other

hand, due to the influence of international financial crisis, EU confronts

the most severe challenge since the end of Cold War and needs to solve a

series of structural, systematic and underlying problems. But EU’s

strategic direction of integration process is not changed. EU has

accelerated the structural reform and striven to lead the integration of

economy, finance and politics forward. EU, a community with 28

members, world’s highest economic aggregate and enormous

comprehensive strength, is still an important strategic force in the world

and a critical element which influences the evolution of international

situation.

The economic aggregate of China and EU accounts for 1/3 of the world’s

total. China-EU economic and trade relationship is one of its kind with


the largest scale and the greatest vitality in the world. Both sides shoulder

the important responsibilities of continuing boosting the growth of global

economy and realizing the prosperity together. Both sides are dedicated to

forging global economy featuring innovative development, joint growth

and integrated interests, and firmly safeguarding and developing an

opening global economy. At the critical stage of reform and development,

China-EU economic and trade relationship embraces new historic

opportunities. Therefore, China is willing to team up with EU to combine

the world’s two major markets more closely, build China-EU into a

community of shared interests, and strengthen the interest tie of both

sides in global strategy, regional and bilateral relations, to realize mutual

benefit and win-win cooperation at a higher level and make greater

contribution to build an opening world economy.

III. China and EU’s joint efforts for “the Belt and Road” offer

opportunities for the CEGP development


(I) The Belt and Road Initiative (B&R Initiative) promotes the

interface with Europe Development Strategy (EDS). The meeting of

leaders of both sides confirmed the interface between the B&R Initiative

and EDS, and proposed breakthroughs to be made in four key fields,

namely, joint construction of infrastructures, third party cooperation on

equipment manufacturing, financial cooperation on industrial investment

demands and improvement of trade and investment liberalization. Both

sides agreed to intensify contact in infrastructures, build an

“interconnection cooperation platform” to strengthen information

communication, boost seamless and convenient transport and interface

related initiatives and projects from both parties, identify cooperation

opportunities from the policies and financing channels, such as the

cooperation between the B&R Initiative and Trans-European Transport

Networks (TEN-T), actively seek for investment opportunities open to

both sides and create good environment for the sustainable and


interconnected cross-border infrastructures of countries and regions

which lie in between China and EU.

(II) International cooperation on production capacity interfaces with

Juncker investment plan. Boosting international cooperation on

equipment and production capacity is a major economic decision of the

Chinese government after a sober judgment on current economic

structure changes and industrial development trends home and abroad. A

basic condition for boosting international production capacity is that “the

infrastructures in developed economies of Europe and America require

upgrading” which happens to coincide with the contents of the Juncker

Investment Plan (JIP), known as European Recovery Engine. JIP was

officially put into operation since 2016. Both international cooperation on

production capacity and JIP regard the investment to key infrastructures

as the major directions for promoting economic growth and improving

interconnection. Therefore, it was just the right time for the strategic


interface and cooperation. China-EU High-level Economic and Trade

Dialogue held in September 2015 advocated the establishment of China-

EU Investment Platform, making China the first non-EU country that

announced participation to JIP.

(III) “16+1” cooperation interfaces with overall China-EU

cooperation. At the beginning of the 16+1 cooperation, EU doubted that

the 16+1 cooperation is another separate action beyond China-EU

cooperation. Some even thought that China intended to disintegrate EU

with the separate action. But with the long-term, open, transparent and

fruitful cooperation between China and central and eastern European

countries, EU gradually removed the doubts. The 4th meeting between

Chinese leaders and their counterparts from central and eastern European

countries held in Suzhou in November 2015 reaffirmed the principle “

‘16+1’ cooperation is an important part of China-EU cooperation” and

stressed the complementariness and mutual promotion of both


cooperation. The Middle-term Agenda for Cooperation between China

and Central and Eastern European Countries published after the Suzhou

meeting clearly pointed out that “16+1 cooperation will develop

synergies with major EU initiatives and plans and contribute to the

China-EU partnerships for peace, growth, reform and civilization, and the

Participants welcome and support the establishment of the China-EU

Connectivity Platform. . Developing ‘16+1’ cooperation synergies with

China-EU’s overall cooperation will contribute to the cooperation

resistance alleviation, achieving good environment for sustainable

development, be helpful to intensify China-EU political mutual trust and

improve the enthusiasm and efficiency for the overall cooperation of both

sides.

