The EU-China Business Association (EUCBA) and the China Chamber of Commerce to the EU (CCCEU) organized an exclusive webinar with His Excellency Mr Zhang Ming, Ambassador of the People’s Republic of China to the EU and Head of the Chinese Mission to the EU on December 7, 2021. He discussed the topic:'Update on the economic and trade relations between the EU and China'
Ms. Gwenn Sonck, Executive Director, EU-China Business Association, welcomed the speakers and participants to the second exclusive year-end dialogue with Ambassador Zhang Ming.
Mr Jochum Haakma, Chairman, EU-China Business Association, said that Covid-19 had deeply changed our world. The speed and efficiency with which China has tackled Covid-19 is really very impressive, but at present our biggest challenge for companies doing business in China is the fact that they cannot go to China due to the high number of Covid-19 infections in the European Union. As an understandable reaction there are strict rules and regulations to enter China, but we would like to know if there could be a fast track for businessmen to go to China, which is important for the continuation of business and for personal contacts. In these difficult times, the EU-China Business Association acts as an even more important bridge to promote the economic and trade relations between China and the EU. For the full year of 2020 the value of completed European FDI transactions in China reached about €9.5 billion, a decline of 21% compared to 2019. For the first two quarters of this year, completed acquisitions and greenfield investments by European companies in China continued to fall. The value of completed Chinese FDI in Europe dropped to USD534 million in the second quarter of 2021. Automotive continues to be the top sector of Chinese investment in the EU, followed by health, pharmaceuticals, biotechnology and ICT. According to a survey of 80 European companies in China, despite the upheaval of Covid, 42% reported increased revenues in 2020, with automotive, machinery, IT and telecom, pharmaceuticals and the retail sector posting strong financials. European companies remain firmly committed to the China market. According to the IMF, China will contribute more than a fifth of global GDP growth over the next five years. There is still an enormous untapped potential from growth in the Chinese market. The 63% drop of Chinese investment in the EU is also partly due to the screening mechanism for FDI set up by the EU Commission, by which mergers and acquisitions from outside the EU can be blocked, but the EU member states have the final say in approving investments. In answer to the Chinese Silk Road, the EU has launched a new project under the name Global Gateway, where they are getting active in competing with the Belt and Road Initiative rather than cooperating with and integrating with this much older and by far the biggest logistical infrastructure project in the history of mankind.
Mr Xu Haifeng, Chairman, China Chamber of Commerce to the EU, said it is time to take stock of the past year and take a glimpse into the future. 2021 was a critical year for the development of China and the EU. China remains the EU's largest trade partner in goods. Chinese investors continue to opt for the EU as an important investment destination. Private capital amounts to 82% of Chinese investment in the EU. On 18th October, the CCCEU published its flagship report for 2021, for which it conducted an analysis of the Development of Chinese Enterprises in the EU. The 2021 Report is titled “Strengthening Mutually Beneficial Cooperation to Shape the Common Future”, and it aims to provide a scientific and true reflection of the changes in the ease of doing business in the EU, and to represent the wishes and recommendations of Chinese enterprises to policymakers.According to the report, over the past 12 months Chinese companies in the EU achieved encouraging growth in turnover, number of employees, and filed patents, thanks to the strong resilience of the European markets and of supply chains. The Chinese business community stays confident in the long-term development of China-EU economic relations, and ready to contribute to the bloc’s twin green and digital transitions.
However, according to the flagship report, the ease of doing business in the EU in 2021 declined for the second consecutive year, with significantly lower scores for the political climate and the business environment in comparison to the past. This affected by a number of events, including the "freezing" of the debates on ratifying the investment agreement, and a series of new unilateral instruments in the trade sector, which have increased Chinese companies’ concerns. The score for business confidence also received a blow due to worsened ties and the politicization of business. As a result, the CCCEU has proposed nearly 70 recommendations in ten key areas, with the aim of support EU policymakers in promoting dialogue and discussions between China and Europe, and in providing Chinese companies with an open and non-discriminatory business environment. The detailed content of this Report could be downloaded in both English and Chinese from the CCCEU’s website.
