China, EU seeking opportunities for better partnership

As Europe's debt crisis shows no sign of abatement in 2012, China and the European Union (EU), two of the world's biggest economies, begin to feel its repercussions in commercial dealings.

Two-way trade between them shed 4.1 percent year-on-year to 495.8 billion U.S. dollars in the January-November period, according to preliminary data released by China's customs earlier in December.

The 11-month downturn, however, contrasts starkly with a notable boom in the past decade, when quadrupled trade has brought substantial benefits to both sides and added great momentum to the advancement of bilateral ties. It heightens the need for closer cooperation between the world's two major trade partners.

At the China-EU summit held in Brussels in September, Chinese Premier Wen Jiabao stressed the strategic importance and global influence of bilateral cooperation and explored the future direction of their relations. He sent a positive message to the world that both sides insisted on dialogue and cooperation and were devoted to common development.

The two sides are committed to a converge of their respective mid- and long-term development strategies, which offers a promising prospect for future cooperation.

There is broad consensus that a stable, pragmatic and long-term China-EU relationship is conducive to their respective socioeconomic development as well as to world peace and stability, and helps enable them to meet various global challenges and solve their common problems.

CHINA-EU TIES IN DEBT-CRISIS SHADOW

The ongoing debt crisis, the gravest challenge facing the EU since the end of World War II, has punched economies in Southern Europe, greatly blemished euro's reputation and jolted its position as the official currency in the eurozone.

As a trustworthy friend and partner, China has demonstrated solidarity with the EU and offered solid support.

In February, Chinese President Hu Jintao pledged policy coordination with the European bloc and active participation in global efforts to back debt-thumped Europe and the eurozone.

At the G20 summit in June, China decided to contribute 43 billion dollars to the recapitalization of the International Monetary Fund (IMF) as a financial effort to help the EU tackle the crisis.

Over the past months, China has continued to invest in eurozone bonds and EFSF notes and actively engaged in consultations with the European Stability Mechanism (ESM) on possible cooperative programs.

"China is a responsible long-term investor and will, as always, follow the practice of diversified investments," Wen told the 8th China-EU Business Summit in September.

"Europe is one of the main investment markets for China's foreign exchange reserves, and China will continue to help settle the region's debt crisis through appropriate means," the Chinese premier said.

The crisis has, however, spotlighted the interdependence between the two economic powers.

"From China's point of view, a decrease in EU's demand for its products is one of the main factors behind the slowdown in China's economic growth," said Feng Zhongping, director of European Studies at the China Institute of Contemporary International Relations.

"From the other angle, Europe has been looking forward to China's assistance in tackling the crisis and, in particular, China's investment in and expanded imports from Europe," he said in a recent interview with Chinese media.

The debt crisis has, in this sense, helped foster a closer relationship, and in such hard times, EU member states, creditors or debtors, hope to boost trade cooperation with China.

"In addition, the crisis has convinced China and the EU of the necessity to enhance financial management and jointly meet new challenges," Feng said.

The ripples have as well reached far out to other aspects of their ties.

"China and the EU have adopted a more pragmatic attitude towards their relations and coordinated more closely in the political area," said Zhao Junjie, a research fellow at the Institute of European Studies of Chinese Academy of Social Sciences (CASS).

In order to defuse the debt crisis, Zhao said, the Chinese and EU authorities have formulated and implemented strategies for their respective socioeconomic development and are seeking consensus and exploring new sources of growth for bilateral relations.

Industrial restructuring is under way both in China and the EU, which have also set low-carbon economy and ecological progress as their future target for socioeconomic development.

"In this way, China-EU ties have stood the test of the debt crisis and still taken a step forward," Zhao said.

The debt crisis has also tipped the balance in favor of China, which now stands on a more equal footing with the EU for future development.

In the view of Cui Hongjian, head of the European Department of the China Institute for International Studies, China is in better shape for economic growth than the debt crisis-hit EU and is thus treated by the latter as an equal economic and political partner in a real sense.

"On this basis, China and the EU are shifting their gaze from the economic and trade area to a broad range of issues, such as political consultations, economic and trade cooperation, cultural exchanges and security dialogue," Cui said in a recent interview with a Chinese paper.

With the debt-crisis pressure building up, their economic and trade ties, once excessively dependent on bilateral trade, begin to be jointly supported by the other pillar of investment, which has adopted a more balanced two-way feature.

PROTECTIONISM IN THE WAY

Despite a 0.7-percent rise in imports from the EU, China suffered a 7.0-percent tumble in its exports to the regional bloc, bearing the cost of the 4.1 percent slump in two-way trade.

Increasing protectionism, which is popular among some EU policymakers, is believed to play a part in the decrease of bilateral trade in 2012.

Admitting two-way trade between the two economic powers as "too big to fail," experts say that trade frictions, with their roots in the EU's protectionist mentality, are major obstacles to a better China-EU partnership.

Aware of the adverse consequences arising from escalating trade disputes, China has, on various occasions, reaffirmed its firm opposition against all forms of protectionism from the EU side.

At a press conference after meeting with EU Trade Commissioner Karel De Gucht in May, Chinese Commerce Minister Chen Deming urged the EU to refrain from taking protectionist measures against China's top telecoms gear makers Huawei and ZTE.

In the September China-EU summit, Premier Wen called on the two sides to vigorously promote the liberalization and facilitation of trade and investment, stand firm against protectionism, abolish the outdated restriction policies on imports and exports and restrain the use of trade remedies so as to make them each other's biggest trading partner by 2015.

The Chinese premier made the call at the China-EU summit following the the latest spat earlier in the month, when the EU launched an anti-dumping investigation into alleged state subsidies for Chinese solar panel manufacturers, in addition to an existing probe into "dumping" allegations of their solar products in the European markets.

In mid-December, Foreign Ministry Spokesman Hong Lei urged the EU to refrain from imposing restrictions on Chinese telecoms gear manufacturers in response to possible measures advised by an internal EU document to prevent Huawei and ZTE from occupying the EU market.

"Undoubtedly, Europe has been the initiator of such trade defense measures in trade with China," said Fredrik Erixon, director of the European Center for International Political Economy, a Brussels-based think tank.

In his remarks on reported discussions within the EU as to whether to shut Chinese enterprises out of government procurement market and EU officials' proposal to conduct public security inspection of investments from China, Erixon said these exposed their intentions to protect local industries.

"It is deplorable to adopt such an attitude towards EU-China trade," he said in a recent interview with Chinese media.

The two sides need to seek a common strategy to curb protectionism and clear each other's misgivings so that bilateral trade will remain as prosperous as in the past decade, he said.

It is not easy to eradicate protectionism in China-EU trade, but the two sides need to seek mutual understanding and accommodate each other's concerns so as to work out a win-win solution.

"As far as the EU is concerned, it is of special importance to recognize China's full market economy status (MES)," said Zhao, the CASS expert.

"Only by doing so can protectionism be discarded and future China-EU economic and trade ties become closer, healthier and more reciprocal," he said.

The EU has, for years, been China's top trading partner and source of technology imports as well as a major source of investments. And close trade contact has been the bedrock of China-EU ties.

Exploring ways to a better EU-China relationship, European experts also set their eyes on the positive roles trade is supposed to play.

Against the backdrop of a global economic slump, the EU and China need to rebalance their trade ties to avoid falling into destructive competition, Gustaaf Geeraerts, professor and director at Brussels Institute of Contemporary China Studies, told Chinese reporters in a recent interview.

"We are in great need of an open trade pattern," he said.

"It is our hope that the EU and China will deepen EU-China relations on the basis of mutual benefit and thus enter into a real strategic partnership," said the expert.