EU – CHINA COOPERATION PAST, PRESENT & FUTURE Mr Rudie Filon 1st Secretary Development & Cooperation European Delegation to China & Mongolia 24 April 2009

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. 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. EU-CHINA RELATIONS
1. EU-CHINA RELATIONS: CONCEPT
3

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. 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. 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. 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
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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.

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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
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10. EU – CHINA RELATIONS
2. Trade and Investment
10

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. CHINA’S ECONOMY –
PERFORMANCE
 Chinese exports doubled in just over 5
years
In contrast, it took Germany 10 years in
1960s
12

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. 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
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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. 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. 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. 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. 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. OR IN OTHER WORDS . . .
EU companies in China
achieve sales of 24 Mio € or
exports of 5 Mio € per hour !!!
20

21. OUR TRADE
 EU exports
• Machinery
• Transport equipment
 EU imports
• Machinery
• Textiles
21

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. WHY EU COMPANIES
COME TO CHINA . . .
???
33

34. WHY EU COMPANIES
COME TO CHINA . . .
PRODUCE GOODS IN CHINA
1.
FOR CHINA
34

35. WHY EU COMPANIES
COME TO CHINA . . .
2. ESTABLISH OR EXPAND
REGIONAL BASE
35

36. WHY EU COMPANIES
COME TO CHINA . . .
3. REQUEST FROM
CUSTOMERS IN HOME
COUNTRY
36

37. EU-CHINA RELATIONS
3. DEVELOPMENT & COOPERATION
37

38. AS A REMINDER . . .
IN SPITE OF ITS ECONOMIC PROWESS
EVEN TODAY CHINA STILL IS
A DEVELOPING COUNTRY!!!!
38

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. KEY BILATERAL PROJECTS
Environment & Sustainable Development
Sector
• Natural Forest Management Project
• Biodiversity Programme
• River Basin Management Programme
50

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)
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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. EU-CHINA RELATIONS
4. EU-INTEREST PROMOTION:
THE NEXT LOGICAL STEP
53

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. 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. 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. EU INTEREST PROMOTION
FROM 2010:
PERMANENT BUDGET LINE IN
EUROPEAN COMMISSION’S BUDGET
ENSURING LONG-TERM APPROACH
57

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
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