China-Europe Economic and Trade Relationship Is Developing Fully

[2009-01-03 12:26:50]

Thursday,December 25,2008 Posted: 14:29 BJT(0629 GMT)

From:MOFCOM Article type:Original

1, The General Situation of the China-Europe Economic and Trade Cooperation during the Period of Reform and Opening-Up

The total area of Europe covers 2,700 square kilometers and the population of Europe exceeds 800 million. The member countries of the EU and the counties which are located in the west of Europe but not member countries of the EU, are developed economic entities, and have mature and highly integrated market and steady policies. The countries in the middle and east of Europe are all carrying on their economic transition very quickly, and joining the EU successively. The countries of the Commonwealth of Independent States are also countries with transition economies. In the economic and trade cooperation with Europe, the countries in the west of Europe are important trade partners and important source places of capitals and technologies for China. And the countries which belong to the Commonwealth of Independent States or are located in the middle and east of Europe, are the important places for China to carry out the market diversification and the “going out” strategies。

(1) The Trade Contacts Develops Rapidly
For 30 years, the trade contacts between China and European countries have been developing fast. According to the statistics of the China Customs, the total volume of bilateral trades had reached to US $ 427.6 billion in 2007 from US $ 6.4 billion in 1978。

(2) The Capitals Invested in China by European Countries Are Usually very Large and Have Good Quality
By September of 2008, the number of the projects invested by European countries in China has exceeded 33,000; the total value of the foreign capitals in contracts has reached US $ 120 billion, and the capital that had been actually used was US $ 65.7 billion. From the investment amount of the projects, we can see that the average investment amount of the projects invested by European countries is larger than that of the projects invested by other countries and regions, and the quality of the projects invested by European countries are quite good.

The EU is a main source place of foreign capitals for China. By September of 2008, the number of the projects invested by the EU, the foreign capitals in the China-EU contracts and the total amount of the EU capitals that have been actually used, respectively accounts for 88%, 93% and 93% of that of the whole Europe.

(3) The Capitals invested by Chinese Enterprises in European Countries Have Grown a Lot
The economic powers of Chinese enterprises are becoming stronger and stronger, and so are their investments in Europe. According to the statistics of the Department of Out ward Investment and Economic Cooperation of the Ministry of Commerce, China actually invested US $ 1.24 billion in European countries in 2007, and actually invested US $ 430 million in Europe in the first three quarters of 2008. The “Going Out” strategy of Chinese enterprises has obtained gratifying achievements in the Commonwealth of the Independent States and in the middle and eastern region of Europe, and has also achieved a breakthrough in the west of Europe. A ladder structure of investment from east (the Commonwealth of the Independent States) to west (the middle and eastern region of Europe and the Western Europe) has formed. In the countries of the Commonwealth of Independent States, Chinese enterprises usually invest in such industries as resource exploitation, manufacturing and transportation, real estate, telecom research and development, agricultural product processing, processing industry, wholesales, retail trades and so on. In the middle and eastern region of Europe, Chinese enterprise mainly invested in home appliance manufacturing, wood processing, bicycle assembly, cigarette manufacturing, IT, real estate, telecom and so on, in the manners such as merge, equity participation, sole proprietorship and so on; Between the two sides, the cooperation in the high-new-tech field has started, and the project contracts and labor service cooperation have become new focal points. In the countries of the Western Europe, especially in the countries of the EU, many Chinese enterprises have also carried out many investments and mergers.

(4) Improving and Perfecting of the Law Framework for the Economic and Trade Cooperation Between China and Europe
China has signed Bilateral Economic and Trade Agreement or Economic Cooperation Agreement with 49 European countries, and is carrying on the negotiation with the EU on improving the “Trade and Economic Cooperation Agreement” made in 1985. China has also signed Bilateral Investment Protection Agreement with 44 European countries and signed Bilateral Agreement on Avoiding the Double Taxation with 43 European countries. Besides, China has been actively carrying out cooperation and consultations with the countries of Europe within the frame of the WTO and so on, and has been trying hard to construct the multinational trading system, so as to create conditions for the bilateral economic and trade development.

(5) Improving and Perfecting of the Multilateral or bilateral Economic and Trade Consultation and Cooperation System between Chinese Government and the Governments of European Countries.
In the last 30 years, Fifty-one Multilateral or bilateral Economic and Trade Consultation Systems which started by the Ministries of Commerce, have been established between China and Europe, and 2 of them are deputy premier level, 7 of them are minister level, 19 of them are deputy minister level and 23 of them are director general level. The Consultation Systems mentioned above also have dozens of subsidiary working groups. The perfected systems have provided powerful guarantee for boosting the trade development between China and Europe.

