Advance Practical Cooperation for Mutual Benefit and Win-Win Result

Distinguished Members of the European Parliament:

I am very pleased to exchange views and discuss with you on the topic of developing China-EU trade and economic relations, at the invitation of the Committee on International Trade of the European Parliament.

Economic and trade cooperation has always been an important part of China-EU relations, and its development is always inseparable from the overall development of China-EU relations. Since China and the EU established diplomatic ties in 1975, they have followed the principle of mutual respect, equality and mutual trust, mutual benefit and win-win cooperation, worked together to overcome difficulties and twists and turns, so that the bilateral relations keeps moving forward on a healthy track. China-EU relations is becoming more mature and stable, growing stronger to resistant to irritants. Particularly in recent years, China-EU relations have made a "triple jump", developing from a constructive partnership to comprehensive partnership and to today's comprehensive and strategic partnership. China-EU cooperation in various fields has achieved fruitful results and brought tangible benefits to the people of both sides.

Based on the comprehensive development of bilateral relations, China-EU economic and trade cooperation has continuously grown and made brilliant achievements in the past 30 years. Autumn is the harvest season, I am willing to review, together with you, the harvest of our economic and trade cooperation through decades.

First, China and the EU have become mutually important trade partners. To date, China-EU trade has expanded from simply trade in goods to service trade, investment and technological cooperation. The scale and the content of economic and trade cooperation has continuously expanded and enriched. Bilateral trade volume reached 425.6 billion U.S. dollars in 2008 from 2.4 billion dollars in 1975, an increase of 176 times; mutual investment started from scratch and now the EU have made a total investment of 63.9 billion U.S. dollars and operating more than 20,000 companies in China. In recent years, Chinese companies are beginning to invest actively in Europe. China has imported technology from the EU with a contract value of 122 billion U.S. dollars. The EU has become China's largest trading partner, source of imports, export market and supplier of technology. China is the EU's second largest trading partner and the fastest-growing export market. From 2004 to 2008, the EU exports to China have increased by 65%, much higher than the average EU export growth of 37% in the same period.

Secondly, the sustained and rapid development of China-EU economic and trade cooperation have created huge benefit to both sides. Experience has shown that such cooperation is a mutually beneficial and win-win success story. With the expansion and deepening of cooperation, the two sides continue to optimize their industrial structure and productivity and levels of economic development continue to improve. In terms of trade, Chinese products enable each European family to save 300 euros per year, reduce the cost of raw materials for manufacturing enterprises and help to curb inflation in Europe. We estimate that in 2008, the EU import of Chinese goods has created approximately 2.7 million jobs. And in terms of trade in services, the EU has generated a surplus of 5.7 billion U.S. dollars with China. Similarly, introduction of technology and equipment from Europe to China greatly accelerates China's industrial upgrading process and promotes economic growth. Especially on investment, the EU companies in China create more jobs and tax revenues. Local production and sales not only replaces much of the original EU exports to China, but also help the EU to achieve bigger market share and more lucrative returns. In 2006 alone, the turnover of EU enterprises in China reached as much as 206.6 billion U.S. dollars (including 43.2 billion U.S. dollars of export). This alone is much more than the 91.7 billion U.S. dollars of EU deficit with China in trade of goods.

Thirdly, economic and trade cooperation promotes closer bilateral relationship. Such cooperation drives forward economic integration and inter-dependence. Today, many quality and inexpensive goods for the EU consumers are "Made in China", while many large enterprises in China are "made in the EU", with shareholders, brands and technologies from the European Union. At the same time, closer economic and trade cooperation between China and Europe facilitate personnel exchanges. China has nearly 200,000 students in the EU, and more than 150,000 EU citizens are working in China. Growing economic and trade cooperation builds more and more connections, enhances the understanding and mutual trust between China and Europe, creates more common interests, strengthens the ability to resist irritants, and thus creating important prerequisite for deeper development of China-EU comprehensive strategic partnership.

Starting from the second half of last year, the global financial crisis exerted no small impact on China-EU trade and economic development. In the first 7 months, bilateral trade volume fell by 20.7% and the EU investment in China fell by 4.8%. China-EU trade and economic relations are facing severe test. However, I believe such cooperation is sustained by a solid internal foundation, plus the willingness and commitment of both sides to promote trade and economic ties, the future development of such cooperation is facing great opportunity.

First of all, China and the EU have a strong consensus to promote cooperation through difficult times. Trade and economic cooperation is a key element of China-EU comprehensive strategic partnership. Moreover, it is the "propeller" for both sides to overcome the crisis and accelerate development. Both fully appreciate this. This year, during high-level visits, summit meeting, high-level economic and trade dialogue, the two sides repeatedly stressed that they will work together to address crisis, resist all forms of protectionism. The two sides pledge to create more trade and investment opportunities, and also signed a series of agreements to expand cooperation on energy-saving, environmental protection, high technology, small and medium enterprises and other fields. China has sent several "trade and investment promotion delegation" to Europe, which reflects our sincerity and determination to join hands with the EU, respond to crisis and overcome the difficult times.

