New opportunities for China-EU Cooperation

Economics September 21, 2024

New opportunities for China-EU Cooperation

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The economic and trade relations between the two economic powerhouses, China and Europe, have been consistently grabbing global attention. The potential and prospects for cooperation in various sectors are seen as game-changers in the global economic landscape. The mutual interest in enhancing cooperation has evoked widespread concern and optimism among stakeholders from both regions. In the past few years the focus of collaboration between China and the European Union has mainly been on three primary areas green transformation digital economy and sustainable development. These sectors don’t merely fall in line with the global economic development trend but also serve as crucial channels for boosting the competitiveness of both China and the European Union on the global stage. Particularly when it comes to the urgent issue of climate change both sides have vocalized a shared aspiration to collaborate in addressing this formidable global challeng，demonstrating a perfect alignment of priorities for sustainable growth and development. China-Eu cooperation covers a wide range of areas, not only trade and climate, but also investment and economic cooperation in China. The growth of China-EU trade has accelerated significantly, with the total trade volume rising and the trade deficit shrinking. Bilateral trade has been increasing，with China’s trade volume with the EU growing from US$100 million when diplomatic ties were established to US$100 million annually. China’s main export markets are the United States, Japan and the European Union, in that order, while the European Union is much less dependent on China ‌.

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In the realm of climate change and clean energy, China and the European Union (EU) stand as significant partners, confronting both opportunities and challenges. Since the signing of the China-EU Joint Declaration on Climate Change in 2005, Europe has emerged as a pioneer in advancing clean energy initiatives. Concurrently, as one of the world’s largest carbon-emitting nations, China is actively promoting green development and emission reduction strategies, sharing common aspirations with Europe regarding climate change.

China and the EU have engaged in collaborative efforts across various domains including energy efficiency, clean energy technologies, low-carbon transportation, and sustainable urban development. These initiatives have strengthened their foundation for addressing climate change while fostering bilateral cooperation in clean energy sectors. Both parties exhibit ample potential and willingness to collaborate further on issues such as energy transition and carbon neutrality.

As a result，there is a significant alignment of interests between China’s development strategies and those of Europe，with both sides sharing common goals and a strong dedication to working together. In 2015，the UK and China solidified their alliance with the establishment of the first China-UK Clean Energy Partnership. This alliance has yielded numerous successes by creating economic growth opportunities, developing cost-effective technologies, enhancing clean energy utilization, and facilitating trade in green goods and services.

In 2023, China entered into an agreement with Denmark by signing the Green Joint Work Plan for Renewable Energy Cooperation (2023-2026), aimed at promoting technical exchanges between both countries within this sector. The collaboration between China and the EU extends beyond mere transitions to green energy; it encompasses joint ventures involving offshore wind power projects, power glass production initiatives, as well as sustainable aviation fuel developments.

These projects collectively address critical areas such as energy conservation, carbon reduction measures alongside efficiency improvements; they also foster innovation in green technology while supporting circular economy practices that contribute to carbon emission reductions and sustainable development goals.

The rapid advancement of new technologies in the digital era has positioned digital transformation as a pivotal strategic initiative for countries in this new age. The mastery and advancement of cutting-edge digital technologies has become essential for boosting national competitiveness and influence，leading nations across the globe to prioritize the creation and execution of successful digital transformation strategies. With the overarching aim of bolstering strategic autonomy, the European Union (EU) employs a “rule first” approach to advance the establishment of an export strategy characterized by extroversion, standardization, and enhanced digital sovereignty. China and the EU have complementary strengths in technology and governance, presenting significant opportunities for extensive collaboration. Additionally, China is actively seeking to leverage digital management as a means to promote modernization and development. However, amid economic turbulence, it is imperative for China to exercise greater strategic patience while responding flexibly and adeptly in a proactive manner to mitigate disagreements.

The EU aims to augment its influence over international regulations governing the digital economy through both internal policies and external initiatives. In pursuit of this goal, the EU has adopted a framework of “digital constitutionalism,” which seeks to safeguard fundamental rights and democratic values while ensuring fair competition within digital markets. Regrettably，this ambition is held back by the relatively weak competitiveness among market players in Europe’s digital economy，resulting in technological advancements trailing behind those made by both the United States and China. Nevertheless, prioritizing breakthroughs in regulatory frameworks remains central to the EU’s agenda.

