Over the past 46 years since the establishment of diplomatic relations between China and the European Union (EU), bilateral relations have experienced some setbacks, but dialogue and cooperation are the cornerstone of China-EU relations. Sharing broad common interests, their cooperation is greater than competition. The two major civilizations have dialogues and exchanges; they are not institutional rivalry. China’s 2021 Government Work Report outlines the direction and prospects for the development of China-EU relations. In the face of major changes unseen in a century, China-EU relations will continue to develop and deepen, which will have a positive and far-reaching impact on the world’s political and economic pattern.

Well-being Injects Strong Impetus

With the transformation of its economic growth pattern, China is vigorously promoting new urbanization and reforms in the fields of medical care, health, and elderly care, with added focus on social development and environmental issues along with its economic growth. The government report once again emphasizes issues related to people’s livelihood, such as the promotion of new urbanization, the construction of a health care system, and green development. China’s urbanization process will promote the continuous increase in the demand for education, culture, tourism, medical care, childcare, and old-age services of urban residents.

As the birthplace of the industrial revolution, European countries are experienced in urban planning, transformation of old industrial cities, and construction of livable towns. They have strong comparative advantages in the life services industry. With the acceleration of China’s urbanization process and the opening-up of the services trade, its new urbanization will create more investment opportunities for related companies in European countries. In addition, countries such as Germany, the UK, and France have abundant experience and distinctive features in the healthcare and elderly care industries. The two sides have broad prospects for cooperation in the field of medical and elderly care.

They also have broad prospects for cooperation in green development. As the EU has been exercising strict controls over exports of high-tech products to China, the growth potential of China-EU bilateral high-tech trade has not been fully tapped. If the EU effectively lowers the export restrictions on high and new technologies urgently needed in China’s current development, such as new energy, new materials, energy conservation and environmental protection, green and low-carbon emission technology, its technological innovation can combine with China’s vast market. Not only will it promote the upgrading of China’s industrial structure and the transformation of the economic development model, it will also inject new vitality into the European economy which is facing challenges due to the impact of the coronavirus pandemic, and improve the well-being of the people on both sides.

The China-EU development not only has its roots in the people, but also benefits the people. The support and the well-being of the people have injected strong impetus into the bilateral development and laid a solid foundation for the continuous development and deepening of China-EU relations.

To a New Level

In the context of the COVID-19 pandemic and the continued sluggish global trade, China-EU trade has grown against the trend. China, for the first time, has surpassed the US as the EU’s largest trading partner. The latest data from Eurostat shows that in 2020, the trade volume between the EU and China reached 586 billion euros, which is 31 billion euros higher than that between the EU and the US.

Despite the huge scale of bilateral trade, there is still huge potential for cooperation between the two sides. China’s government report pointed out that promoting stable development of imports and exports is a priority in 2021. To this end, the Chinese government will continuously innovate and develop the services trade, optimize and adjust import tax policies, and increase imports of high-quality products and services. European countries have strong comparative advantages in high-quality goods and services trade. China’s tremendous market will undoubtedly bring unlimited business opportunities for European companies, help them get rid of the pandemic’s impact, increase employment positions, and promote economic recovery. China-EU economic and trade cooperation will continue to deepen and reach new levels.

However, we should also see that as the scale of China-EU economic and trade cooperation continues to expand, trade frictions have appeared from time to time. It is crucial for the two sides to actively explore mechanisms for properly handling trade disputes through dialogue and consultations, so as to avoid any abuse of trade remedy measures leading to a lose-lose situation. In the meantime, the two sides should also actively carry out feasibility studies on establishing a China-EU free trade area.

Institutional Guarantees for Investment Cooperation

Although two-way investment has developed swiftly, the scale of capital flows is relatively small. The EU investment in China only accounts for about 5 percent of China’s total FDI inflow, while the Chinese investment in the EU only accounts for 3.4 percent of the total foreign investment in the EU. Both sides hope to reach an investment agreement to provide institutional guarantees for Chinese and European investors and boost the expansion of two-way investment in order to change the asymmetric development of investment and trade between them.

