Chinese Prime Minister Wen Jiabao visited the European Commission on 30 January 2009. The President of the EC, José Manuel Barroso, and Wen Jiabao discussed overall EU-China relations, but provided the present economic and financial landscape, the emphasis was put on mutual interest in new opportunities for trade and investment.
Later on, at the beginning of February, during the Strasbourg plenary session, relations with China were again brought up in discussions. The EP insisted on more cooperation and no protectionism between the two partners.
What’s all the buzz about?
The European Union has been China’s biggest trading partner since 2006. For the EU, China is the second largest trading partner, after the USA. Only in 2007, EU goods exports to China reached EUR 71.6 billion, and the imports were EUR 231 billion. The EP cannot ignore the impact of the financial crisis on some industry and service sectors, which play a crucial role in defining the export-import relationship between the European Union and China.
At the beginning of the global crisis, a lot of analysts predicted a shift in world power to some emerging-market countries, such as India, Russia and China.
Before the global financial meltdown resulted in rapidly shrinking exports, massive layoffs and numerous protests of factory workers in China, the International Monetary Fund had predicted that Chinese growth would be 8.5 per cent in 2009. Nevertheless, at the end of January 2009, the IMF downgraded China’s growth rate to 6.7 per cent.
In addition, there was the yuan controversy.
Timothy Geithner, the new US Treasury secretary, accused China of artificially depreciating its currency in order to boost exports. A couple of days later, Dominique Strauss-Kahn, head of the IMF, confirmed that the Chinese currency was undervalued and urged the country to allow the yuan to strengthen.
On the other hand, some analysts claim that China is already in a recession, which gives Wen Jiabao an excuse to insist that he cannot let the currency rise, because of his country’s financial and economic problems.
During the Strasbourg session the MEPs joined the IMF (and apparently Geithner) in urging China to let its currency appreciate, hence its worth on the international financial markets would reflect more accurately China’s economic position.
Surprise, surprise… with a big bang
Despite the continuous pessimistic figures and expectations lately, the newest Chinese credit data revealed a record lending and money growth – result of the Chinese government’s appeal to the banks to boost the economy by increasing lending. “China is the first economy to see real credit expansion at this point in time, during this trough of the global slowdown. That differentiates China from other economies,” said Ting Lu, an economist at Merrill Lynch in Hong Kong, quoted by Reuters.
What lies ahead?
The bilateral trade between China and the EU remains imbalanced. Provided the figures involved, the EU external trade highly depends on a strictly set partnership with China. The two partners will hold a summit after the G20 meeting in April, where they will further discuss bilateral trade policies, patent violations and anti-dumping measures.
Meanwhile, it may not be such a bad idea for the EU to take some Dragon-style surviving lessons from China.
(22 votes, average: 4.05 out of 5)
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China is scared of the economic downturn in the US and has no real interest in Europe, a continent facing 4 problems that are easy to see for everybody.
a) no energy and commodity resources.
b) the highest labour costs in the world.
c) worsening demographics
d) heavily indebted private and public households.
Toni Straka, the points you make are the ones that make as interesting to China.
a) We are competing for the same energy sources.
b) This makes there manufacturing and exporting to the EU profitable.
c) A lot of stuff can be sold to old people. And, by the way, China has an aging problem, too.
d) China is one of the creditor of this heavily indebted Europe.
And here is the latest news story on the U.S. being softer on China’s controversial currency policy.
http://online.wsj.com/article/SB123461810961987989.html