To that end, efforts have shifted towards fostering rule-making across three dimensions: establishing standards for the digital market itself; advancing innovations in digital technology; and evaluating processes related to digital construction. This represents a highly effective strategic recalibration on part of the EU that China should consider integrating into its own strategic deployment alongside relevant resources.

China should strengthen its ability to set the agenda for cooperation with Europe，actively engage with the European counterparts to explore collaboration opportunities in different sectors，and work towards achieving breakthroughs in more practical areas. Given the current circumstances, there is an urgent need to develop a new framework for China-EU digital cooperation. It is recommended that both government and industry work in tandem to address market demands and maximize economic benefits. Additionally, the EU should take proactive measures to explore markets and bolster stability through resource-sharing initiatives such as the Belt and Road Initiative.

The Maritime Silk Road stands out as a key aspect of China-EU cooperation. EU countries such as Germany, France, the United Kingdom, Italy and the Netherlands are all important trading partners of Fujian’s Maritime Silk Road. Take Xiamen, capital of Fujian Province as an example. Xiamen’s import and export with the EU in the first 11 months of 2023 soared to 116.55 billion yuan，marking a 19.3%year-on-year surge and setting a new record for the same period. The EU has become Xiamen’s largest export market and second largest trading partner. Data show that the “new three” represented by lithium batteries, solar cells and electric manned vehicles are the main engine of Xiamen’s export growth to the EU. In the whole year of 2022, Xiamen’s exports to the EU “new three things” reached 11.14 billion yuan, a surge of 23.1 times. This year has continued its growth momentum on a high base, with exports from January to November of 32.51 billion yuan, an increase of four times. Among them, the export of lithium batteries increased by 5.2 times, and the export of electric manned vehicles increased by 40.4%. In terms of imports，Xiamen imported 4.17 billion yuan of aircraft from the EU in the first 11 months，driving Xiamen’s imports from the EU to increase by 21.3 percentage points. At the same time, the import of aircraft parts was 970 million yuan, a substantial increase of 57.7%. In addition, a large number of famous European enterprises such as Siemens, Nestle and AB InBev have invested in Fujian, effectively enhancing the competitiveness of Fujian’s leading industries, advanced manufacturing and modern service industries. Focusing on deepening China-Eu industrial cooperation，Fujian has seized new opportunities for economic and trade cooperation with Europe，and carried out intensive work to attract European multinational enterprises，render a service to elevate China-Eu financial and trade cooperation to a new level.

Furthermore，the Maritime Silk Road holds great importance in facilitating cultural interactions between China and Europe. Fujian Province regularly hosts and participates in cultural festivals, art exhibitions and performances in European countries. In February 2024, the “Zhangzhou Minnan Culture Week” was opened in Paris, France. During the activity, the organizers carefully prepared a number of activities such as interactive experience of Fujian Zhangzhou intangible cultural heritage projects and promotion of Minnan Kungfu tea to let French audiences have an in-depth understanding of Zhangzhou’s rich intangible cultural heritage. In the field of educational cooperation, Fujian has established cooperative relations with a number of European universities and educational institutions, carrying out student exchanges, teacher visits and joint research projects. This not only promotes cultural integration, but also enables the flow of talents from different countries and promotes the development of various countries.

The adjustment of trade rules and the reform of the multilateral trading system are also important areas for China-Eu cooperation. Against the backdrop of rising global trade protectionism and stagnant WTO reform, China and the EU work together to uphold the multilateral trade order, promote the reform of the WTO, oppose “zero-sum game” and advocate fair and reciprocal trade rules, which will help build a more just and equitable international economic system. Due to the promotion of the Belt and Road Initiative and the EU’s Erasmus+program，educational，cultural，and youth exchanges between China and the EU have significantly increased，fostering a platform for mutual understanding and friendship between the two populations. By holding more joint cultural events and supporting two-way student exchanges, China and the EU can further enhance mutual trust and jointly shape a more inclusive and diverse world.

