International ties

Wen Jiabao in Europe – foundations of a 'win-win' relationship

By John Ross (chinadaily.com.cn)
Updated: 2011-06-27 11:53

Wen Jiabao's visit to Europe has attracted more attention in that continent than would normally attend a visit by China's Premier. The Financial Times, Europe's most important business publication, carried a major 'tone setting' article by the premier and every major media outlet is commenting at length.

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The reason is obvious and widely discussed. Europe is struck by the Greek debt crisis. China is the world's second largest economy, with the world's largest foreign exchange reserves. China and the EU's bilateral trade accounts for 10 percent of the world's total. There is evidently a great deal to discuss.

The way relations with China can aid Europe is dramatically illustrated by the case of Germany – the European Union's largest economy. Germany is the only major European country whose GDP has already fully recovered from the decline during the financial crisis. During the first quarter of 2011 Germany's annualized growth rate was six percent – the highest of any major developed economy.

Playing a significant role in Germany's recovery has been its trade relations with China. Germany now exports more to China than to the United States. Germany and China's economies are highly complementary. Germany is one of the world's most important suppliers of high quality equipment and high technology manufacturing. Its products are being used in large numbers by China's factories. At the same time China is a supplier of many manufactured products, which Germany's high-wage and therefore high-cost economy can no longer profitably produce. Germany sells machines to China, which are then used to produce consumer goods, which are re-exported to Germany – a clear win-win relationship.

Other synergies between Europe and China are evident. France and Italy are the world's most important manufacturers of high quality and luxury consumer goods of the type increasing numbers of people in China can afford. Companies in Europe's most important financial hub, London, can greatly aid Shanghai and Beijing to develop their own positions as financial centers. Spending by Chinese tourists in London's famous West End shopping district has risen tenfold, to an annual £300 million, in the last three years. So important are Chinese tourists now considered in probably London's most famous shop, Harrods, that special ATMs which accept China's Union Pay bank cards have been installed.

Turning to more macro-economic issues, China has backed up its statement that it supports the Euro with action – buying bonds from countries which face potential problems such as Spain and making investments in Greece and other countries.

Wen Jiabao should also be getting good advice on the trip. Fu Ying, China's vice foreign minister responsible for relations with Europe, was a highly respected Chinese Ambassador in London who combined 'steely', to use the Financial Times words, defense of China's interests with a charm that was widely commented on.

As China seems well prepared what could go wrong on the European side?

The first problem might be that some countries see China as a sort of 'bank' to be drawn on, rather than as a partner for mutually beneficial economic engagement. Governments in Ireland, for example, pursued a long-time policy of criticizing China and then, when Ireland experienced a financial crisis, Ireland's central bank suddenly started to be very 'polite'.

That type of approach will get nowhere. China, which is still a developing country, has many things within its own borders it can spend its money on. Its government is quite right in promoting the importance of 'win-win' relationships with other countries and this means China has to get something out of any agreement as well as others.

Another danger is continuation of policies which subordinate Europe to the foreign policy of 'neo-con' circles in the US. For example refusal to recognize China's formal status as a market economy, and the arms embargo, does not serve either the economic or the political interests of Europe at all.

Hopefully, however, the pressing matter of Europe's financial crisis, coupled with the huge benefits to be gained from Europe-China cooperation, will focus minds on both sides. Few countries in the world have as much to gain from mutually beneficial trade and cooperation as those in Europe and China. It is greatly hoped that Wen Jiabao's visit will help allow such benefits to be reaped.

Little wonder his trip is receiving such attention.

John Ross is Visiting Professor at Antai College of Economics and Management, Shanghai Jiao Tong University. From 2000 to 2008, he was then London Mayor Ken Livingstone's Policy Director of Economic and Business Policy. The views expressed here do not necessarily reflect those of the China Daily website.