Lecture One 24April09_ EU – CHINA COOPERATION Past, Present & Future

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EU – CHINA COOPERATION PAST, PRESENT & FUTURE

Mr Rudie Filon
1st Secretary Development & Cooperation
European Delegation to China & Mongolia

24 April 2009

Published in: News & Politics, Business
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Lecture One 24April09_ EU – CHINA COOPERATION Past, Present & Future

  1. 1. European Commission EU – CHINA COOPERATION PAST, PRESENT & FUTURE Mr Rudie Filon 1st Secretary Development & Cooperation European Delegation to China & Mongolia 24 April 2009
  2. 2. TODAY’S AGENDA EU-China Relationship: Concept 1. 2. Trade and Investment 3. Development & Cooperation 4. EU-interest promotion: the next logical step 2
  3. 3. EU-CHINA RELATIONS 1. EU-CHINA RELATIONS: CONCEPT 3
  4. 4. HOW DO WE COMMUNICATE? EU-China Summits  EU –China High Level Mechanism  EU-China Joint Committee meetings  • Prepared by Senior Officials Meeting • Working groups at technical level Sectoral Dialogues  EU-China Troika Ministerial Meetings  EU-China Strategic Dialogue  4
  5. 5. EU-China Diplomatic Relations: Milestones 1975 – Establishment of diplomatic relations  1985 – EC and China sign Trade & Economic Agreement in Brussels  1988 – Delegation of the European Commission opens in Beijing  1994 - Broad EU-China political dialogue established  1995 - First EC Communication on EU-China relations is published  1998 – First EU-China Summit held in London  2004 - EU-China Summit in the Hague: ‘Strategic Relationship’  2006 - EU-China Summit in Helsinki - Decision to launch negotiations for an  EU-China Partnership and Cooperation Agreement (PCA) 5
  6. 6. EU-China Diplomatic Relations: Milestones 2007 Beijing EU – China Summit: need  for a more balanced trade & economic partnership. Tool = High Level Mechanism should enhance political dialogue and consultation at all levels.  2008 First HLM held in April between President Barroso and PM Wen Jiabao  2009 2nd HLM planned in Brussels in May 6
  7. 7. EU DELEGATION IN BEIJING Head of Delegation – “EU Ambassador” (anticipates Lisbon  Treaty) Deputy Head of Delegation  Sections  • Political • Trade and Economics • Development and Cooperation • Science, Technology and Environment • Information Society and Media • Finance and Contracts • Administration • Press and Information 7
  8. 8. EU’s China Policy Engage China further, both bilaterally and on the  world stage, through an upgraded political dialogue; Support China's transition to an open society based  on the rule of law and respect for human rights; Encourage China’s integration into the world trading  system and support its economic and social reform process; Raise EU's profile in China.  8
  9. 9. Rationale for a Closer Relationship EU and China are major economies and trade  partners Both are key regional and global players  Both are driving forces for globalization (WTO)  Both are committed to promote peace and  stability on a regional and global scale 9
  10. 10. EU – CHINA RELATIONS 2. Trade and Investment 10
  11. 11. CHINA’S ECONOMY –SIGNIFICANCE 4th largest world economy  3rd trading power ($1.15 trillion, after EU and  US) 2002: similar to Italy’s  2010: similar to Germany’s  2020: will duplicate with regards to year 2000  2020: 2nd world economy after US  11
  12. 12. CHINA’S ECONOMY – PERFORMANCE  Chinese exports doubled in just over 5 years In contrast, it took Germany 10 years in 1960s 12
  13. 13. CHINA’S ECONOMY - RISKS • Bubbles in Real Estate • Hiccups in Stock Exchange Market • State Sector reforms - unemployment – social instability • Environmental damage • Energy scarcity / high energy costs But analysts agree that risks are controllable and will affect rhythm of reforms, not the path chosen. 13
  14. 14. INEVITABLY . . . - The financial crisis – China’s perspective - The full blow is now also felt in China - Aim to maintain 8% growth may be hard to achieve - Some say it could even be 5% but unconfirmed 14
  15. 15. FINANCIAL CRISIS Government has taken immediate action to stimulate the economy: 4 trillion RMB stimulus package No full consensus: could bring targeted economic growth but strong focus on infrastructure (although already modern) without fiscal and economic reforms, social security, more education investment (innovation!), domestic consumption promotion. 15
  16. 16. FINANCIAL CRISIS Analysts believe China may recover quicker than other countries:  Large but still developing economy  Financial sector fundamentally sound  Substantial financial reserves 16
  17. 17. CRISIS MAY ALSO MEAN OPPORTUNITY The word ‘crisis’ (Weiji) in Mandarin is composed of two characters, wei, meaning danger and ji, which stands for opportunity. Risks definitely exist but Chinese investors might well come out on top as global players and competitors, with the real prospects of participating in the ownership of key foreign financial groups as strategic investors or even majority shareholders. 17