IV. Challenges and measures during CEGP development

(I) The rise of European protectionism influences China-EU economic

and trade cooperation


1. “Market economy status” and excess production capacity. According to

the obligations under Article 15 of the Protocol on China’s Accession to

the World Trade Organization (WTO), “the surrogate country approach”

applied by WTO members for anti-dumping to China must be terminated

before the end of 2016 when the 15-year transitional period expires. Since

early 2016, the European Commission started evaluation on whether

accepting China’s “market economy status” or not, which involved EU

institutions and members, European Parliament, European industrial

associations, and stakeholders of China-EU political and economic

relationship and EU-US relationship, far beyond the law and technology

consideration while more evaluation from politics. During European

Commission evaluation, the lobby organizations mainly from the iron and

steel industry held various activities to attempt to link “solution for

Chinese excessive steel production capacity’s impact to European steel

industry” with China’s “market economy status” and hinder EU’s


“concession to China” at this point. In May, 2016, European Parliament

adopted the non-legislative resolution on “objecting to accept China’s

market economy status” with overwhelming majority and appealed the

EU to “apply anti-dumping measures to deal with China’s excess

production capacity”. Under the pressure from various parties, the

European Commission started to look for a compromise, i.e. abolishing

the diction “market economy status” to meet China’s “political claim”,

and continuing the surrogate country approach in a disguised mode and

urgently upgrading its trade protection system to alleviate the complaints

of some EU members and interest groups on “China’s excess steel

production capacity”. Under the guide of this principle, the European

Commission issued documents on the anti-dumping calculation methods

for China and submitted it to the Council of the European Union and

European Parliament on November 9. Finally, on December 13, the

Council of the European Union made a resolution and reproached “the


significant distortions” in Chinese economy had “influenced EU’s

industry, trade, commerce and people’s life”. Thus, under the name of

promoting free and fair trade, improving EU’s competitiveness and

protection/creating jobs, they will keep the right for carrying out anti-

dumping measures to the “market distortions” of Chinese goods.1 The

resolution applied the so-called “market distortion” notion/standard to

replace “non-market economy” notion/standard, which was a disguised

continuance of “the surrogate country approach”. Thus, China appealed

to WTO and required EU to comprehensively and completely perform its

obligations.2 The origin of discrepancies on market economy status and

excess production capacity between China and EU is that EU ascribed

economic downturn, decreasing competitiveness of steel and other

industries and other problems to external factors, and imputed

1 EU website: COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT: Possible change in the calculation methodology of dumping regarding the People's Republic of China (and other non-market economies), 9, Nov. 2016. http://ec.europa.eu/transparency/regdoc/rep/10102/2016/EN/SWD-2016-370-F1-EN-MAIN-PART-1.PDF

2 http://www.fmprc.gov.cn/web/wjdt_674879/fyrbt_674889/t1414406.shtml PAGE \* MERGEFORMAT 2

unreasonable industrial and labor structural costs to China through

upgrading its trade protection system. China argued strongly on just

grounds for relevant issues. China stressed steel trade was a global issue

and urged EU to improve industrial competitiveness through boosting

industrial structural adjustment instead of hindering normal trade and

circulation. Against the backdrop of globalization’s confrontation of

countercurrent and EU’s continuous upgrading of its trade protection

system, the dispute on trade codes and production capacity between

China and EU will continue.

2. Obstacles for the M&A in Europe by Chinese capitals. Due to the rapid

growth of China’s foreign investment, the closer China-EU economic and

trade relationship and the price decrease of Euro-based assets, Europe has

become one of China’s major international investment destinations.

Statistics by an overseas research institution indicate that China’s foreign


direct investment (FDI) in 2016 soared by 40% to nearly $200 billion.3 In

2016, China’s FDI to EU exceeded 35.1 billion Euros ($37 billion), up

76% year on year.4 In terms of investment fields, China’s FDI to EU

mainly focused on manufacturing and service industries. The investment

to manufacturing accounted for 1/3 of the total. Other investment fields

include IT and communication technology, renewable energy, transport

and infrastructures and recreational sectors. The investment to real estate

saw an obvious decline. In terms of investment destination countries, in

2016, Chinese capitals flowed back to the core economies again, namely,

the UK, France and Germany. The investment to Germany (11 billion

Euros) and the UK (7.8 billion Euros) accounted for above 53% of

China’s total investment to EU, which was closely followed by the

investment to Northern European countries.5 Chinese investment showed

special favor to Germany, a country with a powerful manufacturing, high

3 http://www.mofcom.gov.cn/article/i/jyjl/m/201603/20160301275020.shtml4 http://www.ftchinese.com/story/0010709465 http://www.yicai.com/news/5216508.html


work efficiency and more standard market. In 2016, China’s investment

to Germany accounted for 31% of its total investment to Europe.