Although global changes have brought real challenges to China-EU cooperation, it has provided new opportunities for the two sides to deepen cooperation in many areas as well. China-EU cooperation should not be confined to the economic sphere，but instead，should be broadened to encompass various areas including environmental protection，scientific and technological innovation，and people-to-people exchanges.This expansion will enable both sides to collaboratively tackle global challenges and advance the development of a more equitable，open，and inclusive international order. By working hand in hand, China and the EU will write a new chapter of mutual benefit in the global change. China and Europe’s two major markets have great potential for growth. As one of the most populous countries in the world, China has huge consumption potential and a huge and expanding domestic market. As one of the largest economies in the world, Europe has mature consumption capacity and habits, and its open market is highly attractive to foreign investment.

Trade cooperation between China and Europe has reached a huge scale, but there is still much room for cooperation between the two sides. Through cooperation with European companies, China can further improve product quality and brand competitiveness, further deepen market opening and provide more investment opportunities. European companies, on the other hand, can take advantage of China’s huge market to expand international cooperation and achieve more growth.

In terms of industry, China and Europe are highly complementary. China’s economic development has achieved remarkable results, especially the rapid rise of the manufacturing industry, has become the world’s largest manufacturing country. China has a huge market and abundant labor resources in the manufacturing sector, which has the potential to undertake more industrial transfer. Europe is known for its technology and innovation capabilities, with a series of high value-added, high-tech industries, such as automotive, machinery, aerospace, medical devices and so on. European companies have accumulated a great deal of technical and managerial experience in these areas. Cooperation between China and Europe can drive the convergence between manufacturing and services，while also bolstering the competitive edge of both sectors in the global value chain. In the process of deepening the China-Eu comprehensive strategic partnership，mutually beneficial practices in key areas have become increasingly rich，which have not only promoted the economic development of both sides，but also provided a model for global governance. Collaboration in trade，investment，science，technology，and environmental protection stands as a central pillar of China-EU relations.

In the realm of commerce，the establishment and functioning of China-Europe freight trains serve as a tangible example of economic collaboration between China and Europe. According to the China Railway Corporation, by the end of 2021, more than 40,000 China-Europe freight trains, carrying more than 4 million TEUs of cargo, have been launched, involving more than 160 cities in more than 50 countries and regions, and connecting major economic regions of Eurasia. The effective running of China-Europe Express trains has not just lowered trade expenses，but alsoopened up fresh development prospects for nations on the routes while advancing regional economic integration. China and the EU are currently collaborating to eliminate trade obstacles and enhance market openness through measures such as tariff reductions and streamlining customs procedures，aiming to promote trade liberalization and facilitation.

On investment, the successful negotiation of the China-Eu Investment Agreement is another milestone of mutual benefit between China and the EU. The agreement provides a legal framework for both sides to enhance the level of investment protection, remove investment barriers, and enhance transparency and predictability of investment regulation. This will provide a more stable and predictable market environment for Chinese and European investors, especially for companies that continue to seek to expand their investments in each other’s markets, and the signing of the agreement will significantly improve the security and return on investment.

Collaboration in science and technology is another crucial area for enhancing mutual benefits between China and the EU. The two sides have carried out extensive cooperation in cutting-edge areas such as scientific and technological innovation, clean energy, information technology and life science. China and the EU are stepping up their investments in collaborative research and development projects，pushing forward the development of new energy vehicles，renewable energy technologies，and leading the way in standard-setting for areas like 5G and artificial intelligence. Among scientific research institutions and higher education institutions，China and the EU have set up joint laboratories and joint scholarship programs to encourage exchanges and cooperation among scholars and researchers，and jointly promote the cutting-edge development of global science and technology.

China and the EU collaborate on environmental protection and sustainable development efforts to address climate change and advance the shift towards a green economy. Under the framework of the Paris Agreement, the two sides pledged to reduce greenhouse gas emissions, develop clean energy, and cooperate in research on carbon capture and storage technologies. Furthermore，China and the EU have collaborated to advance the growth of green finance by setting up environmental funds，issuing green bonds，and implementing other measures to attract increased private investment in environmental initiatives，aiming to achieve a harmonious balance between economic prosperity and environmental preservation.