2, Economic and Trade Overview of China and Its Major Trading Partners

(1) The European Union

Thirty three years ago this year, on May 6, 1975, the European Community (EC) and China formally established diplomatic relations. In 1978, China and the EC signed the “1978 Trade Agreement;” this was the first intergovernmental agreement to be reached between China and Europe. In 1985, the two parties signed the “Sino-EU Trade and Economic Cooperation Agreement.” The 1985 agreement covered areas such as trade, investment, development assistance and economic cooperation, and replaced the 1978 Trade Agreement. Using the existing framework of the Sino-European economic and trade agreements, the two sides established a joint committee mechanism to discuss economy and trade at ministerial level. Three working groups were set up under this committee to deal with economy and trade, environmental protection, and energy. A science and technology leadership committee and the Sino-European Information Society Project were also established. In recent years, China and the European Union (EU) have also launched a series of dialogue mechanisms that deal with intellectual property rights, trade policy, industrial policy, competition policy, and textile trade. In November 2007, the establishment of high-level Sino-EU economic and trade dialogue between deputy leaders of concerned countries was announced. The first of these talks was successfully held in April 2008.
Sino-EU economic and trade ties are an important component of the all-round strategic partnership between China and the EU. By providing an important economic foundation, they also hold together bilateral relations between the two partners. In recent years, the fact that leaders of both sides have attached great importance China-EU economic and trade relations and the active promotion of ties has yielded substantial results and led to the rapid development of bilateral economic and trade cooperation. At present, the EU is China's largest trading partner and is its biggest export market. The European trading bloc is also the largest source of technology imports for China and is its fourth largest investor. China is the EU’s second largest trading partner.

(2) Russia

During the last 30 years of reform and opening-up in China, economic and trade ties between China and Russia have deepened in all respects and have rapidly developed. In 1982, after an exchange of letters, border trade between the former Soviet Union and China was officially reestablished. From 1984 to 1986, the two countries signed a series of documents including the "Sino-Soviet Intergovernmental Agreement on Economic and Technological Cooperation," and the "Sino-Soviet Intergovernmental Economic and Technological Cooperation on Industrial Construction and Modification Projects in China." These documents laid the foundation for the rapid reestablishment and development of bilateral cooperation between China and the Soviet Union. Following the breakup of the Soviet Union, in March 1992, the two countries signed the "Sino-Russian Intergovernmental Agreement on Economic and Trade Relations,” this confirmed that two countries would give each other most-favored-nation treatment, something which would guarantee the stable transition of economic and trade relations between the two countries.

In 1996, China and Russia established the mechanism for the regular meetings between the prime ministers of the two countries. In the same year, the two countries set up the Committee for Chinese and Russian deputy premiers regular meeting, which has ten 10 sub-committees in charge of economic and trade, energy, transport, nuclear, science and technology, aerospace, finance, information, civil aviation and environmental protection respectively. These sub-committees have made a series of remarkable achievements in promoting economic and trade relations between the two countries: First, the scale of bilateral trade grew by leaps and bounds to reach 52.19 billion U.S. dollars from January to November of 2008, and it is expected that the goal proposed by the heads of the two countries, i.e. to increase year 2010 bilateral trade volume to 60-80 billion U.S. dollars, will be realized in advance. Second, mutual investment grew from scratch and become increasingly active, the current investment size has exceeded more than 2 billion U.S. dollars, mainly concentrating in energy, mineral resources development, forestry, trade, household electrical appliances, communications, construction, manufacturing, metallurgy, chemical industry, transportation, and other sectors. Third, economic and technological cooperation has been conducted in various fields, for instance, the first-stage project of Tianwan Nuclear Power Plant has been put into operation; the two sides continue to launch large-project cooperation in energy, nuclear energy, high technology, aerospace and other fields, injecting new vitality to the two countries’ economic development. Fourth, the cooperation in project contracting and labor service contracting is progressing well. As of the end of 2007, the value of labor service contracting and project contracting agreements signed between the two sides amounted to 8.22 billion U.S. dollars, and the turnover reached 4.46 billion U.S. dollars. Fifth, the economic and trade cooperation in border areas become increasingly active, ranging from the establishment of industrial parks in two adjacent areas, production of textile, home appliances and other daily necessities, to modern logistics, timber deep processing, resource development, financial services and many other cooperation forms. The cooperation plays an active role in driving local economic development and improving the living standards of the people.

(3) Shanghai Cooperation Organization

Shanghai Cooperation Organization (SCO), founded in June 15, 2001, is the first regional international organization advocated by China and named after Chinese city. Shanghai Cooperation Organization originates from the "Shanghai Five" mechanism designed to solve border issues, along with the development of the situation, regional economic cooperation is upgraded as SCO’s important cooperation content, and gradually develops into an impetus to promote the strengthening of the organization, and has equal importance with anti-terrorism and security.

Over more than seven years since Shanghai Cooperation Organization was set up, under the leadership and promotion of Chinese side, regional economic co-operation has gone through the initial stage, entered into a comprehensive and pragmatic cooperation stage, and has produced important results. China and other member states have reinforced the trade and economic relations, and continuously improve their mutual dependence, and all member states have strengthened the sense of identity towards the regional economic cooperation.

The trade volume between China and other member states increased from 12.1 billion U.S. dollars in 2001 when SCO was set up to 67.5 billion U.S. dollars in 2007, with an average annual growth of 30%, and is expected to exceed 80 billion U.S. dollars in 2008. The cumulative total investment made by China in five other member states exceeded 10 billion U.S. dollars, is mainly distributed in energy, mineral resources development, forestry, trade, household electrical appliances, communications, construction, services and other fields. Sino-Kazakhstan oil pipeline project and the Central Asian natural gas pipeline project have been launched one after another. This local region has become an important destination for China’s “going out” strategy. At 2006 Shanghai summit, Chinese President Hu Jintao proposed to focus on the cooperation projects in energy, transportation, telecommunications and other prior areas, encouraged multiple parties to involve in the cooperation so as to make mutual benefit. With the support of Chinese preferential credit and the SCO UnionPay organizations, a batch of economic cooperation projects have been successfully launched and actively implemented, and the energy, transportation and telecommunications networks connecting this region have taken initial shape.

Source: MOFCOM