Chinese President Xi Jinping met with German Chancellor Angela Merkel, French President Emmanuel Macron, President of the European Council Charles Michel and President of the European Commission Ursula von der Leyen via video links on December 30, 2020. The Chinese and European leaders announced that the two sides had completed investment agreement negotiations as scheduled. The China-EU Comprehensive Agreement on Investment follows international high-level economic and trade rules and covers four aspects, namely market access commitments, fair competition rules, sustainable development, and dispute settlement.

Chinese Premier Li Keqiang recently emphasized in his government report that implementing a high-level opening-up and facilitating the signing of the China-EU Comprehensive Agreement on Investment is an important task of the Chinese government in 2021. When the agreement is signed, more EU companies will invest in China and take root in China. Meanwhile, Chinese companies’ investment in Europe will also have legal and institutional guarantees. The agreement will gradually yield institutional dividend — the steady growth in the flow of goods, technology, services, capital, and personnel between China and the EU. As President Xi pointed out during his video meeting with European leaders: “The agreement will provide greater market access, higher level of business environment, stronger institutional guarantees, and brighter cooperation prospects for mutual investment.” The treaty will also greatly boost world economic recovery in the post-pandemic era, enhance the international community’s confidence in economic globalization and free trade, making significant contributions to the building of an open world economy, according to the Chinese president.

Deepen People-to-people Exchanges

Deepening cultural exchanges between China and foreign countries is an important task mentioned in the government report. Due to differences in ideology, values and culture, the cooperation between China and the EU in non-commercial exchanges is not profound enough. Although China-EU relations are trending toward continuous development and deepening, people-to-people exchanges lag behind the development of economic and trade relations, which is not conducive to the overall and sustainable development of China-EU relations. The exchange between countries lies in the connections of the people. Continuously enhancing cultural exchanges and promoting mutual understanding of each other’s history, culture, society, and nationality is the best way to achieve people-to-people exchanges. Strengthening people-to-people exchanges and exploring new models of people-to-people exchanges has become the consensus of the leaders of China and the EU.

Strengthening Global Governance Cooperation

In the context of increasing globalization, the ties and interdependence between countries have become more integrated, and no country can be isolated from the international community. Global issues such as response to global financial crises, international trade system arrangements, global climate change, environmental protection, public health security, energy and resource security, food security, anti-terrorism, drug smuggling, and human trafficking have surpassed the power of any country to tackle on its own. Therefore, strengthening cooperation in global governance has become the consensus of all countries in the world. At present, global governance has problems such as underrepresentation, imbalance of governance institutions, and low efficiency of global governance organizations, which urgently needs reform. The report mentioned that China will continue to pursue the policy of opening-up and cooperation and work to make the system of global governance fairer and more equitable.

Both the EU and China are active advocates of global governance reforms and have many common positions on global governance. The EU plays a vital role in the formulation of rules in the fields of global climate change, international dispute settlement mechanisms, environmental protection, product standards, and automobile emission standards, which makes it the world’s largest supplier of institutions. In the future, China and the EU should join hands to promote multilateral cooperation, strengthen coordination and cooperation within the framework of the UN, the G20, the World Trade Organization, and the World Health Organization; and promote political solutions to international and regional hotspot issues. In the face of the pandemic, the two sides should coordinate anti-pandemic actions to ensure that vaccines are fairly distributed as a global public product, especially for the benefit of developing countries.

World Impact

In the long run, the development and deepening of China-EU cooperation will release impact worldwide. From an economic perspective, China and the EU have gigantic economic aggregates, ranking first and third in the world respectively. The sum of the two economies accounts for one third of the global economic aggregate. The stable development of China-EU economic and trade relations will not only benefit their respective economic recovery and growth, but will also inject confidence and impetus into world economic recovery.

From a political perspective, the EU is the largest group of developed countries and a significant pole in a multi-polar world. China is willing to see a strong, prosperous, and united EU. Their cooperation in international and regional affairs will surely promote the development trend of the world’s multipolarization and the establishment of a fair and reasonable new international political order.

From the perspective of global governance, as one of the most influential political forces in the world, their coordination and cooperation on global affairs and regional issues requiring urgent attention such as climate change, combating terrorism, maintaining energy and food security, and advancing the reform of the international financial system and global governance will help strengthen their respective voices in global governance and promote world peace, stability, and development.

The author is an associate research fellow at Guangxi Academy of Governance.