Mutual Trust and Common Prosperity

— Status quo and prospects of China-European Union cooperation in industrial investment

By Xu Xianping, Vice Minister of the National Development and Reform Commission

China is the world's largest developing country. The European Union (EU) is the largest bloc of developed countries. Deepening their mutual understanding and high-level, multi-faceted cooperation in industrial investment serves as an important springboard for consolidating and developing their comprehensive strategic partnership. In the new century, with the establishment of China's basic socialist market economy system, and with the improving investment environment and the growing strength of Chinese enterprises, China and the EU have conducted extensive industrial investment and cooperation in terms of high technology, transportation, energy, environmental protection and communications, thus achieving fruitful results, which have served as great drivers for China and the EU's bilateral economic cooperation.

First, sharply growing reciprocal investment. The EU has become the fourth largest foreign capital source for China. By the end of 2009, the EU's 27 member countries have cumulatively set up 31,874 enterprises in China, with a total investment of 68 billion yuan. From January to November 2010, the EU set up another 1,491 enterprises in China, with an investment of more than $5.96 billion, up by 13 percent year on year. By the end of 2009, China had made use of official favorable loans from 20 EU countries, with an effective amount of $21.4 billion. They were mainly used for basic infrastructure, global climate change, energy conservation and emission reduction, energy, transport, education, health and public security.

In recent years China's investment in the EU has developed not only in scale but also in level. China's foreign direct investment (FDI) in the EU has covered all its 27 member states, with FDI stock reaching about $6.28 billion by the end of 2009, setting up nearly 1,400 enterprises, and employing 15,000 local workers. In 2009, China's investment flows in EU reached $2.97 billion, accounting for 5.3 percent of China's total overseas investment flows, an increase of 5.35 times. China's investment in the EU covers areas such as service, manufacturing and finance. Gradually China has developed big programs, including Hamburg-Shanghai European tourism center invested by Shanghai Garden, and Sany Heavy Industry's European research and development center and mechanical manufacturing base in Germany. There is also a cooperative program between China Aluminum International Engineering Corp. Ltd and Rio Tinto. China National BlueStar (Group) Co. Ltd purchased a carbon fiber business in Britain, and the cooperative program between CITIC Heavy Industrials Co. Ltd and a Spanish company was recently approved.

Second, remarkable achievements in cooperation on major programs. In civil aviation, the Airbus A320 Tianjin final assembly program is a successful example of China-EU industrial investment cooperation. Now, some planes are being gradually delivered to clients and put into operation. Chinese enterprises successfully took part in the program as the sole provider of rudders, elevators, and fairing to reduce drag. Chinese enterprises have also carried out cooperative research with European helicopter makers on Z15 helicopters.

Cooperation represented by the Airbus A320 Tianjin final assembly line has played a leading role in pushing forward trade cooperation between Chinese aviation circles and Airbus. From 2005 to 2009, China purchased 410 Airbus A320 planes. In November 2010, during Chinese President Hu Jintao's state visit to France, China signed a purchase agreement for 102 planes with Airbus.

In railways, cooperation with enterprises such as Siemens greatly pushed forward China's high-speed railway development. The two sides have conducted multi-faceted cooperation in railway locomotives, communications signals, traction power system, system integration, ballastless tracks and high-speed turnouts, electrification, engineering consultation and supervision. These programs laid a sound foundation for China to learn advanced technology and management experience of international railways, to raise its own developmental level, and to tap into the international market.

In the automobile area, China and the EU both brought advantages into play, implementing an international-oriented development strategy of combining foreign trade with overseas investment, and thus making great achievements. Imports of Chinese auto parts have greatly cut the manufacturing cost of local auto products. From January to October 2010, China exported to Europe $9.497 billion worth of auto parts, accounting for 36.7 percent of China's total export of parts and components.

A positive effect from the merging and acquisition of Chinese and European auto companies is emerging. In March 2010, Geely purchased Volvo, achieving a win-win action for both sides.

In petrochemical areas, during the 11th Five-year Plan period, the China-British Shanghai SECCO Petrochemical Co. Ltd and the China-German joint venture BASF-YPC Co. Ltd in southeast China's Nanjing, as well as China-British joint investment in three sets of ethene production lines in Huizhou of Guangdong Province have been established, with the Shell Petrochemicals Co. Ltd accounting for 20 percent of China's total ethene production.

In steel, Germany's ThyssenKrupp AG jointly invested in the construction of the galvanizing production lines in Dalian with Anshan Steel Co. and a stainless steel production line in Shanghai. The No.1 and No.2 galvanizing production lines between Anshan Steel Co. and ThyssenKrupp AG (Dalian) have already been put into operation, reaching an annual galvanizing capacity of 800,000 tons. Cold-rolled sheets produced by Anshan Steel Co. are used in the production of surface plates for high-grade sedans such as BMW. The cold-rolling section of Shanghai Krupp Stainless has been put into operation.

