The financial crisis and EU-China trade interdependency （Chen Xin）

Wen Jiabao the Prime Minister of People's Republic of China and European Commission President Jose Manuel Barroso at the start of an EU China High level cultural forum at the EU Commission headquarters in Brussels, Belgium, 6 Ocotber 2010, ahead of a European-China summit.| EPA/OLIVIER HOSLET

Bilateral trade volume between China and the European union, reached €567 billion in 2011, the highest record of China-EU trade, in the context of the ongoing European Sovereign Debt Crisis. China's export to the EU in 2011 was €356bn, with 14% growth, and import from EU is 211 billion USD, increased 25%. The faster expanding of import from EU also means a China's support to European economy to overcome the crisis.

The decline of the EU share in China's trade

Although China-EU trade reached its highest level in 2011, we can still see a slight decline of the EU's weight in China's trade since the financial crisis. The bilateral trade volume in 2009 took the highest share of China's external trade in recent 20 years, with 16.5%. Since then, it takes a downward turn, and in 2011 it dropped to 15.6%.

The EU share of Chinese exports reached its peak in 2008 with 20.5%, but since then it has also declined. In 2011 it represented 18.7% of the China's export. EU's share in China's import declined from 12.7% in 2009 to 12.1% in 2011. The declining share in China's trade does not necessarily mean that EU is less important for China, but means China's trade is expanding in other markets, which reflects China's multi-market strategy.

The increase of China's share in EU trade

From the EU side, there is an interesting tendency happening. From the bilateral point of view, the EU is China's biggest exporting market, and at the same time China is the  EU's biggest import resource. And if we add the US to the picture, another  interesting tendency appears. Based on the data from Eurostat, in the share of the EU's import, China obviously is a steadily expanding, with a 10% increase from less than 8% in 2000 to more than 18% in 2010.

At the same time, we can see that the US share in EU imports is almost in a down turn, with 10% decrease from close to 21% in 2000 to near 11% in 2011. In 2006, China for the first time surpassed the US and became the EU's biggest import resource. On the other hand, in the share of EU export, in the latest 10 years, the US share has been experiencing a similar 10% drop, from 28% in 2000 down to 18% in 2010, and in 2011 it turned to 17%. At the same time, China's share in EU exports has been one of consistent expansion, from 3% in 2000 reached close to 9% in 2011.

If we see the trade flows between EU-US and EU-China, the picture would provide a very sharp comparison. In 2000, EU-China trade was around €100bn, and by 2011 it turns to more than €400bn. However, EU-US trade had some waves around €400bn in the latest 10 years. China's catching-up in trade is at so fast a pace, which leads China will soon become the EU's biggest trading partner, and in the next 10 years China will be the EU's biggest export market.

What does it mean?

It means that the trade and economic interdependency is going deeper and deeper between EU and China. And the interdependency has experiencing a slight adjustment since the financial crisis. It means not only does China count on the EU, but also the EU counts on China as well. China does matter for the EU. 

http://www.neurope.eu/blog/financial-crisis-and-eu-china-trade-interdependency

（Contact Chen Xin：chen-xin@cass.org.cn）