H.E. Mr Zhang Ming, Ambassador of the People’s Republic of China to the EU and Head of the Chinese Mission to the EU, said that in 2021, despite the ongoing pandemic and the weak recovery of the world economy, the business communities of China and the EU have done a remarkable job. Thanks to their efforts, China-EU business cooperation has grown momentously. In the first 10 months of this year, China-EU trade reached USD670.4 billion, exceeding last year's total trade volume, representing an increase of 30% year-on-year. There is no doubt that the achievements and the resilience of China-EU economic and trade ties are a powerful response to those who advocate decoupling and undermine China-EU cooperation. We also have to note that the bilateral investment between China and the EU is decreasing. Our discussion can help us reverse the situation. At the end of last year, after seven years of negotiations, the two sides finally reached a comprehensive, balanced and high-quality investment agreement. This is highly important for market access and a level playing field for companies of both sides. In March this year the agreement on geographical indications came into force. The unified high-level protection system enables people from both sides to buy each other's products. Last month, China and the EU reached common ground on sustainable finance, providing guidance for green investment.
As the world's largest market, China has 1.4 billion people who aspire for a better life, among them are more than 400 million middle-income consumers. There is huge space for the consumption growth of one billion people. Committed to further opening-up, China has revised its list for foreign investment for four consecutive years, reducing the number of items on the list from 93 to 33. This list will become even shorter. Not long ago, President Xi mentioned that China will open its medical and telecommunications sectors. The profits and turnover of European enterprises in China reached a new high in 2020 and 60% of them hope to further extend investment in China. China has become the world's most important market for many companies. The prosperity and opening up of the European market is also a driving force for China's economic development. China and the EU are deeply connected, offering each other opportunities and market demand.
In 2021, China-EU relations experienced twists and turns. In March, based on lies and disinformation, the EU imposed unilateral sanctions on China, which hampered bilateral relations. The China-EU investment treaty has been put on hold by the European parliament. In recent years the EU has been strengthening and expanding a series of economic and trade tool boxes which has made many business people worry about the future direction of the EU. CCCEU Chairman Xu talked about the screening mechanism as a result of which Chinese investment in the EU is declining. According to a survey by the CCCEU, the rating of the EU business environment fell for the second consecutive year. Many people asked me about the future trend of China-EU relations. It depends on how the EU views China and China's development. In March 2019 the EU has proposed a triple positioning for relations with China which has severely impacted and disrupted the development of bilateral relations. China opposed the triple positioning from the very beginning. Two years later you can look back and see what this triple positioning has brought the EU itself. China always believes that China and the EU are partners, not rivals; they are each other's opportunities, not challenges; cooperation is the right word, confrontation will bring no winner. China has always been committed to mutual respect, seeking common ground while shelving differences and striving for common interests. By making the pie bigger, as two major forces, two markets and two civilizations in the world, China and the EU have a joint responsibility of maintaining world peace and stability, and promoting common development and prosperity. Our common interests far outweigh our differences. We have a thousand reasons to be partners and not one reason to be rivals. It is clarifying that some people in Europe have taken note of the present state of China-EU relations. Recently we have heard comments that China and the EU should reengage in trade. In an article a member of the European Parliament said that economic nationalism and isolationism are bad for all players in the international arena. The trade volume of over €1 billion illustrate that our interests are interdependent. China and the EU have adopted an effective approach to manage differences over the past decades but key is to maintain equal standing and adhere to the principle of dialogue and mutual benefit and jointly building a healthy, stable and future-oriented relationship.
In the past two years we have both come to appreciate more than ever the significance of a community with a shared future for mankind and the importance of openness, cooperation, multilateralism, dialogue and consultation. We should work together and go hand-in-hand instead of letting go each other's hand. We must build bridges and dismantle the walls instead of dismantling the bridges and building walls. We must uphold common values and the multilateral trading system. This year marks the centenary of the founding of the CPC, the beginning of China's 14th Five Year Plan and a new year to comprehensively build a modernized socialist country. This year also marks the 20th anniversary of China's entry to the WTO. China's opening up has promoted development and brought opportunities to the world economy. Openness has become the defining feature of contemporary China. As China enters the new era it will remain committed to opening up at a higher level, sharing development opportunities with the rest of the world and making economic globalization more open, inclusive, balanced and beneficial to all. We welcome European companies to participate in China's development, share the development opportunities in China and achieve greater success. We also expect that Chinese companies investing in Europe will be treated fairly and indiscriminately.
