Four key words of 2010 China-EU economic and trade relation （Chen Xin）

1. European Debt Crisis

While Greece debt crisis just ended, the Irish debt problem appeared. The debt problem became a hurdle to EU’s economic recovery. How will China-EU trade develop in the backdrop of the debt crisis?

If the debt crisis can be controlled in a short period of time, its impact on China-EU trade will be limited. According to the latest data released by China Customs, the amount of China-EU import and export from January to November in 2010 reached 433.9 billion dollars, which is still higher than the amount of China-USA and China-Japan respectively.

If the crisis spreads, EU will have to tight the fiscal policy. This will have adverse impact on the private consumption and the demand for staple products. Hence China's export to EU may be affected.

2. Export of rare earth

Rare earth exported from China becomes the hot issue of China-Western trade relation this year.
China does not have the high technology to extract rare earth. So the rare earth industry in China pollutes a lot. Normally the western countries blame China on ineffective environmental protection, however, on rare earth issue they force China to export, no matter how badly the environment is polluted.

The EU has the advanced technology to extract rare earth. If it can transfer technology to China, it will greatly help China minimize pollution.

3. Anti-dumping

The EU recently launched many anti-dumping cases against China's products. According to the statistics from China’s Mofcom, the EU has launched 10 cases to China from January to October this year.

The tougher stance of EU is closely related to its new global trade policy. On 9 November 2010, the EU Commission published its new global trade strategy. The strategy advocates a tougher policy to explore the oversea market for EU enterprises. This year the EU launched three kinds of trade protection investigation against China's wireless modem. It shows EU is increasingly concerned about the high technology exports from China. And it reflects the new tendency that China-EU trade friction will move to the high end of the value chain.  

4. Exchange rate of the Chinese currency (RMB)

"Since the introduction of QE2, the U.S. Federal Reserve has injected too much dollars to the economy and lead to its depreciation of dollars. It is dollar that leads to the unstable situation of international currency system, not the RMB.

Regrettably, some EU officials also say that the exchange rate of the RMB to Euro is undervalued.