Opportunities in Crisis

Editor’s Note: Despite COVID-19, China became the EU’s largest trading partner last year, overtaking the U.S., according to Eurostat data. They also concluded negotiations on a comprehensive agreement on investment that will cement their cooperation. Zhang Ming, head of the Chinese Mission to the EU, talked about the opportunities and challenges facing this partnership to Beijing Review reporter Wei Hongchen. The following is an edited excerpt: 

Beijing Review: What led to the consolidation of ties in a year of global pandemic and other uncertainties?

Zhang Ming: Both China and the EU have major common interests, share common responsibilities in supporting multilateralism and are committed to maintaining world peace and prosperity, boosting globalization and improving global governance. Also China and the EU both seek to address and manage differences through dialogue and cooperation rather than confrontation, and both reject attempts to usher in a “new Cold War.”

The two sides have jointly upheld the Iran nuclear deal and strengthened trilateral cooperation with Africa to build a more sustainable and secure world.

High-level exchanges between China and the EU in 2020 were more frequent than ever. We set up two new mechanisms for high-level dialogue in green development and digital fields. China’s trade with the EU grew 5.3 percent despite the slump in the world economy.

How do you see the China-EU Comprehensive Agreement on Investment progressing? And the agreement on geographical indications (GI) that took effect on March 1?

After 35 rounds of talks over seven years, the negotiations on the China-EU investment agreement were finally concluded last December. The agreement will remove barriers to two-way investment and will be conducive to post-pandemic economic recovery and economic globalization. It will also drive China’s reform and opening up forward. China has made a commitment to open up to the EU and the rest of the world at a higher level.

The China-EU GI agreement will enhance consumer awareness of high-quality and specialty products from both sides. Such products would gain in popularity in the other’s market, bringing more options to consumers at reasonable prices.

However, in February, the European Commission published its new trade strategy said to be aimed at combating “unfair trade practices.” Does it smack of protectionism? How do you think this will affect China-EU relations?

It is indeed worrying, especially for Chinese companies operating in Europe. This violates the fair and open trade principles upheld by the EU and is detrimental to the EU’s economic recovery and long-term development as it will make the EU less business-friendly.

Over the past two years, China’s investment in the EU has dropped markedly, which is a case in point. It is hoped that our EU partners will pay attention to this.

The European economy, though hit by the pandemic, has a strong basis and its market has enormous potential. But capital flows between China and the EU are relatively small in scale. China’s foreign direct investment (FDI) stock in the 27 EU countries totaled 255.1 billion euros ($304 billion) by the end of 2019, accounting for only 3.6 percent of the total FDI flowing into the EU, according to Eurostat. The China-EU investment agreement and the GI agreement will inject new impetus into their economic and trade ties.

Do you see EU companies exiting China in the wake of the pandemic and calls by some governments to reshore their industries back home?

According to a survey by the European Union Chamber of Commerce in China, 89 percent of the European businesses surveyed are willing to stay in China. Two thirds of the respondents rate China among the top three investment destinations. Many European companies, including Volkswagen from Germany and Danone from France, have increased their investment in China. The European business communities seem to reject the calls to decouple from China.

Under the impact of the pandemic, some people in Europe and the U.S. have called for moving the industrial and supply chains of their key industries back home to reduce their dependence on external markets. But if we take a closer look, we will realize that the current global structure of industrial and supply chains is the result of years of joint efforts and choices made by companies from all over the world, which will not change at will. The interests of Chinese and EU industries have long been intertwined and highly interdependent.

China and the EU should strengthen mutually beneficial cooperation, ensure normal operation of investment projects and firmly say no to decoupling. This will add more stability to the global industrial and supply chains and world economic recovery.

At the Group of Seven Summit and a special edition of the Munich Security Conference held in February, U.S. and European leaders emphasized the need to strengthen transatlantic relations for addressing “challenges posed by China.” How will this affect China-EU relations?

Some regard China as a challenge or a rival. But China has always been a champion of peace. After four decades of reform and opening up, we have achieved significant development but we are aware that many of our development indicators are still far behind those of developed countries. Therefore we do not have the time, energy or interest to be anyone’s rival, nor do we wish anyone to regard China as a rival.

The COVID-19 pandemic is a reminder that we all share a common destiny, and no country could seek its own development alone. In the face of common global challenges, the only correct approach for the international community is solidarity and cooperation, rather than bloc politics along ideological lines or creating small circles targeting specific countries.

We seek to advance our relations with the EU, which does not target any third party. Hopefully, the EU, while developing relations with third parties, does not take China as a target. Changes in the EU’s relations with the U.S. should not affect China-EU relations.

What bearing do the 14th Five-Year Plan (2021-25) and development plans beyond have on China-EU ties?

China will become a global market and a market for all, and it will share development dividends with Europe and all other countries.

We will accelerate green, low-carbon and sustainable development and contribute to the global response to climate change. Science and technology innovation will play a leading role in the new development stage, and intellectual property rights will be protected in a more systematic and comprehensive way.

China’s new development philosophy that underscores innovative, coordinated, green, open and shared development is highly compatible with the green and digital transformation in Europe. The two sides can further synergize their development strategies and forge green and digital partnerships.

China’s new development paradigm with the domestic market as the mainstay and the internal and external markets reinforcing each other means it will not close its door to the outside world. Instead, China is building an open economy at a higher level while improving its economic resilience and competitiveness.

This will create a better business climate and stronger institutional guarantees for European businesses in China and for firms from both China and the EU to cooperate at a higher level.