Secondly, the economic stimulus plans provide enterprises with new business opportunities. The Chinese government is fully implementing the stimulus package to promote stable and rapid economic development. This includes a total of 4 trillion yuan investment scheme, readjustment plans for ten major industries. Infrastructure and technological innovation is the focus of the package. This package has achieved initial results. It has created favorable conditions for foreign companies to develop Chinese market. European companies in particular, relying on technology strength and rich experience, have seized the initiative. In the first 7 months, China's imports from the European Union fell by only 12.2%, well below the overall decrease of 23.6% over the same period, and smaller than the decrease of import from the US, Japan and other developed countries. According to EU Chamber in China, related EU companies operating in China are set to benefit from China's economic stimulus plan and will expand investment in China in the future.

Thirdly, both markets of China and EU contain great potential in the wake of the crisis. China has a big population, big market capacity, fast-growing and increasingly diverse consumer demand. From 1978 to 2008, China's total retail sales of social consumer goods grew by an average annual rate of 15.2%. The Chinese Government is committed to create a growth pattern mainly relying on domestic demand. Particularly after the outbreak of the financial crisis, China strives to expand domestic demand, especially consumer demand, to sustain economic growth. With rising income, improving social security system, and more optimal policy to expand domestic demand, China's market will once again achieve substantial development. The European Commission predicts that by 2010, China's middle-income segment of population will reach 150 million, high-end consumer goods market will be more than 1 trillion euros, and continue to grow by 12% annually on average. China's services market will exceed 500 billion euros, and continue to increase by an annual average of 14%. Airbus predicts that by 2024, China will need 1,790 new passenger aircrafts. The EU, with 500 million population and high per capita income, is the world's largest consumer market, which will also create tremendous opportunities for Chinese enterprises.

The most important is that China will continue to expand opening-up and seek mutual benefit and win-win cooperation. Since China's reform and opening up, especially after WTO accession, its degree of openness has greatly improved. The general tariff level has dropped from 15.3% to 9.8%, of which tariffs on agricultural products is only 15.2%, 1/4 of the world's average. China opens 104 of all the 160 service trade departments. In 2008, China imported 1.13 trillion U.S. dollars of goods and equipment. This created about 20 million jobs for relevant countries and regions. In the future, while stabilizing export, China will continue to expand imports, with focus on the introduction of advanced technology and equipment, to increase imports of key parts and components, important resources and raw materials; continue to improve the policy measures to stabilize and increase foreign investment, encourage foreign investments in high-tech, energy-saving and environmental protection industry. China will also actively support domestic enterprises to "go abroad" and make overseas investment, stimulate economic development in host countries and create jobs for the local community. Recently, China's relevant departments have made it clear that, in order to stabilize and expand foreign investment, China will study and formulate policies to further promote foreign investment. To improve the legal environment of opening up, China has adopted vigorous measures to strengthen intellectual property rights protection. Recently, the Chinese court sentence in the "tomato garden" Windows operating system piracy case, is considered by the global software industry as a landmark victory in anti-piracy operations.

However, we must also bear in mind that the in-depth development of China-EU economic and trade cooperation is not like apples fall to the ground naturally. If we do not make efforts to defuse friction and contradictions, to strengthen consultation and cooperation and seek mutual benefit and win-win results, great potential will not translate into reality. In fact, issues to China's concern, such as full market economy status, anti-dumping, high-tech export restrictions and difficult access to businessmen visa and issues to the EU's concern, such as trade imbalance and market access have, to some extent, affected China-EU trade and economic cooperation from further development. To resolve these differences, the two sides need the spirit of win-win cooperation, adopt new ideas and find new impetus. I hope that we will continue to uphold the following principles, and actively promote China-EU economic and trade cooperation.

First, view and plan the long-term development of China-EU trade and economic cooperation from a strategic perspective. After more than 30 years of development, such cooperation has reached unprecedented wide scope, deep level and big influence. If one gets entangled with isolated cases, it will inevitably lead to our economic and trade policy deviation, and affect the long-term development of overall economic cooperation. There is no conflict of fundamental interests between China and Europe; there is no geo-political wrangling. Both sides support and are committed to multi-polarization and economic globalization. Since the establishment of diplomatic relations, China and the EU have always pursued common ground through shelving difference, and conducted mutually beneficial cooperation in bilateral relations. This creates a stable environment for trade and economic cooperation, and accumulates much successful experiences. Looking back at history, steady progress in China-EU relations always go hand in hand with the in-depth development of bilateral economic and trade cooperation. Otherwise, it could affect economic and trade cooperation. At present, China and the EU are committed to deepen the comprehensive strategic partnership. We should take a strategic and long-term perspective to view and plan bilateral economic and trade cooperation, strengthen policy coordination and dialogue, actively promotes common development, and make sure that temporary issue does not affect the mainstream of cooperation.

