Academic journal article Review of European Studies

EU-China Economic Relations: Interactions and Barriers

Academic journal article Review of European Studies

EU-China Economic Relations: Interactions and Barriers

Article excerpt

Abstract

EU-China economic interactions became more and more frequent in the past decades, nowadays EU and China are main trade partner for each other. This paper analyzed EU-China economic interactions from three dimensions: bilateral governmental interactions, trade and investment flows as well as barriers to trade and investment. Findings show that EU-China close relationship is particularly based on goods trade especially on intra-industrial trade of manufacturing industrial products, and trade imbalance is arising from trade in Machinery and Transport Equipment and Other Manufactured Goods (e.g., Clothing and clothing accessories); This paper also found that there exist a myriad of trade and investment barriers to EU-China interactions, including both tariff and non-tariff obstacles. Therefore, this paper argued that if EU and China want to handle the trade imbalance efficiently, they must improve composition of trade in goods, while essentially, it requires lessening or eliminating EU-China trade barriers which hampered trade composition improvement.

Keywords: EU-China relations, trade, trade barriers, FDI

1. Introduction

China's development in the past decades has attracted world-wide. As a country that has more than 1.3 billion population, its annual average economic growth is over 10% (real GDP growth) from 1980s to 2000s. Undoubtedly, China's Reform and Opening-up policies initiated in the end of 1970s have contributed much to the economic boom particularly gains. In the third plenary session of 11th central committee of CCP held in 1978, Chinese central government decided to quit the idea of "economy being subordinated to politics". Accordingly, China began to reform the economic system and open its gate to the outside world. Since then, promoting economic development began to be regarded as the paramount task of the central government. The Opening-up policy was firstly experimented in eastern coastal regions in 1980s, and then it was gradually applied to the entire country in early 1990s. Later, CCP proposed to partially give up the Planned Economic System and tried to build a Socialist Market Economic System in 1992. So far as the labor force is concerned, the central government and various enterprises realize that China has an obvious advantage over other countries. What is more, because of insufficient domestic demand, export-oriented strategy was considered to be the most fundamental tactic to promote economic development.

There is no denying the fact that export has become one of the three driving factors (consumption, investment and export) of China's economic growth in the past decades. Total exports and imports amounts to 12.54% of GDP, and total exports amounts to 5.97% of GDP in 1980, and then they increased to 29.78% and 15.99% in 1990, and 39.58% and 20.80% in 2000. In 2006, these two percentages reached the highest points, 65.17% and 35.87%. Since the global financial crisis broke out in 2007, China's exports trade was seriously affected, total exports and imports percentage of GDP and the total exports percentage of GDP reduced in recent years, but they were respectively 50.28% and 26.68% in 2010. Moreover, government also launched many preferential policies to attract foreign investment, such as income tax exemption or reduction. Actual utilized FDI was only $3.49bn in 1990, but it increased to $40.72bn in 2000, and even reached $105.74bn in 2010. These facts adequately prove that international economic and trade interactions are exactly very important to China's economic development.

Currently, China is the second exports economy and the third imports economy in the world. And, as the largest exporter and importer in the world, EU has been an important export destination and source of imports and FDI of China. In March 2004, European Union (EU) became the largest trade partner of China, and China became the second largest trade partner of EU (Dai, 2006). Actually, Since European Economic Community (EEC) and China established diplomatic relations in 1975, EU-China economic and trade relations have become much closer. …

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