The year 2020, which marked the 45th anniversary of the establishment of China-EU diplomatic ties, is destined to be remembered as an extraordinary one in history. During the past year, the international community weathered the once-in-a-century pandemic, and then a U.S. presidential election full of dramatic twists and turns made the whole world hold their breath. But for both China and the EU, another layer of significance lies in the signing of the China-EU Geographical Indications Agreement (GIs) and the completion of negotiations on the EU-China Comprehensive Agreement on Investment (CAI). The momentum of China-EU economic and trade cooperation has always been one of the top concerns for European companies in China. Jörg Wuttke, president of the European Union Chamber of Commerce in China, said at the 2021 Annual Meeting of China Chief Economist Forum via video link on January 9, “We are very pleased to see that China continues its opening-up policies, relaxes restrictions on foreign investment access, and aligns with international standards. All these efforts have laid a solid foundation for extending cooperation between Europe and China.”
Visitors discover the exhibition booth of Heide Apotheke (HA), a German drugstore chain, on the opening day of the third China International Import Expo (CIIE) in Shanghai on November 6, 2020.
Thriving Trade Ties
The EU is China’s second largest trading partner, and China is the EU’s largest trading partner. Data from the EU Chamber of Commerce in China show that since China’s entry into the World Trade Organization (WTO), EU-China trade has seen a steady growth. The bilateral trade volume in 2019 reached US $705.1 billion, 9.2 times that of 2001 and nearly 250 times that of 1980. In 2020, EU-China trade sum still increased by 3.5 percent, bucking the global declining trend.
The average daily sum of China’s commodities exported to Europe has reached €1 billion, and the average daily exports from Europe to China have also increased to €500 million. Numerous European investors have long been active in the Chinese market. According to the data released by the Shanghai municipal government last December, there are 87,300 foreign companies in Shanghai, of which 10,400 are European companies and 14,000 come from the Americas. The foreign direct investment (FDI) accounts for 25 percent of Shanghai’s GDP, and 11 percent of Shanghai’s employees work for foreign companies; about 66 percent of trade and 30 percent of industrial output are generated by foreign companies, and one third of the taxation also comes from the FDI. “So that shows we are not just guests, we are real stakeholders in the city of Shanghai,” said Wuttke.
On September 14, 2020, China and the EU achieved a monumental success in concluding the Geographical Indications Agreement, which put 100 products with European Geographical Indications (GIs) in China and 100 Chinese GIs in the EU market under protection against usurpation and imitation. That means, Chinese consumers can stay assured about the authenticity of European specialties and foods available in the Chinese market, and meanwhile authentic Chinese products are also available on the European market.
According to the agreement, the Chinese GI products protected in the EU include Pixian Dou Ban (Pixian bean paste), Anxi Tie Guan Yin (Anxi oolong tea), Panjin Da Mi (Panjin rice), and Wu Liang Ye (Wuliangye liquor), while the EU list protected in China includes Cava (a wine from Spain), Champagne (a wine from France), Feta (a cheese from Greece), Irish whiskey, and Munchener Bier (a beer from Germany).
“This is really special between Europe and China, since Europe doesn’t have that kind of agreement with the United States, and it is also conducive to strengthening the economic and trade ties between us,” said Wuttke.
According to the news released on December 11 on the European Commission’s official website, from January to August 2020, EU exports of agricultural products to China reached €11.213 billion, a year-on-year increase of 32.8 percent; the related imports from China shrank to €3.532 billion, a year-on-year decrease of 1.5 percent. That means the EU’s export trade surplus to China in agricultural products reached €7.681 billion, a year-on-year increase of 58.23 percent.
A Significant Agreement
On December 30, 2020, the leaders of China and the EU jointly announced the completion of negotiations on the EU-China Comprehensive Agreement on Investment as scheduled. The investment deal, announced by both sides after seven years of negotiations, is a hard-won achievement, showing that constructive contacts between China and Europe can bear fruit.
Why is the investment agreement so important for both China and the EU? “As a matter of fact, it is actually a market access agreement. It is opening the door [to the Chinese market] for European finance, insurance, service providers, and manufacturers. I hope that via this new access we can actually get more market share,” Wuttke indicated.
Wuttke further pointed out that the current size of the Chinese economy is almost equivalent to that of the European market. This is an achievement China has made in gradually opening its market. However, great potential remains for the further opening up of China’s economy, and some industries have not yet opened to foreign investment. For example, in the financial sector, foreign banks only have a market share of 1.7 percent, and of that, just 0.2 percent belongs to European banks. However, in certain industries, European companies do have a higher market share, such as the automobile sector. “For China, it’s important to keep the door open; and for Chinese consumers, they can also benefit from more intense competition in the market,” said Wuttke.
China has a population of 1.4 billion. But for the EU Chamber of Commerce in China, more focus has been put on the per capita aspect as the Chinese government does. “China is expanding its policies on reform and opening-up, and there you can see that GDP per capita is going through the roof, thereby creating more room for potential business,” Wuttke stressed.
Broader Scope for Cooperation
The next goal of European companies in China is to gain more market access to the country’s service sectors, such as transportation, legal consulting, and tourism, according to Wuttke. As many European companies have built their names across the globe, bringing European service providers to the Chinese market means a lot to the country’s tertiary industry. For instance, it can be very challenging for China to handle an aging society. However, in this field, the related European companies have accumulated relatively rich and mature experience.
Speaking of the future, Wuttke said, “Europe and China have maintained a good foundation for bilateral cooperation. Both sides have benefited from the development of globalization, and both are staunch supporters of multilateralism. In the context of current criticisms on multilateralism and uncertainties in globalization, the EU and China should work together on tackling issues such as WTO reform and global anti-epidemic collaboration. Additionally, the two sides have a lot of mutual interests in developing the green and low-carbon economy, as well as digital economy. Strengthening economic and trade ties will help to maintain the stability of the EU-China and global industrial supply chain in the aftermath of the pandemic and provide impetus for the recovery of the world economy.”
Note: This article is compiled based on the video speech delivered by Jörg Wuttke, president of the European Union Chamber of Commerce in China, at the 2021 Annual Meeting of China Chief Economist Forum.