As 2021 is coming to a close, my mission in Brussels is also coming to an end. Ambassador Zhang said that over the past four years, he has had the honor of witnessing many historic events in China-EU relations. In the economic and trade field he witnessed China become the EU largest trading partner, the conclusion of the investment agreement between China and the EU and the strong resilience and vitality of China-EU cooperation, facing Covid-19. He also had the honor of making many friends in industrial and commercial circles. The EU-China Business Association, the China Chamber of Commerce to the EU, the EU Chamber of Commerce in China, BusinessEurope and others talked with him many times about their wishes, plans, difficulties, suggestions and even criticisms and complaints. Together with his colleagues, he has always treated them as friends and tried their best to help them with their plans and overcome difficulties and also encourage the central and local governments to adopt policies and measures in response to their suggestions and criticisms in order to further open up and improve the business environment. Of course, he always asked for their patience and confidence.
Ambassador Zhang said: “I have been a farmer, and I have seen the cordial work and life at the farmhouses in Wallonia. I have learned how much they hope to sell their cheese, beef, and grains to distant Chinese markets. In Zeebrugge, I saw Volvo car parts and finished cars being transported by the China-Europe Express. At the headquarters of Bekaert, I was awed by this century-old company's outstanding innovation ability and its persistence and tolerance for cooperation with China. At IMEC, I learned that their cooperation projects with China are among the best. The famous Dutch ASML regretfully told me that the cooperative project they were eager to complete was artificially shelved. In the south of France, I was excited for the international nuclear fusion science project jointly participated in by China, the European Union and eight other parties. Such cooperation will make the homeland of mankind cleaner and more beautiful! Of course, my list of regrets is also very long. The end of the epidemic is not in sight; the China-Europe investment agreement is still in the deep freeze; the idea of taking a look at the Croatian Peljesac Sea-crossing Bridge built by Chinese companies was not realized; the goal for the number of Chinese tourists to Europe to reach new heights is also not realized due to the pandemic, and so on. The fundamentals of China-EU trade cooperation, which is mutually complementary in nature, will not change, nor will be the direction of making progress amid sound competition. I hope China and the EU will seek common ground while shelving differences, expand consensus and work together to improve the well-being of our peoples and promote world prosperity and stability. Ending his speech, Ambassador Zhang wished everybody a safe, happy and peaceful Christmas and New Year.
Q&A session. The EU has approved human rights sanctions, including those on four Chinese officials and one Chinese entity. How will the EU decision affect bilateral trade relations? Ambassador Zhang: The two sides have a mature approach to solving problems. Those that cannot be solved for the time being should be managed through communication, but unilateral sanctions should not be used. The EU sanctions have caused difficulties in relations and are not constructive. China has done a lot to prevent the downward spiral in China -EU relations. Not long ago, Presidents Xi Jinping and Michel reached consensus and are actively preparing for the next China-EU summit. Regretfully, the EU has decided to extend the sanctions against China and the atmosphere of the relations may be affected further. It is not in line with the fundamental and long-term interests of China and the EU.
Will the CAI be ratified in 2022, what are the main obstacles and what will China do? Ambassador Zhang: The CAI is a high-level agreement of mutual benefit and all parties have high expectations. China will honor its commitments, including for the CAI. China has not stopped its work to ratify the agreement. The current obstacle is that the EU has frozen the process. The ball is in Europe's court. The key to solve the problem is to return the agreement to its economic nature. It aims to regulate China-EU economic trade and investment activities and solve the problems in economic and trade cooperation. It is not the master key to open all doors. If some people insist on resolving all differences and problems between China and the EU, I don't think they want to solve the problems.
