China, EU eye promising future

Since the two sides are interdependent in trade and economy, greater cooperation can foster a more fruitful partnership

China-EU relations have entered a new phase amid the novel coronavirus pandemic. Unlike in the past, when China and the European Union saw each other as mutually beneficial partners, the EU's policy toward China in recent years has been more about meeting challenges.

The EU's concerns about China can be summarized as follows. First, technology may "migrate" to China weakening the EU's competitiveness. The EU believes that technology transfer is a security issue as much as a matter of competitiveness. Both developing and developed EU economies are facing economic recession, and the European Commission has been warning EU member states to protect European companies from being taken over by their foreign counterparts amid the global public health crisis.

The second concern is telecommunications security. On Oct 9, 2019, the European Commission released a report saying 5G network security is a matter of great concern for the EU. Whether the United Kingdom's decision to ban Huawei's 5G equipment will have a spillover effect on the rest of Europe remains to be seen, but there is a consensus among European countries about this issue and the need for an assessment of risks. In addition, the European countries are facing pressure from the United States to ban Huawei in order to "safeguard" their telecom security.

The third concern is the safety of supply chains. In the early stage of the novel coronavirus outbreak, European countries were suffering from shortages of medical supplies. And some European think tanks believe that the dependence on China for pharmaceuticals has caused anxiety in Europe, and making the industrial chain more resilient has become a priority for the EU.

In fact, French President Emmanuel Macron called on France and the other EU states to increase local production of face masks, ventilators and other strategic medical equipment to reduce their dependence on China and strengthen Europe's economic sovereignty.

The EU's fourth concern is that China's way is seeking to divide and rule in its dealings with the EU. In recent years, because of Brexit, the emergence of the Poland-Hungary axis in Central and Eastern Europe, and the continuing influx of refugees, maintaining unity has become paramount to the EU. In this context, individual countries dealing with China in the absence of a common European foreign policy have also raised concerns that China's rising influence is undermining the EU's solidarity. And the fact that in 2019, Italy became the first G7 member and major EU country to sign a memorandum of understanding with China on the Belt and Road Initiative aroused strong reaction in Europe.

Indeed, rising EU concerns over China have created some difficulties for bilateral cooperation. On the other hand, China's direct investment in Europe has been declining in recent years. Yet these factors have not stopped us from looking forward to better China-EU relations in the future. The Chinese people often say that there is an opportunity amid crisis, which is also the case for China-EU relations.

To begin with, the EU Recovery Fund shows the bloc's solidarity. The fund, an unprecedented stimulus package worth 750 billion euros ($886 billion) to pull the EU economies out of the worst recession in memory, is a great achievement and an important step toward European fiscal integration. In the process of reaching the agreement, despite their differences, all the EU member states agreed that dealing with the crisis was of utmost importance. Fiscally rich countries, notably Germany, are willing to take more economic responsibility for boosting the European project.

And a more united and confident EU would also have fewer qualms about dealing with China. That the EU Recovery Fund is designed to not only deal with the current crisis but also promote economic transformation and develop green and digital industries - with at least 30 percent of the $886 billion likely to be invested in such industries - is in line with China's development direction. There is huge room for cooperation between China and the EU in these fields.

Also, as the economic pressure on the EU increases, its need for cooperation with China, too, will increase. Despite the EU's multiple recovery measures, the impact of the pandemic on its economy is likely to last long. Actually, the EU economy is forecast to shrink by about 8 percent this year and its fiscal deficit is likely to increase dramatically.

By contrast, China has largely contained the virus at home, and its economy and foreign trade have begun to recover, making it more attractive to Europe, at least economically. As a matter of fact, China and the EU are negotiating an investment agreement that, if finalized soon, will help European companies to further access the growing Chinese market.

Besides, there is still potential for Chinese investment in Europe. The EU and China are already extremely important trading partners, yet there are many untapped potential fields, especially in the area of trade in services.

For example, from 1991 to 2018, the share of intra-EU trade in services as a percentage of GDP rose from 9.6 to 24.9. But China's trade in services has developed slowly, resulting in the small proportion of China-EU trade in services in overall trade. And unlike the trade in goods, the EU has a surplus in service trade with China, which is increasing year by year. The surplus was 8.8 billion euros in 2017, increasing to 11.7 billion euros in 2018 and 16.7 billion euros in 2019. The EU's surplus in service trade comes from the travel industry, which is largely dependent on tourism, and technology services, and perhaps that's why the EU has been more willing to cooperate with China in technology than the US.

This year marks the 45th anniversary of the establishment of diplomatic ties between China and the European Economic Community, the predecessor of the EU.Looking back at the growing momentum of China-EU relations, we can see that the two sides have been interdependent in trade and economy and have little geopolitical conflicts. And with the world facing unprecedented changes, we have every reason to continue to look forward to a promising future for China-EU relations.

The author is deputy director of Institute of European Studies at the China Institutes of Contemporary International Relations. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.