A Look Back at 2012 China-EU Relations （Tian Dewen）

It's a fact that underscores the rebalancing of the world economic order: The European Union is China's largest trading partner; and China is the European Union's second-largest, after the United States.

In 2012, China maintained relatively rapid economic growth, while the EU struggled on member states' debt crises. Though last year was not a remarkable year in terms of China-EU trade volume, it did see the two entities' political relationship continue to mature. 

In recognition of the importance of building on the China-EU economic ties, a systematic and multi-level political relationship has been developed between the two sides. Trade, together with political understanding, ensures China-EU relations should continue to prosper.  

A Relationship Changing with the Times

The trade and economic ties have been the historical cornerstone of China-EU relations. Despite rapid changes in world trade relationships, since the mid-1990s the rise in bilateral trade volumes has maintained robust momentum.  And in 2012, despite the sluggish world economy, China and the EU maintained a basically stable economic and trade relationship.  Accompanying this trend are continued shifts in the two parties' positions in the global economic landscape and the recurring threat of protectionism in Europe, evidenced last year by a growing number of trade frictions involving ever-greater monetary stakes.

According to the latest data released by China's Ministry of Commerce, the European Union remained China's biggest trade partner in 2012. Due to the European economic slump, in the first nine months of 2012, Chinese exports to the EU registered US $250.46 billion, representing a year-on-year drop of 5.6 percent. China's imports from the EU clocked a year-on-year increase of 2.1 percent to US $160.53 billion. Meanwhile, data released by Brussels shows China continues to be the EU's second largest trade partner, with bilateral trade valued at €46 billion less than the total trade sum between the EU and the U.S.

With regards to investment, China's Ministry of Commerce reports that the first ten months of last year saw the 27 EU countries establish 1,418 new enterprises in China, a year-on-year increase of 2.75 percent. However, investment in real terms amounted to US $5.236 billion, representing a drop of 4.95 percent from 2011. Germany remained the biggest European investor in China, funneling US $1.279 billion into the country from January through October. Counted separately, Germany would rank seventh on a list of foreign investors in China by country, followed in Europe by Holland with US $1.01 billion, Britain with US $833 million and Switzerland with US $809 million.

Meanwhile, China's investment in the EU has increased rapidly. According to data released mid-September by A Capital, a private equity fund, China's total overseas direct investment increased 67 percent year on year in the second quarter of 2012. The value of investment topped US $24 billion, US $5 billion of which headed to the EU market, a year-on-year increase of 95 percent. Europe is soon to become the top destination for Chinese overseas investment in non-resource industries. Within the EU, the leading recipients of Chinese direct investment include Portugal, Germany and France.

Against a backdrop of woeful economic prospects, intractable sovereign debt crises and the crushing financial burden of bailout packages, Europe has to certain extent "turned in" on itself. Voices arguing for protectionist trade policies have been on the rise. The continent's trade with China has been used as a convenient scapegoat for the region's economic woes. 

2012 correspondingly saw a rise in China-EU trade frictions. In July, European solar companies headed by German SolarWorld AG officially lodged a complaint with the European Commission and requested an investigation into possible "dumping" in Europe of photovoltaic products by Chinese firms. In September, the commission launched its investigation.

Today, Europe is the world's largest market for photovoltaic products, and also a main destination for Chinese exports in the industry. In 2011, the value of China's photovoltaic products heading to the EU reached € 21 billion, accounting for 73 percent of the industry's global exports.

The investigation launched against China constitutes the most significant trade dispute in terms of trade value the world has ever seen. From China's perspective, it appears to be a blatant grab by European solar enterprises in order to secure themselves a bigger slice of a booming industry. If the EU ends up imposing sanctions, China's photovoltaic enterprises would undoubtedly sustain heavy losses. Such an imposition would elevate trade frictions, as China would likely be forced to counteract by adopting anti-sanction measures. 

Politics for the Better

Politically, China and the EU have established a systematic, multi-level platform for dialogue on trade and economic cooperation, epitomized by the China-EU Annual Summit. Since the inaugural summit in London in April 1998, the two sides have met 15 times for the annual event. On February 14, 2012, the 14th installment of the top-level leadership meeting opened in Beijing. This summit was first scheduled for October 2011 in Tianjin, but was delayed due to debt crisis negotiations.

On September 19, the 15th China-EU Summit kicked off in Brussels as scheduled. These summits are an outlet for both sides to express their views on the course bilateral relations are taking. Considering the damage to China-European relations the escalating photovoltaic products trade frictions may inflict, negotiations during the 15th summit focused on avoiding sanctions. The EU expressed a will to ease tensions, and also committed to suspending their trade remedy investigations into the wireless communication tools produced by two Chinese companies, ZTE and Huawei.

A highlight of the 2012 China-EU relationship was improvement in bilateral cultural exchanges. Last February, the EU-China Year of Intercultural Dialogue was launched in Brussels. In April, State Councilor Liu Yandong inaugurated the China-EU High-Level People-to-People Dialogue with her EU counterparts.