Secondly, uphold the principle of mutual openness and mutual benefit. The EU is an active supporter of open market. It applied MFN status to China in 1978, 22 years earlier than the United States. China recognizes, through 30 years of successful experience in reform and opening up, the need to do so in the future without hesitation. China's opening up is by no means just taking without giving. We insist on fair competition and complementarity. While achieving our own national development, we also consider the interests of partners and pursue mutual benefit and win-win cooperation. Protectionism is not a solution and will only hurt every one. Whether now or in the future, China and the EU should strengthen coordination, resolutely resist all forms of protectionism, maintain open markets, and make efforts to create more trade and investment opportunities. Some have doubts over China's win-win strategy of opening-up, due to trade surplus. I would like to point out that the trade imbalance is caused by many reasons, including the international industrial transfer and thus the relocation of trade. China's trade policy is not the cause. Nevertheless, in recent years, the Chinese government adopted a series of measures to encourage more imports, such as import promotion activities, greater facilitation of imports, sending purchasing groups and so on. Even in the current difficult economic times, the Chinese government has still introduced new initiatives to encourage import, such as to promote domestic sale of processing trade companies and improve customs clearance efficiency.

Thirdly, to maintain and improve the smooth and efficient communication and coordination mechanisms. With the in-depth development of China-EU comprehensive strategic partnership, the two sides have set up multi-level and wide-ranging economic and trade talks and dialogue mechanism from the top leader's level down to the technical level. Communication channels become smoother and played an important role to solve problems and advance cooperation. This provides a powerful impetus for economic and trade cooperation has. In May this year, during the 11th China-EU Summit, and the 2nd high-level economic and trade dialogue, the two sides reached many consensus on major issues of common interest, and achieved a series of important results. This played a key role to stabilize China-EU trade and economic cooperation in times of crisis. In the future, both sides should make good use of these meetings and dialogue mechanism, clearly identify the position and the function of various mechanisms, further expand exchanges, promote cooperation, resolve differences, and make greater contribution to the sustained and stable development of China-EU economic and trade relations.

Fourthly, give full play to complementary advantages of both economies. The EU has advanced science and technology, capital strength, international marketing experience. Its high-tech manufacturing, high-end brands, energy saving, environmental protection industries and advanced services enjoy obvious advantages. China has abundant labor resources, low production costs and its consumer goods and other labor-intensive industries have a strong competitive edge. At present, China's per capita GDP is less than 1/11 of the EU. The two sides are at different stages of economic development. The EU relies mainly on knowledge and innovation to drive the economy. Its advantage in science and technology, research and development, branding, cross-border operations will continue to strengthen. The Chinese economy is half way through industrialization. Its labor-intensive manufacturing and processing industries will be further developing. For a long period of time in the future, the competitive advantage of China and EU respectively will not change. The complementary nature of economic structure also provides a broad space for the expansion of bilateral economic and trade cooperation. At the same time, such complementarity also determines that China and Europe can not achieve an absolute balance in each and every sector of trade and economy. We should take a comprehensive and open attitude towards strengths and weaknesses of ourselves and each other's, with a focus to harness our strength, learn from each other, rather than simply protect our own disadvantage.

Fifthly, follow the trend of economic development in China, Europe and the world. At present, the world economy has suffered a severe blow, but it also generates new impetus for development. The EU is vigorously developing "green economy". China is committed to accelerate the transformation of economic development model, optimize and upgrade industrial structure, and vigorously promote independent innovation. A win-win situation of mutual reliance, mutual dependence, and cooperation will continue to develop. Both the scope and the level of economic and trade cooperation will expect to further expand and upgrade. In the field of energy-saving and environmental protection, China-EU cooperation has just achieved preliminary results. For instance, the China-EU Clean Development Mechanism projects, launched two years ago, have played an active role to help China reduce emissions and promote sustainable development. Yet in areas such as high-tech cooperation, some EU restrictions prevent the two sides from tapping the potential of investment opportunities. We hope that the EU will relax restrictions and eliminate policy barriers to China-EU economic and trade cooperation.

Distinguished MEPs, all of you are experts on international trade and economy. Your comprehensive understanding of China-EU economic relations great enthusiasm to further the China-EU economic and trade cooperation are very inspring. I hope we will work together to create good atmosphere in the European Parliament and the European Union for promoting China-EU economic and trade relations and deepening China-EU comprehensive and strategic partnership. Thank you!