Crisis offers new chances for Sino-EU transformation

  2011/10/14 source：

The global economy is experiencing a serious crisis, but also a potential transformation. Cooperation between China and the EU is an important part of this process, and can help both parties. The EU is experiencing an unprecedented debt crisis that threatens the whole eurozone. While the political solutions can only come from inside Europe, outside help is needed for export markets, foreign investment, and bond purchase.

China, now the world’s second largest economy, is the obvious choice. There are many areas in which the two can cooperate. One necessary step is to limit the irresponsible monetary policy of the US, designed to stimulate US economic growth and causing the US dollar to devalue.

The falling value of the US dollar is a threat to both the EU and China. For instance, it caused Airbus more than $4 billion loss in 2007-2010, and is shrinking the value of China’s US Treasury bonds. The devaluation of US dollars props up the prices of commodities, such as oil and food, which is a potential threat to global inflation.

But both sides also want to avoid a sudden collapse of the US dollar. At present the US has a large trade deficit and foreign debt. But this model is not sustainable. Once the scale of US debt is too big for creditor nations to endure, a crisis will ensure, and large economies including the EU and China will face a nasty shock. This situation should be avoided.

The EU and China can support each other in the reform of the international monetary system. EU proposes reinforcing supervision of the global financial system. The aim of the EU is to become the rule-setter of the new international monetary system and institutionalize emerging markets.

The Chinese government would like to see the yuan become an international reserve currency, improve its discourse power in international bodies, and gradually become a rule-maker in the international financial system. Although China’s and the EU’s goals are different, their realization depends on mutual cooperation.

Cooperation between EU and China will contribute to the resolution of the European debt crisis. Chinese leaders have expressed confidence in the euro several times. The Chinese government bought bonds from Greece and Portugal, and invested in many EU countries. But European states should guarantee the security of Chinese assets. If European countries put forward joint euro bonds, maybe the Chinese government would buy more.

China and EU can also cooperate in their economic transformation. If the EU cooperates technologically with China in fields such as environment and new energy, it will not only benefit China’s economic transformation, but also help the EU escape a difficult situation.

To reject growing trade protectionism, EU and China should work together to improve the development of Doha round negotiations. If both sides take interdependence and development seriously, they should strengthen multilateralism.

It’s really the right time to deepen China-EU cooperation. But it’s difficult for the EU to abandon its existing concepts of China.

The EU still limits high-tech products’ export to China for both security and ideological reasons. Some Europeans think there are political implications behind Chinese investments.

The EU is a model of pluralism and the world is becoming more and more diverse. The EU also should learn to respect other development roads, political systems, and civilizations.

Finally, on issues such as international financial system reform and climate change, China and EU should enhance their negotiation and coordination, and further bilateral strategic cooperation. Such cooperation is the embodiment of the China-EU strategic cooperative partnership.