In the course of the China-EU dialogue year, the two sides have worked on 300 initiatives to better exchanges in literature, arts, philosophy, language, press and publications, sports, youth outreach, tourism and many other fields. Activities have been conducted in 22 Chinese provinces, municipalities and Special Administrative Regions, and all 27 EU member countries. Through the dialogue mechanism, China and the EU have worked together in organization and event coordination and to promote bilateral people-to-people exchanges among their populations. The dialogue year has served to greatly enhance mutual understanding.

Dialogue on human rights is also a feature of the China-EU relationship. On May 29, 2012, the 31st round of the China-EU Human Rights Dialogue was held at EU headquarters in Brussels. During the meet, the two sides discussed their progress in the field, and exchanged opinions regarding issues such as international human rights cooperation, judicial enforcement and racial discrimination. China outlined its principled stance on issues like Tibet, Xinjiang and its legal system. Representatives asked the EU to respect China's interests and concerns, to resist from interfering in China's internal affairs and ensure their analysis of China's human rights situation was objective and impartial. The EU side presented their progress on protecting the rights of immigrants and minority ethnic and religious communities. Since 1999, the EU and its member states have not filed a single motion on human rights in China at the UN. This is thanks to the positive results of China-EU human rights dialogues. The bilateral dialogue has undoubtedly played an active role in enhancing mutual understanding and reducing the potential for conflict.

Mutual Cooperation Still to be Improved

Since the long-term policy for China-Europe relations was outlined by the EU in 1995, China and the EU have enjoyed 17 years of constantly improving ties. Representatives of the top leadership from both sides have upgraded the bilateral relationship from a "constructive partnership" to a "comprehensive strategic partnership." Over nearly two decades, China and the EU, working together, have made impressive achievements in their economic and trade exchanges, and gradually intensified their cooperation in politics, people-to-people exchanges and culture.

But there's still work to be done. The bilateral relationship should advance while maintaining close cooperation in order to promote stability in an uncertain global geopolitical landscape. Both sides should work together to push forward the process of multipolarization, to reduce bilateral conflicts and frictions in the economic and political fields and to enhance mutual understanding and strategic trust.

To achieve these objectives, China and the EU should work together. The bilateral relationship is of paramount importance to both sides and to the world as well. Discord between two of the world's largest political entities would be damaging to the international community and to chances for sustained world peace and development.

The China-EU relationship has changed alongside a changing international landscape, the key feature of which has been the rise of developing nations and the concomitant relative decline in Western countries' influence. Perhaps Europe feels uneasy in the face of a rising China – the country is very different to its European counterparts in its cultural traditions, ideology and social institutions.

Eberhard Sandschneider, director of the Research Institute of the German Society for Foreign Policy, has said that China's achieving astounding economic success while eschewing the Western democratic path has aroused some people's concern. In his view, after 30 years of economic development, China is now equipped with the capacity to convert its economic success into political clout. However, from the European perspective, as one of the rule-makers in international affairs, it's very hard for the EU to accept a new, powerful game player and heed the suggestions it has the right to make. As for China, it is of great importance to objectively recognize its rising international status and national strength, and to approach its newfound responsibilities with a sober, rational mindset.

Looking to the future, it is necessary for the two sides to outline a set of mutually beneficial priorities that will advance the China-EU relationship. First, they should approach the development of healthy bilateral ties as a "win-win game" that benefits not only the two sides but also world peace and prosperity.  Europe should recognize that China's peaceful rise implies one fifth of the world's population is finally ridding itself of poverty and living affluent lives. This is a good thing, for Europe and for the world at large. China's development has provided great opportunities for European enterprises and economies to grow.

In 2012, in spite of its financial commitment to debt bailouts, the German economy was still a standout in terms of economic performance. Thanks for this growth should, at least in part, go to China. The countries have proved themselves to possess complementary economies whose connectivity mutually benefits each other's industries. Both sides have won through trade.

China and the EU should emphasize complementary advantage in their dialogue and explore methods for cooperation that accrue maximum benefits to both sides. In his visit to Europe in May, China's Vice Premier Li Keqiang said, "When "designed in Europe" is combined with "made in China" and when European technologies are combined with the Chinese market, the results will be amazing."

Finally, the concept of mutual benefit should never be forgotten, especially in times of crisis. At the EU-China Summit held in September 2012, Herman Van Rompuy, president of the European Council, said that the Chinese and EU economies have become interdependent and inseparable in a very short period of time. The result is that in the field of economy and trade, sanctions and anti-sanction measures can only spell losses for both sides. Communicating through equal dialogues, and ensuring both sides engage with each other through the spirit of mutual benefit, should guide China and the EU through any problems that may arise between them.

（Contact Tian Dewen：tiandw@cass.org.cn）