Engaging in person-to-person interactions is another key aspect of our mutually advantageous collaboration. In the field of education, the China-Eu 2020 Higher Education Cooperation Program has led to an increasing number of cooperation projects between universities of the two countries, involving teacher exchange, student exchange, joint training and other forms. At a cultural level，China and the EU have come together to celebrate their cultural heritage，foster mutual understanding and acceptance among diverse cultures，and establish connections of friendship between people through initiatives like the China-EU Year of Cultural Dialogue.

The collaborative efforts of China and the EU in key areas such as trade，investment，science and technology，environmental protection，and people-to-people exchanges have led to significant economic gains and societal changes. The deepening of this cooperation not only enhances economic ties between China and the EU，but also serves as a model for global collaboration，jointly advancing sustainable development of the global economy and strengthening global governance. As China-Eu cooperation continues to deepen, the two sides will share opportunities in more areas, jointly meet challenges and write a new chapter of mutual benefit.

Looking towards the future，the China-EU comprehensive strategic partnership should be established on a foundation of mutual trust，cooperation，and mutually beneficial outcomes.It should aim to broaden collaboration areas，enhance the quality of cooperation，collaboratively tackle global challenges，and play a more significant role in promoting global stability and prosperity. The following strategic proposals will help deepen the future of China-Eu cooperation:

Enhance collaboration in multilateralism.To advance global governance and rule-making，China and the EU must maintain their partnership in defending the international system centered around the United Nations，resisting unilateralism and protectionism，supporting the reform of the multilateral trading system and the modernization of the WTO，and ensuring an equitable and impartial international economic order.

Deepen cooperation on green economy. In addressing climate change and environmental governance, China and the EU can jointly promote the research, development and dissemination of green technologies, jointly build green supply chains, promote the development of global green finance, and help the world transition to a low-carbon and sustainable economic development model.

Strengthen cooperation on digital economy. China and the EU should collaborate in establishing global digital governance rules，encouraging data flow and mutual trust，advancing the use of emerging technologies like artificial intelligence and 5G，all the while ensuring data security and privacy protection，leading to the creation of an inclusive，equitable，and secure digital environment.

Additionally，it is important to broaden interactions between individuals and promote collaboration in education. China and the EU should continue to support cooperation projects in academic, educational and cultural fields, encourage youth exchanges, jointly organize cultural events, enhance mutual understanding between the two peoples, and build a more inclusive and diverse global cultural environment.China and the EU should collaboratively tackle global challenges such as public health，food security，and energy transition，establish joint response mechanisms，exchange experiences，and collectively advance solutions to global issues.

Promote security and defense cooperation. China and the EU may conduct more exchanges and cooperation in such areas as counter-terrorism, cyber security and maritime security to jointly safeguard regional and global security and stability. At the same time, China and the EU can explore the possibility of building a common security framework and contribute to maintaining world peace.

Work together to meet global challenges. China and the EU should jointly address global challenges such as public health, food security and energy transition, set up joint response mechanisms, share experience, and jointly promote the solution of global issues.

In the future，the comprehensive strategic partnership between China and the European Union will further develop and strengthen，setting an example for global cooperation. Both parties should enhance mutual economic benefits，as well as collaborate on global issues and work together to advance the development of a shared community for all humanity. In this process, China and the EU need to remain open and inclusive, and also need to resolve differences through dialogue and consultation to achieve common prosperity and global stability. China and the EU collaborating to address challenges will instill greater confidence and hope worldwide，thereby emerging as a significant force for reshaping the global governance system.

Nevertheless，in recent years，the relationship between China and Europe has given rise to numerous issues. First, China-EU trade imbalance, bilateral trade deficit continues to widen. According to Eurostat data, since the outbreak of the epidemic, the EU has gradually run a large trade deficit with China, which has tripled in 10 years to reach around 400 billion euros in 2022. This imbalance is not only quantitative, but also qualitative, hitting areas where the EU has a comparative advantage, such as medical devices. By 2023，the EU has witnessed a significant decline in its trade deficit with China.

Second, barriers to market access still exist and tend to increase. In general，European companies operating in China continue to demonstrate confidence in the Chinese market. Based on Eurostat data，the EU has been experiencing a significant increase in its trade deficit with China since the start of the epidemic，with the deficit tripling over a 10-year period to reach approximately 400 billion euros by 2022. Barriers to market access and investment restrictions are currently among the top three regulatory barriers facing European companies in China.