  18. 18. CONCLUSION The downturn will be painful also for China but will also provide an opportunity to upgrade manufacturing. A “leaner & meaner” China may emerge once the economy picks up again! 18
  19. 19. EU-CHINA TRADE: SIZE & SCOPE China is EU’s 2nd biggest trading partner (after  US) (16,24% of imports, 5,8% exports) EU is China's first trading partner (ahead of US  and Japan) EU enjoyed a trade surplus with China at the  beginning of the 1980s EU's biggest bilateral trade deficit in 2007:  €159,8 billion (and widening) 19
  20. 20. OR IN OTHER WORDS . . . EU companies in China achieve sales of 24 Mio € or exports of 5 Mio € per hour !!! 20
  21. 21. OUR TRADE  EU exports • Machinery • Transport equipment  EU imports • Machinery • Textiles 21
  22. 22. CHINA’S TRADE BALANCE Sustained growth of imports and exports  Surplus reached a new record in 2007  Huge trade surplus with US and EU  Trade deficit with most Asian countries  Almost balanced with Africa  22
  23. 23. China, a globalisation success story, not a globalisation scare story! China stands for the benefits of globalisation.  China's growth has meant:  • cheaper goods in European shops • cheaper inputs for European business • more competitive European companies • growing markets for Europe's exporters • lower interest rates and inflation in Europe 23
  24. 24. BUT NOT ONLY BENEFITS . . . Europe has an economic interest in an  economically strong China, and both sides have an interest in economic openness. However China also stands for the central  challenge of globalisation: tough new economic competition. Europe has to face up to that competition,  while insisting that it is fair competition. 24
  25. 25. China’s growing trade means growing expectations European companies, while gaining from China's growth,  continue to face serious barriers to access China's market. There is a growing risk that the EU-China trading  relationship will not be seen as genuinely reciprocal. China has reached a stage in its development when it is  legitimate to point to China’s growing responsibilities: to maintain an open global trading system, and to remove barriers further to trade. 25
  26. 26. AND MORE EXPECTATIONS . . . China also has to commit to trading fairly,  and reduce state interference in the economy. Europe and China can achieve these things  through dialogue. But where other efforts fail, Europe uses  WTO dispute settlement system to ensure obligations are met and rules enforced 26
  27. 27. NON-TARIFF BARRIERS - 1  Product certification, labelling standards, import approval requirements, customs clearance delays.  The application of laws is often not uniform and regional variations in customs procedures have a negative impact on trade. 27
  28. 28. NON-TARIFF BARRIERS - 2  Unreasonable sanitary and health requirements can also create barriers that hamper exports to China, not least because Chinese national standards often differ significantly from international standards. 28
  29. 29. MAIN ISSUE FOR EU EXPORTERS High compliance costs and extended delays for business which impact on their ability to sell on the China market, affecting in particular EU small and medium enterprises. 29
  30. 30. IPR PROTECTION IPR Protection: • Chinese government is committed to changing the situation • There is a legal framework, but still too weak (no dissuasive approach) • Local governments fail to comply with the law, due to local interests • Major problem: enforcement of IPR legislative initiatives 30
  31. 31. INVESTMENT  China investment in EU has so far been insignificant  EU investment in China sustained over the last ten years  EU is the third largest investor in China 31
  32. 32. INVESTMENT BARRIERS In many manufacturing and services sectors European  investors are still prevented from setting up wholly owned foreign enterprises and are required to establish joint ventures with Chinese partners. In the telecom and financial services sector, EU firms have  been unable to expand significantly because of high capital requirements and complex approval procedures. In the manufacturing sector, China continues to maintain  investment restrictions on some key industries for Europe such as automobiles, petrochemicals or steel 32
  33. 33. WHY EU COMPANIES COME TO CHINA . . . ??? 33
  34. 34. WHY EU COMPANIES COME TO CHINA . . . PRODUCE GOODS IN CHINA 1. FOR CHINA 34
  35. 35. WHY EU COMPANIES COME TO CHINA . . . 2. ESTABLISH OR EXPAND REGIONAL BASE 35
  36. 36. WHY EU COMPANIES COME TO CHINA . . . 3. REQUEST FROM CUSTOMERS IN HOME COUNTRY 36
  37. 37. EU-CHINA RELATIONS 3. DEVELOPMENT & COOPERATION 37
  38. 38. AS A REMINDER . . . IN SPITE OF ITS ECONOMIC PROWESS EVEN TODAY CHINA STILL IS A DEVELOPING COUNTRY!!!! 38