Third is the expansion of areas for cooperation. Businesses from China and the EU have conducted vigorous and fruitful cooperation in R&D, standards enactment, equity investment, marketing, and training of skilled personnel. Mechanisms such as Sino-German bilateral economic and technical cooperation forums have built high-level communication platforms for both countries' companies and generated nearly 70 cooperative projects, including TD-SCDMA, the Shanghai maglev rail line, a direct current power transmission project between Guizhou and Guangdong lines, covering IT, biology and environmental sectors. Chinese companies, such as Huawei, ZTE, Lenovo and Haier have carried out productive cooperation with local companies in Britain, France, Germany, Spain and Italy and effectively raised images of Chinese brands. Companies from Europe, including France Telecom, Vodafone, Siemens, Alcatel-Lucent, Telefonica, Nokia and Ericsson, are increasing their investment in China and regard the Chinese market a vital part of their global strategies.

China and the EU have two highly complementary economies. It is important to further raise industrial investment cooperation levels between China and EU. The EU, consisting of the most developed economies in the world, has mastered leading technology in many fields. EU countries pioneered the low carbon concept and possess advanced industrialized technologies and expertise. Recently, the European Commission launched the Europe 2020 Strategy to prepare the EU economy for the next decade. The strategy outlines priority areas for the EU's economic development: Smart growth, developing an economy based on knowledge and innovation; sustainable growth, promoting a low-carbon, resource-efficient and competitive economy; and inclusive growth, fostering a high-employment economy delivering social and territorial cohesion. In this context, promoting complementary and mutually beneficial industrial investment cooperation between China and the EU is timely and consistent with interests of both parties.

China and the EU should seize opportunities presented by the increasing willingness of the international community to collaborate to overcome the implications of the international financial crisis, the acceleration of the world economy's restructuring and the upgrading of industrial structures, and break down obstacles to development trends. We should respect the other party's core interests, take an in-depth look at the potential for cooperation between the two sides, seek maximum overlap of our interests and foster new cooperative highlights.

The EU should recognize China's full market economy status at an early date and ease restrictions on high-tech exports to China.

China will further enhance its intellectual property rights protection, improve its trade and investment environment, and proactively support mutual industrial investment cooperation moving to a new stage, which will create favorable conditions for both sides to rejuvenate their real economies and upgrade their industries.

First, consolidating cooperation in existing fields. China and the EU should fully tap auto industry technical cooperation potential in energy conservation, key parts, diesel passenger cars and heavy commercial vehicles, and collaborate to develop rail transportation equipment and aviation equipment. The cooperation should extend to the promotion of the development of new-energy vehicles featuring high efficiency and low emissions, greater intensity of the research of standards for electric vehicles' safety, key parts and performance evaluation, and the exchange opinions on the construction of electric vehicle charging networks.

China supports companies from both sides to increase cooperation in the manufacture of A350 aircraft and subcontracting of Airbus aircraft based on the general assembly line of A320 series and China's large aircraft research and development. The two sides should boost cooperation in market expansion and technology and explore ways to deepen cooperation in railway field. They also have potential to deepening cooperation in TD-SCDMA and its technical evolution, as well as in the evolution and transformation of next-generation Internet.

Second, developing clean energies. The two sides should cooperate in tapping renewable and new energies, explore non-conventional resources such as coal-bed gas, expand solar photovoltaic and solar thermal markets and the use of biomass energy, and develop smart grids and technological research in and integrating renewable energies into the grids.

Third, promoting energy conservation. The two sides should focus on cooperation in clean coal technologies. They should loosen limitations on technology transfers in energy conservation and emissions reductions, and collaborate to develop energy-saving technologies, equipment and products. It is necessary for both sides to promote industrialization of key technologies in resources recycling, popularize advanced environmentally friendly technologies, equipment and products. They should also deepen technological cooperation in wastewater and garbage treatment and recycling.

Fourth, developing biotechnologies. The two sides should actively conduct cooperation to develop biotechnology medications, gene therapy, new vaccines and diagnostic reagents that are used to prevent or treat major diseases, development and industrialization of bioengineering products, organic foods, bio-breeding industry, biological products for green agriculture, marine biological technologies and products and development and use of bio-manufacturing technologies.

China's development is the result of three decades' unwavering reforms and opening up. An increasingly open China welcomes the investment of companies from the EU and supports capable Chinese companies to develop in EU countries.

Chinese Vice Premier Li Keqiang's visits to three EU countries are bound to promote strongly the establishment of our industrial cooperation partnerships at higher levels and in wider areas and diversified forms between two sides in new situations. We have faith that a solid foundation for an even greater future for the comprehensive China-EU strategic partnership will definitely be based on increased bilateral industrial investment cooperation. This will take sincere attitudes, pragmatic action and the capacity to seize opportunities and seek a win-win situation.


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