19 November 2017
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  • » 10/27/2017, 17.16

    CHINA – EUROPEAN UNION

    Trade relations between China and the world after the Communist Party Congress



    Economic analysts look at Xi Jinping’s stronger power base. Economic ties between China and the European Union may not be all that positive whilst Beijing’s emphasis is on state control and the debt of state-owned enterprises.

    Beijing (AsiaNews/Agencies) – With the Chinese Communist Party congress over, and Xi Jinping's power strengthened, European analysts are assessing their economic impact on Europe. Xi is now considered the ‘new Mao’.

    In his keynote address at the opening of the congress, Xi promised a "modern socialist country", one that is "prosperous, strong, democratic and culturally advanced". At the same time, he also stressed that the Party-State must be lead in all areas of society, including the economy.

    Whilst promising greater market openness when he spoke about reforms, he stressed the importance of boosting – not curbing – state-owned enterprises (SOEs).

    “The world market is given less prominence from this speech than in the past, we saw more mention of the role of the state,” said Hans-Dietmar Schweisgut, the EU ambassador to China.

    When Xi came to power in 2012 he promised full market reforms. However, in the past five years, the choices made by the Party-State have always been in favour of SOEs, less favourable to Chinese private companies, and unfavourable to foreign companies.

    Boosting the state's presence in the economy is likely to make international trade more difficult, even between China and the EU.

    Europe and China are the two largest trading players in the world. China is the largest exporter to Europe after the United States, whilst Europe is China's top trading partner.

    The EU is certainly committed to greater openness and trade with China, but at the same time it wants guarantees that China trades fairly, respects intellectual property rights and fulfills its obligations as a member of the World Trade Organisation (WTO).

    In 2013, the EU and China started negotiations for an investment agreement. Yet, there is a clear imbalance: China’s exports to Europe are about twice Europe’s to China.

    "We have always said that the main way to change that is if China were to open its markets, to offer the same opportunities for investment from Europe as Chinese companies currently have in Europe,” said Ambassador Schweisgut.

    This would be a major step forward over EU-China talks held in late 2013, and a direct response to the political commitment made by European and Chinese leaders at the EU-China Summit in June 2015.

    The aim of an agreement would be to provide investors on both sides with long-term predictable access to both the EU and Chinese markets by protecting investors and their investments.

    The implications of such an agreement would be to provide real added value to European and Chinese companies investing in their respective markets.

    Although Xi mentioned reforms, analysts and economists doubt that market liberalisation will be implemented. When Xi talks about reform he means improving China’s state-centred model, making state intervention in the economy more effective.

    “Don’t anticipate big reforms,” said Willy Lam, adjunct professor at the Centre for China Studies at the Chinese University of Hong Kong. “Bear in mind that Xi is a conservative believing in party control.”

    “A lot of reforms that are happening are clearly favouring large SOEs over smaller SOEs, and much, much more than private enterprises,” said Christopher Balding, an associate professor of business and economics at Peking University’s HSBC Business School in Shenzhen.

    This drive for control entails significant risks. Although the championing of state power has led to some changes, it also means credit continues to be funneled into unproductive SOEs to propel growth, with banks signing off loans because the borrowers are seen as having implicit state guarantee.

    In today’s China, SOEs receive as much as 30 per cent of total loans, but only account for 16 per cent of employment and less than a third of fixed asset investment. Last year, their return on asset was a paltry 2.9 per cent compared to 10.9 per cent in the private sector.

    What’s more, the focus on SOEs mean China can’t get to the root of its debt problem. SOE debt has long been the biggest driver of the country’s surging debt levels, which increased from 160 per cent of gross domestic product in 2008 to some 260 per cent today.

    This rate is carefully monitored by the International Monetary Fund (IMF), which has warned that it could lead to financial turmoil, as debt growth becomes untenable.

    “It [debt] is going to continue to rise,” Peking University’s Balding said. “They [Chinese officials] are concerned about debt but prioritize SOE-funded growth over debt.”

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    See also

    09/12/2008 ASIA
    Economic crisis: US, China and the coming monetary storm
    The massive levels reached by the foreign debt of the United States and the excessive and unjustified devaluation of China’s yuan are two high risk factors for the world economy and stability. Solutions found so far may be useful for financial institutions but not for the population. A “transnational” oligarchy is emerging that includes central banks, the Chinese Communist Party, Russia’s oligarchies and oil sheiks.

    12/03/2016 16:14:00 CHINA
    China’s central bank reassures world that growth targets reachable

    Governor Zhou Xiaochuan pledges not to use “exchange rates or other monetary policies to stimulate exports", nor resort to massive capital injections.



    09/10/2007 CHINA – EUROPEAN UNION
    Europe complains about low yuan
    Euro-zone finance ministers criticise Beijing for keeping its currency artificially low to increase its trade advantages. The issue will be discussed October 19 when G7 finance ministers meet. The European Union is divided.

    22/04/2010 CHINA – UNITED STATES – JAPAN
    IMF joins the world to ask Beijing to revalue its currency
    In its World Economic Outlook, the International Monetary Fund says only a new Chinese monetary policy can guarantee a global economic recovery. It also warns Japan to invest more. The United States prepares to hit China’s aluminium export to send Beijing a strong signal.

    24/10/2017 08:59:00 CHINA
    Xi Jinping like Mao Zedong: his 'thought' and his name in the Party’s constitution

    Only Mao and Deng Xiaoping have their names included in the PCC charter. According to observers, "Xi's thought" is a mixture of Maoist type slogans, wrapped in a nationalistic pride in which the Party's totalitarian power emerges, with Xi at its "core". Preparations for new Central Committee and the Politburo. Xi will not have absolute power, but shared with other factions, especially those of Jiang Zemin and Hu Jintao. Wang Qishan retires.





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