  39. 39. DEVELOPMENTAL CHALLENGES Widening income gap between rich and poor  Widening income gap between interior areas and  costal regions, urban and rural areas Poor labour conditions  Corruption  Imbalance between economic development and  environmental & social development Often lack of know-how/expertise/best practice on  how to improve the situation 39
  40. 40. HURDLES ON THE ROAD TO CHINA’S SUSTAINABLE DEVELOPMENT Major problem areas:  Demographics – ageing population  Inadequate social security system  Lack of efficient health care system  High energy consumption  Dependency on coal and other highly polluting substances  High demand for natural resources 40
  41. 41. PUBLIC MISPERCEPTIONS “IT’S A SCANDAL THAT THE EU GIVES MONEY TO CHINA!” “CHINA DOES NOT NEED THE EU. IT IS STRONG AND SUCCESSFUL ALREADY” “CHINA’S INCREASING PROMINENCE ON THE WORLD STAGE IS A THREAT” 41
  42. 42. SO WHAT JUSTIFIES EU-CHINA COOPERATION??? China has money enough to buy all necessary expertise BUT By providing EU expertise and paying (part of) it the EU is able to influence the Chinese reform agenda 42
  43. 43. EU – CHINA COOPERATION EVOLUTION:  1980’S: HELP CHINA FEED CHINA  1990’S: TRADITIONAL COOPERATION  INCLUDING SUPPORT FOR CHINESE INDUSTRY NOW: JOINT INTEREST COOPERATION  FUTURE: LESS BUT MORE TARGETED  COOPERATION SUPPLEMENTED BY MORE EU INTEREST PROMOTION 43
  44. 44. EU – CHINA COOPERATION Bilateral Co-operation Programmes  Regional Co-operation Programmes  EU 7th Research Framework Programme  EU Human Rights and Democracy  Programme European Community Humanitarian Aid  Office (ECHO) Non-Governmental Organisation (NGO)  budget 44
  45. 45. BILATERAL COOPERATION  The present bilateral co-operation portfolio includes 20 projects with an overall budget of about € 180 m.  All recent projects are Technical Assistance. EU stopped paying for offices, project infrastructure, project cars etc. but rather expects China to provide these. 45
  46. 46. PRIORITY ISSUES • China’s Economic and Social Reform Programme (WTO, Western Development Strategy, Industrial Restructuring, Unemployment, ...) • China’s Impact on the Global Environment (Energy, Forestry) • China’s environment and sustainable development (Water conservation, soil contamination, biodiversity, air pollution) 46
  47. 47. FOCAL SECTORS  EU Focus on Three Main Areas • Support and Provide increased Sustainability in Chinas Economic and Social Reform Process • Promoting Environmental Policy and Actions aiming at Sustainable Development • Encourage good governance initiatives 47
  48. 48. KEY BILATERAL PROJECTS Trade, Energy & Human Resources Development Sector EU–China Trade Project • Intellectual Property Rights protection 2nd phase • Civil Aviation programme • Managers Exchange & Training Programme • Energy and Environment Programme • 48
  49. 49. KEY BILATERAL PROJECTS Good Governance Sector • EU-China Law School • Thematic and horizontal budget lines • Social Security Cooperation Project • Social Protection programme (new) • Information Society programme 49
  50. 50. KEY BILATERAL PROJECTS Environment & Sustainable Development Sector • Natural Forest Management Project • Biodiversity Programme • River Basin Management Programme 50
  51. 51. KEY PROJECTS - REGIONAL REGIONAL COOPERATION 70 projects with an overall budget of about €20m. • Asia Invest • Asia Link • Asia IT&C • Asia ProEco • Asia Urbs • SWITCH (NEW) 51
  52. 52. FUTURE COOPERATION  FRAMEWORK: DEVELOPMENT COOPERATION INSTRUMENT - DCI (FROM 1ST JANUARY 2007) NEW CHINA STRATEGY PAPER (2007-2013)  NEW MULTIANNUAL INDICATIVE  PROGRAMME 2007 – 2010 CONTINUATION OF STRATEGIC AREAS OF  COOPERATION (CLIMATE CHANGE, AVIATION, TRADE INTEGRATION, SOCIAL PROTECTION) 52
  53. 53. EU-CHINA RELATIONS 4. EU-INTEREST PROMOTION: THE NEXT LOGICAL STEP 53
  54. 54. NEW: EU-INTEREST PROMOTION DEVELOPMENT COOPERATION =  BENEFICIARY INTEREST NEW BUDGET = EU INTEREST  AIMS TO SUPPORT COMMERCIAL,  S&T, ACADEMIC AND POSSIBLY EVEN CULTURAL EU INTERESTS IN CHINA 54
  55. 55. EU-INTEREST ACTIONS IN CHINA  Managers & scientists training  Support to market entry of SMEs through matchmaking events  IPR helpdesk  Standardisation support  People-to-people networking  EU event venue 55
  56. 56. EU-INTEREST ACTIONS IN CHINA - TIMING Science & Technology Fellowship China intake 1 started in April 2009. Funding for 2nd intake secured to start in April 2010. EU Centre for SME support will operate from late 2009. 56
  57. 57. EU INTEREST PROMOTION FROM 2010: PERMANENT BUDGET LINE IN EUROPEAN COMMISSION’S BUDGET ENSURING LONG-TERM APPROACH 57
  58. 58. EU-CHINA RELATIONS XIE XIE (Thank you)! Mr. Rudie Filon 1st Secretary (Development & Cooperation) EU Delegation to China & Mongolia The views expressed by the presenter are not necessarily those of the European Commission 58

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