Mr. Tóth is an Hungarian fellow of Politique.com based in Luxembourg. Considering present states of main players’ economies in global commerce, their standby might be an obstacle to development and innovation which could guarantee prosperity for the society. European Union citizens could also just benefit from more intensive commercial connections with the People’s Republic of China but the question is how bilateral trade can be improved.

 

In a time of multi-polarity and economic globalization China’s economic race seems to be moderating and the European Union is still struggling with the echoes of the latest financial crises and current migrant crises. Along with these issues, economic interactions have not been progressing as experts and professionals expected, although there is still huge potential to be exploited.

The daily trade accounts more than €1 billion nowadays, despite of regressive demand on the European side balanced by growing purchasing power of the Chinese middle and upper classes. Industrial and consumer goods amount the majority of the import from China meanwhile export is made up of machinery and equipment. Concerning outward foreign direct investment from China Europe is regarded as marginal destination, not like China for European investors who altogether are ranked among the top five.

In global aspect, the European Union acts as counterbalance for China against the United States. China had considerable support from the EU during its join to the World Trade Organization. Apart from some cooling off periods in diplomatic and human rights relations, the EU is the biggest trading partner of China and it has crucial role for the European economic prosperity. The trade deficit of the EU against China eased in the previous years as result of placing many manufacturing operations back to the EU and Chinese protectionist measures.China-EU-trade-war-funny 2

Besides being the largest trading nation, a major player in international affairs and dominating member of global economy, China still shows symptoms of “severe lack of balance, coordination and sustainability in its development” as the China’s Policy Paper on the EU stated in 2014, April.

In the recent years, Chinese producers are having ponderous time because of decreasing product prices on the market along with positive effects of stable inflation. The GDP growth in 2015 was around 6.9% and it is expected to be even lower in 2016. Other future risks might derive of real estate bubble and rising national debt.

In spite of that China promised to fulfill the WTO requirements, barriers to entry into its market are still present and state subsidies are often given to local enterprises causing unfair conditions for foreign ones. The lack of copy right protection, transparency in political decision making as well as limiting access to public procurement (Buy Chinese policy) for foreigners provide solid base for distrust from external parties. At the same time Chinese firms are getting known for their expertise in creativity and inventiveness strengthened by effective marketing strategies meaning harsher competition.

Unless Beijing commences implementing floating exchange rates, non-intrusive government, accounting standards, proper property laws and bankruptcy laws, the market economy status will not be approved by other WTO members what can still create opportunity for imposing higher dumping rates into the EU.001ec949c22b13f7af6c03

However, the Chinese leadership works to build an open world economy and a new type of international relations featuring equality, mutual trust, inclusiveness, mutual learning and win-win cooperation. Therefore it is committed to liberalizing its economy, reduction of state control in relevant fields.

Improvement in quality of life is primary goal of the current government prognosticating enormous future government investments in these areas.

Relatively low levels of investment flows anticipate huge potential in financial sectors, be wealth management, merger and acquisition or internationalizing of the RMB if the given regulations and obligations for financial sector will be diminished by one single EU-China investment agreement in the near future. Defensive instruments must be framed properly in areas such as customs, product safety, licensing procedure and real estate renting. Elimination of restrictive practices on one side will provoke reduction of countermeasures on the other side which is the main aim of the EU-China 2020 Agenda for Cooperation adopted in 2013.

In the last decade, positive results in economy and technological innovation of the EU-China pair are undeniable. Success of cooperation to date indicates further enhancement in an even more integrated and mutually beneficial cooperation in order to ensure prosperity and continuous development.

Mihály Alex Tóth

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