Strategic autonomy has become a catch phrase in the EU's policy and China has reaffirmed its support for it. What are your thoughts? Ambassador Zhang: China supports the EU's autonomy proposal because it is in line with the EU's positioning as a global power. It is a matter for Europe and the U.S. to strengthen interaction. China has never opposed dialogue and cooperation between Europe and the U.S. China-EU relations have their own value and should not be subordinate to major power relations. China-EU relations are not directed against any third party.
Do you expect more obstacles, difficulties or uncertainties in China-EU relations? Ambassador Zhang: When a new government takes office in a country it often needs a period for developing internal and external relations, but cooperation and mutual benefit are the mainstream and essence of China-EU relations, which will not be changed by individual events. It is essential to ensure smooth communication, properly manage differences and expand cooperation. Germany is the largest trade partner of China within the EU. China and Germany have set up a high-level government consultation mechanism and have held six rounds of consultation so far. After taking over the EU rotating presidency, we hope France will play a positive role in China-EU relations.
On December 1, the European Commission launched the Global Gateway, compared by some to China's Belt & Road Initiative. Could there be synergies between the two? Ambassador Zhang: Infrastructure is lacking in developing countries and is crucial to their development. China has carried out many projects in the framework of South-South cooperation. China sincerely welcomes all to help developing countries build infrastructure and promote common development whether it is the BRI, Global Gateway or Build Back Better. It is all about pursuing our common international responsibilities and achieve the goals of the 2030 agenda for sustainable development. This is similar to the concept of common prosperity in China. If we turn infrastructure into a geopolitical game it will be wrong. The China-Europe freight train built during the Covid pandemic has been called a lifeline.
What is your assessment of Cop26 and further cooperation between China and the EU on the green economy? Ambassador Zhang: Cop26 is of great significance for the implementation of the Paris agreement. It is important to show ambition in tackling climate change, but what is more important is action and cooperation. China has issued the action plan for carbon peak by 2030 and the carbon neutralization goal. China and the EU have made solid progress in the green economy cooperation.
What can China do to support the development of the EU's digital economy? Ambassador Zhang: It is in the common interests of China and the EU to promote practical cooperation in the digital economy. Last year, China and the EU established a high-level digital dialogue mechanism. China and the EU have respective strengths and common interests and concerns. Some say the EU is stronger in rule making and China is more focussed on market applications. It shows the complementarity of both sides. Rules and markets are like two sides of the coin. China and the EU should not only open up their markets but also work together to establish rules in the global digital field.
Will the next step be the conclusion of a free trade agreement? Ambassador Zhang: So far, China has concluded 19 FTAs with 26 countries. Recently China applied to join the CPPCC. Trade is important in the post-Covid-19 recovery. It would be a pity not to have a FTA between China and the EU. At least both sides could carry out a joint feasibility study. We hope the EU will be more active in this regard. China is open to negotiate an FTA.
Do you agree with the assessment that the Democracy Summit in the U.S. is divisive? Ambassador Zhang: Democracy is the common value of all mankind. It is not the patent of a few countries. Whether a country is democratic or not should be judged by its people, not by a handful of outsiders. The U.S. divides countries and regions into different categories based on its own likes and dislikes. If it is not an action that divides the international community, what can we call it? This action runs counter to the spirit of democracy and smells of Cold War confrontation, which will only bring instability and chaos to the world.
What are the biggest challenges for the China's economy in 2022? Ambassador Zhang: Countries in the world are facing common challenges such as rising energy prices, inflation and debt accumulation. China is no exception, but China's GDP grew by 9.8% year-on-year in the first three quarters of this year and macro indicators stayed in the proper range. The employment situation is basically stable and China's recovery took the lead in the world. China will run its own affairs well.
What is the possibility of China reopening its borders and allowing travel? Ambassador Zhang: Travel restrictions have brought some inconvenience for businessmen traveling to and from China. On the other hand it has created conditions for European enterprises in China to operate normally. I cannot predict how the situation will evolve but China more than anyone else needs to resume normal entry and exit at an early date. We will continue to optimize the fast channels especially for businessmen.
Mr. Haakma delivered concluding remarks and thanked Ambassador Zhang for four years of cooperation.
