China is the single most important challenge for EU trade policy. EU-China trade has increased dramatically in recent years. China is now the EU’s 2nd trading partner behind the USA and the biggest source of imports. The EU is China’s biggest trading partner. China is set to be the biggest national exporter in the global economy in 2009. China now accounts for about 9% of world trade in goods. Total bilateral trade between the EU and China was worth €326 billion in 2008.
China is Europe’s fastest growing export market. Europe exported €78.4 billion worth of goods to China in 2008, a rise of 9% compared to 2007. Exports from the EU to China grew by 65% between 2004 and 2008. Europe runs a surplus on trade in services with China – € 5.7 billion in 2008 (up from €3.9 billion in 2007). This is about 30 times smaller than its trade deficit for goods, which was €169 billion in 2008.
Europe’s imports from China have grown by around 18% per year for the last five years. In 2008, the EU imported €248 billion worth of goods from China. China is Europe’s biggest source of manufactured imports. Two decades ago China and Europe traded almost nothing.
Preliminary data suggests that EU-China trade has decreased in 2009 due to the economic downturn. European imports from China have gone down, while EU exports to China seem to have remained largely stable.
The trade deficit with China is focused on office and telecom equipment, textiles and iron and steel. The trade deficit reflects a huge shift within the economies of Asia to focus production in China. Although imports from China have surged, Asia’s share of total EU imports has increased only moderately, by 10% over the last decade. However, the deficit still reflects the considerable problems EU businesses have accessing the Chinese market.
China is the most frequent location of anti dumping investigations by the EU. The EU currently has 50 antidumping measures in force against Chinese imports in order to correct unfair trading practices. However, these affect only about 1% of Chinese imports to the EU. In 2009, there have only been four new anti-dumping investigations started regarding Chinese imports.
European companies invested €4.5 billion in China in 2008 (down from €7,1 billion in 2007). Chinese companies invested €0,1 billion in Europe in 2008 (down from €0,6 billion in 2007). EU investment stocks are one of the largest foreign investment stocks in China, worth more than €32 billion in 2006. Almost half of EU foreign direct investment to China goes to manufacturing.
Barriers to trade and investment
Intellectual property rights protection remains a problem for European businesses in China.. Seven in ten European businesses operating in China say that they have been the victim of IPR violations. In 2007, European manufacturers estimated that IPR theft cost them 20% of their potential revenues in China. Almost 60% of all counterfeit goods seized at European borders in 2007 came from China.
European services companies find it very difficult to break into the Chinese market. Although China has signed agreements to open its market, since 2001 it has granted 22000 telecoms licenses in China and only 12 have gone to foreign companies. China maintains investment and ownership caps in many sectors such as banking, construction and telecommunications.
Foreign law firms in China are not allowed to employ Chinese lawyers and are not permitted to participate in bar exams to gain Chinese qualifications. Also the public procurement market in China remains very difficult for foreign operators as well as for foreign owned companies in China to access.