China in the World Economics - Essay Example

According to the European Commission the "one clear core objective" that should guide the future development of EU-Asia relations is "to focus on strengthening the EU's political and economic presence across the region, and raising this to a level commensurate with the growing global weight of an enlarged EU"1. With this macro objective in mind the question about the strategic and systemic implications of the Chinese economic development for the new EU member states arises. In this context the EU's approach to the People's Republic of China is of overall importance. This is because China holds the key for regional cooperation and integration in East Asia. Thus, facilitating the projection of the EU's soft power to East Asia could become a priority for the new EU member states. The policy of the EU towards China is a multilevel engagement policy. Furthermore, it is a mixture of bilateral and multilateral approaches.2 This partnership is not strategic in the military sense. Yet, the issue of the lifting of the European arms embargo against China indicates that hard security issues have entered EU-China affairs. The Premier of the State Council of the PR China, Wen Jiabao, has coined the term 'comprehensive strategic partnership'. Wen defines the term in the following way: "By "comprehensive", it means that the cooperation should be all-dimensional, wide-ranging and multi-layered. It covers economic, scientific, technological, political and cultural fields, contains both bilateral and multilateral levels, and is conducted by both governments and non-governmental groups. By "strategic", it means that the cooperation should be long-term and stable, bearing on the larger picture of China-EU relations. It transcends the differences in ideology and social system and is not subjected to the impacts of individual events that occur from time to time. By "partnership", it means that the cooperation should be equal-footed, mutually beneficial and win-win. The two sides should base themselves on mutual respect and mutual trust, endeavour to expand converging interests and seek common ground on the major issues while shelving differences on the minor ones.3 The EU has been China's largest trade partner for two years and China is the first non-EU country to participate at the Galileo program. Politically, they share much in common as both believe in multilateralism, pursue democracy in international relations and work for safeguard the authority of the United Nations. China's integration into the global economy will further accelerate with its recent accession to the World Trade Organization (WTO). Numerous key sectors of China's burgeoning economy, such as banking and finance, are being forced to open up and liberalize, regardless of whether they are prepared. Beyond economics, China is a permanent member of the UN Security Council, possesses intercontinental-range nuclear weapons, and has become gradually more active in a host of regional and multilateral organizations. There is considerable debate about the size of China's economy relative to that of other economies. The value of Chinese exports has increased rapidly in recent years, and it is now the world's third largest goods exporter after the US and the EU.4 The total value of China's goods exports in 2005 was $762 billion, nearly 10% of the world total, compared with $593 billion in 2004, an increase of 28.4%. It has also become the world's largest importer, with goods imports valued at $660 billion, or 8.2% of the world total. China's trade in goods surplus was $102 billion for the whole of 2005 (4.6% of GDP), more than triple the previous year's surplus of $32 billion (1.7% of GDP).5 In spite of all such impressive figures, development is certainly not peaceful in China at present and dangers inherent in political and economic decentralization are many. China's rapid economic growth, its increasing competitiveness and its growing goods exports have raised concerns in the EU and the US. A number of specific trade issues - textiles, leather shoes and car parts - have seen responses from the EU and the US, which have been characterized, as 'protectionist'. Also, the annual budget deficit is at all-time high, government-run banks are essentially defunct, state-owned enterprises desperately need to be rationalized, and the emergence of major outbreaks of rural unrest threaten to create regional political crises. Chinese analysts have argued for the adoption of a "great-power mentality" to replace Beijing's view of itself as a victim of the international system. In addition, these analysts assert that China needs to more closely associate with the interests of great powers, and that China as a rising power needs to pay attention to its responsibilities as a great power. The EU can no longer afford to base its relationship with China around progress on human rights matters. Europe must develop a position on the security and strategic aspects to the relationship. In turn, China should address regional and worldwide uncertainty over the potential threat Beijing poses. Another of China's concerns is security of energy supply. Again, both China and EU have the strong motivation for preserving world and regional peace, and neither has the intention or ambition for international or regional hegemony. In particular, although the EU still has strong reservations on China's political system, human right situation, etc, but EU has "put the EU-China relationship on a commensurate footing with the EU's approach towards other major international partners such as the US, Japan and Russia"6 To China, it seemingly is a good chance for trade after the EU's enlargement with the big integral market, which has 450 million consumers and common customs. But can it get past the greater differences of history, culture, religion, sociology and political mindset of China Also, EU strengthening the strategic partnership with some great powers such as China may pose a dilemma for the EU because of its traditional alliance with the U.S. The new strategic partnership with China, may also be in order to resolve the Central and Eastern European crisis and for lifting its position and influence in the world affairs. But reviewing the China-EU relationship and the latest development of the European integration, we will find that the ongoing European integration or the forming EU is not a homogeneous single-dimension parameter. But as I have said that the China-EU relationship is clearly dominated by economic aims and less by security question. The EU must implement its Lisbon agenda for stronger economic growth and push for more coherence in its foreign policy. China's development, which the EU's wholeheartedly welcomes, will not be sustainable unless it is accompanied by political reform. The rapid technological catching up of China in the manufacturing sector (viewed increasingly as the factory of the world) leaves still some scope for a China-EU complementarity of economic activities with a visible breakdown between manufacturing and service activities. It is clear, obviously, that China and the EU specialize in different stages of the same manufacturing process, with China more involved at the lower end of the spectrum in, for example, the computer and office equipment industry. This invites therefore further clarification into the issue of trade or production "complementarity" between the two regions. Of particular importance is the evolving manufacturing specialization of Chinese-based firms, in the context of an enlarged EU. Shared economic prosperity has been underlined with reference to the existence of two types of complementarity between the EU and Chinese systems of production. One at the level of the filire, with the EU supplying much needed technology and machinery to China, and China involved in less technology intensive activities (in consumer goods for example). The second, being a low knowledge intensive / high knowledge intensive complementarity taking place within the spatial organization of global manufacturing systems. However, complementarity in terms of filire is already a feature of the past, for the EU now has a trade deficit with China in machinery. More preoccupying, although the EU still has much strength in knowledge intensive manufacturing activities (such as in the biotechnology area), the Chinese shift to the higher end of the value added chain in many of these industries is inexorably rapid. At this juncture, the only complementarity that the EU can best promote in the future seems to be more along the lines of a services / manufacturing complementarity. With the growth in wealth, China is also fast becoming a superpower of not only mass production but also mass consumption. The growing economic power of China makes some believe that '[t] here is no such thing as a global strategy without China'7 and the China issue will global future. The fact that China has overtaken Japan as the world's third largest exporter (behind the US and Germany) and the third largest importer (Williams, 2005) would make the WTO a much less influential organization without China's presence. While, corporate Europe needs the doors to the China market (and, increasingly, Chinese capital) and European multinationals representing an important part of FDI in China, along side overseas Chinese, Japanese and American investments. Again, lifting the arms embargo would pave the way for the EU to sell weapons and military equipment (like French Mirage fighter jets and German missiles by the European arms industry to China. But most importantly, it is generally accepted that lifting the arms embargo would be compatible with the common desire between China and the EU for building such a new world order, thus restraining the hegemonic power of the US. Thus strategic relationships are important factors that can be fostered well with economic solutions between China and EU. Read More