Germany became the biggest investment receiver of China’s investment

to Europe. China’s investment to Germany firstly exceeded Germany’s

investment to China for the first time in 2016.6 In face of China’s rapid

growth in foreign investment, some western countries had a rising

resistance. According to incomplete statistics, from mid-2015 to 2016,

China’s acquisition plans with value of nearly $40 billion had been

denied by European countries, excluding the hindrance to China’s

acquisition to Swiss PIP( plant-incorporated protectants) giant Syngenta

(acquisition amount: $43 billion) and German semiconductor enterprise

Aixtron (acquisition amount: $715 million).7

The year of 2016 saw frequent obstacles to China’s M&As in Europe.

The objective reasons were China’s investment scale to Europe

6 同注 17. Same with Footnote 17.7 http://www.yicai.com/news/5183075.html


dramatically expanded and the M&As concentrated on manufacturing and

related sectors. Against the backdrop of European protectionism, some

European countries and industries had doubts on China’s “M&A

motivation”. They believed that China “will destroy the European

competitors through pertinent policy support and replace European

technologies with Chinese ones.” Meanwhile, the so-called Chinese

M&As to endanger “state safety” caused by the difference in political

systems appeared in some governmental and public consensus. In

addition, the US interfered China’s M&As in Europe through the

Committee on Foreign Investment in the United States (CFIUS) (e.g. the

obstacle to China’s acquisition of Aixtron) was another important external

factor.

(II) China teams up with EU to meet the challenges

1. Under the situation of changing politics in Europe, China-EU

relationship will confront a more complicated political environment, and


it will be harder to consolidate and improve mutual trust in politics and

secure the sustainability of China-EU cooperation. China should closely

focus on EU’s political and economic changes, strengthen

communications and cooperation with European countries and parties that

support reform and stability, insist on the direction of developing China-

EU FMPs, ensure the balance and progress of the relationship with EU,

European sub-region and European countries, and keep alert to European

conservative political forces that challenge China’s core interests.

2. Continue boosting the joint efforts on the Belt and Road and

China-EU economic cooperation interface, and jointly restrict the

rising of protectionism

Despite the slow recovery of European economy, the decline of China’s

economic growth and foreign trade, China-EU economic and trade

cooperation is still relatively stable. Under the situation of the decrease of

China and EU’s trade volumes, the statistics of EU and Chinese customs


indicated that the China-EU trade volume was 514.7 billion Euros in

2016, 6.3 billion Euros less than the previous years. China’s exports to

EU increased 1.2%, with a favorable balance of 174.5 billion Euros.8

China overtook the US and France and became Germany’s biggest trade

partner for the first time.9 China-EU bidirectional investment recorded

increase. In 2016, EU’s 28 countries established 1,741 new enterprises in

China, down 1.8% year on year, with actual paid-in amount of $9.66

billion, up 35.9% year on year. Germany ($2.71 billion), the UK ($2.21

billion) and Luxemburg ($1.39 billion) were among the top ten investors

to China.10 It is difficult to see a good trend for the global economic

growth and trade situation in 2017. As important trade and investment

partners, China and EU should, based on consolidating current

cooperation basis, continue boosting the joint efforts on the Belt and

8http://trade.ec.europa.eu/doclib/docs/2012/march/tradoc_149251.pdf；http://www.gov.cn/xinwen/2017-01/13/content_5159449.htm#allContent9 http://www.mofcom.gov.cn/article/tongjiziliao/fuwzn/feihuiyuan/201702/20170202517082.shtml10 http://www.mofcom.gov.cn/article/tongjiziliao/v/201702/20170202509836.shtml


Road, deepen the cooperation in trade and investment facilitation,

interconnection and infrastructures, and jointly restrict the negative

influence of protectionism.

3. Boost China-EU cooperation in the third-party, regional and

international governance to jointly resist the anti-globalization

countercurrent.

China-EU cooperation in a third party will come to the stage of policy

interface and project implementation. China-France and China-Germany

cooperation in a third party, especially in Africa, Afghanistan, Southern

Europe, Central and Eastern Europe might be the major parts. In the case

of the change of foreign policies by the Trump Administration, China and

EU will have more urgent cooperation demands in safeguarding the

stability of the Middle East and carrying out the nuclear deal with Iran. In

terms of global governance, China and EU will also have broader

cooperation space in jointly maintaining and advancing the Paris


Agreement reached at the UN Climate Change Conference.


Documents

· Web viewsteel industry held various activities to attempt to link “solution for Chinese excessive steel production capacity’s impact to European steel industry” with China’s