Third, the cross-border flow of data is difficult, the relevant laws and regulations are ambiguous, and the compliance risks of enterprises in China are increasing. The EU Chamber of Commerce in China pointed out that major laws and regulations such as the CybersecurityLawof the People’s Republic of China have been in force for many years，but the concept of” important data”has not been clearly defined，and the catalog of important datastipulatedin the Data Security Law of the People’s Republic of China has not been made public. This makes it impossible for data processors to comply with compliance requirements, resulting in compliance issues and increased operating costs. Some local governments are also affected by vague legislation, which makes it impossible to accurately interpret and enforce laws and regulations, affecting local efforts to attract foreign investment.

Furthermore，there remains a notable”temperature difference”between China’s efforts in financial opening policies and the perceived benefits by foreign institutions，indicating the necessity for deeper financial opening. In general，foreign institutions tend to believe that China’s financial openness has improved. According to a survey, 71% of the members of the European Chamber of Commerce think that China’s financial openness has improved significantly, and 7% think that China’s financial openness has decreased. A further 7% of EU financial institutions believe they face more opportunities than challenges in China.

Thankfully，tensions in economic cooperation between China and the EU have fueled both competition and collaboration in the economic sector. Such competition and cooperation are not limited to traditional trade fields, but also include technological innovation, environmental protection, digital transformation and many other aspects. For example, in the field of technological innovation, China and the EU have broad prospects for cooperation in such areas as digital transformation and green development. Such competition and cooperation have prompted both sides to constantly seek innovation and progress, thus boosting their respective technological development and industrial upgrading ‌.

Moreover, friction in China-Eu economic cooperation has helped both sides better understand each other’s needs and concerns. Through friction, both sides can be more clear about their respective strengths and weaknesses, so as to better play their respective advantages and make up for shortcomings. For example，after China entered a new journey of reform and opening up，new drivers have been mobilized，and the domestic consumer market has flourished，which has had a broad positive impact on the world. At the same time, the EU has rich experience, a large number of talents and mature industries in the fields of environmental governance, scientific and technological investment and urbanization. The two sides have strong economic complementarity and many converging interests, which have facilitated extensive exchanges and cooperation in various fields ‌.

In addition, friction in China-EU economic cooperation also provides opportunities for both sides to improve and develop. By facing friction and challenges, the two sides can jointly seek solutions and push cooperation to a higher level. China and the EU are instrumental in various international organizations. We collaborate to support the international system centered around the United Nations，promote multilateralism，and tackle global issues like climate change and energy. The China-EU comprehensive strategic partnership has maintained the momentum of development in a complex and changing international environment, demonstrating strong resilience ‌. In particular, on the Ukraine crisis and other hotspot issues, China and the EU had a lot of communication, demonstrating the global significance of China-Eu high-level communication ‌.

Against the backdrop of economic globalization, China and the EU, as important forces supporting economic globalization, are committed to safeguarding world peace and development. Both parties have extensive collaboration plans and tangible initiatives in green environmental protection and energy transition.For instance，China and Denmark are partnering in renewable energy，while China and the UK are collaborating on clean energy technology，ultimately driving the worldwide shift towards a low-carbon economy. Therefore, both sides should try to break down barriers and emphasize the importance of cooperation and global economic integration.

China-EU cooperation is mutually beneficial and an important platform for sharing development opportunities and addressing global challenges. The two sides should continue to uphold the principles of openness, inclusiveness, cooperation and win-win results and push for deeper and more solid cooperation in various fields. As China and the EU work towards constructing a community with a shared future for humanity，they will notonly forge a brighter future for their citizens but also significantly contribute to global peace and prosperity. Looking ahead, we look forward to an even more exciting new chapter in China-EU cooperation and a new chapter of mutually beneficial international relations.

By Yiqi Wen

New opportunities for China-EU Cooperation

Work together to meet global challenges. China and the EU should jointly address global challenges such as public health, food security and energy transition, set up joint response mechanisms, share experience, and jointly promote the solution of global issues.

By Yiqi Wen

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