The European Union and China have some of the most developed economies in the world.
For the PRC EU is the largest trading partner, and China is second only to the US for the EU, and they mutually contribute to sustainable development and prosperity in economic terms.
In 2013, the 16th EU-China Summit, held on 21 November, gave new impetus to mutual interest, opening the door to negotiations for a better mutual economic future. One of the main steps is the launch of negotiations for a Comprehensive Investment Agreement between the EU and China.
With China’s WTO membership, the country went for important reforms and for liberalization of significant parts of its economy. This action helps China to position itself on the global trading scene in a new light.
Accession to the WTO is a milestone in the reform and opening of China to the global market, which leads us into a new era of even more significant economic convergence.
Chinese President Hu Jintao said “China’s `to the WTO is a milestone in China’s reform and opening up, bringing us into a new era to further opening up. Joining the WTO was a major strategic decision based on our comprehensive analyses of the situation at home and abroad in order to push forward China’s reform and opening up and socialist modernization drive.”
Since 2001, China has been one of the most successful and productive members of the WTO. This opening of China to the world makes it possible to bring it closer to the European Union.
The economic and trade indicators for 2014 between the Union and China are indicative of this trend.
- GDP: EUR 16 556.9 billion for the EU and EUR 9 014.7 billion for China;
- GDP per capita: € 32,307.7 for the EU and € 6,468.2 million for China;
- Total bilateral trade in goods and services: EUR 518.8 billion;
- Position of foreign direct investment – EU and China (2013): External, amounting to EUR 130 billion and incoming EUR 27 billion;
- Average industrial tariffs: 3.8% for the EU and 8% for China;
- Agri-food tariffs applied on average: 7.2% for the EU and 13.9% for China;
Bilateral trade and investment trends between China and the EU are growing remarkably, and this indicator is one of the most important for the direction of the economic partnership.
The value of the US dollar in total bilateral trade in goods since 1995 has increased by ten percentage and points to $ 600 billion or € 526 billion by April 2016 versus the USD / EUR exchange rate in 2014.
Trade in services under Mode 1 of the GATS General Agreement on Trade in Services strongly increased to over $ 70 billion or € 61.4 billion in 2014.
In the last decade, despite the constraints in some sectors and the adverse effects of the crisis, the balance of trade in goods tilts the scales in favour of China because EU barriers are lower than those in China for sectors where European companies specialize more closely. The trade balance of goods is about 175 billion euros in deficit for the EU. In the service sector, the EU has a surplus of $ 230 billion or € 201.6 billion in 2014.
Because of China’s specific state policy, there are practices that may make it difficult for foreign companies to operate in the country. There is interference from the government in the economy in the sectors where state-owned enterprises operate, which also profit from access to subsidies and cheap financing for competition purposes.
There is insufficient protection and enforcement of intellectual property rights, as well as industrial overcapacity in a number of industrial sectors, such as steel production.
These are some of the obstacles that create complications and are about to be corrected under the pressure and positive effect of the mutual economic partnership. The challenges do not stop the EU and China from demonstrating their readiness to reduce tensions through dialogue and cooperation.
China’s rapid development and market expansion offers enormous opportunities as well as significant potential for further expansion of trade and investment, thereby strengthening common relations and making harmful practices unnecessary and disadvantageous.
Bulgaria, as an invariable part of the EU, receives a secure position for a growing economic partnership in its relations with China. At the state level, there is a strong annual political dialogue with the PRC.
Good practices of economic co-operation, trust and mutual knowledge have been established over the years. Bulgaria is one of China’s most hospitable partners on the Community market.
In 2011, the trade between the two countries amounted to 1 billion 346 million US dollars. Of which Bulgaria’s exports amounted in USD to 402.8 million, while imports amounted to 943.2 million USD.
Trade with China in 2012 reached $ 1.739 billion, with imports totalling $ 977 billion and exports of 762 million USD. In 2013, the trade between Bulgaria and China reached 1.888 billion USD (an increase of 8.6% compared to 2012), of which Bulgarian exports to China amounted to 868 million USD (14% growth) and imports from China $ 1,020 billion (4.4% growth). In 2014, bilateral trade amounted to $ 1,874 billion, of which Bulgarian exports amounted to $ 714.6 million and imports amounted to $ 1.159 billion. For 2015, the trade was $ 1.689 billion (9.9% down on 2014), with Bulgarian exports at US $ 612.4 million (-14.3%). In 2015, the trade volume amounted to 1688.7 million USD, down 9.9% compared to 2014. Bulgaria’s exports to China amounted to USD 612.4 million. (-14.3%) and imports to 1076.3 million USD (-7.2%).
The hybrid domestic economic nature of the Chinese economy makes the entry of Bulgarian companies difficult. For the same reason, China is becoming an excellent investor in the Bulgarian market and a recipient of Bulgarian goods on his own market.
The ability to pursue a coordinated national economic interest, even at a corporate level, makes China an economically useful partner for Bulgaria. Accordingly, the Bulgarian economy for China becomes an attractive terrain from the periphery of the Community market.
Despite the decline in invested/exported, China ranks second after Turkey among our export partners outside the EU and is 10th in our country’s total exports. The import varies – in BG are imported telephone sets, air conditioning machines and equipment, parts and accessories for vehicles, chairs, toys, fittings, electric boilers and chillers and many others.
Bulgarian exports are still limited within a small range of goods dominated by refined copper, copper alloys and copper ores, which account for over 70% of our exports to the Asian country.
Traditional Bulgarian products like wines and essential oils remain poorly represented. China is the largest market in the world of alcoholic beverages; the trend is leaning towards China to become the largest wine consumer in the coming years.
The Chinese market also provides good opportunities for promoting Bulgarian mineral and table waters.
In the past few years, imports of agricultural products and foods in China have increased at a huge pace, fuelled by rapid economic growth and rising incomes of the Chinese population. Since 2015, exports to the PRC of Bulgarian corn have grown significantly.
Bulgaria has the potential to export to the Chinese market cereals and oilseeds, wines, traditional dairy and meat products, poultry and eggs, processed fruits and vegetables.
According to Chinese legislation and international conventions, the Chinese authorities inspects the quality of imported products of plant and animal origin, requiring the country of origin of the products to make a formal application for importation into the territory of China, assesses public and veterinary hygiene in the country of origin of the goods, as well as the food safety system, assesses the risk of importing meat products into China, sets out the requirements for control and veterinary hygiene and requires registration of the undertakings producing the products in question.
The procedure for the signing of the so-called bilateral protocols and the coordination of phytosanitary certificates for exports (for products of plant origin), the coordination and the bilateral approval of the respective export certificates (for products of animal origin), which also constitute official authorization for the implementation of imports of the requested products into the territory of China requires a long time and is related to the admission of working visits by Chinese experts from General Administration of Quality Supervision, Inspection and Quarantine. As of December 2016, Bulgaria has launched 28 export procedures for China for agricultural and food products. Of these, they have successfully completed 3 – for corn, alfalfa and fish.
The steps towards a free trade agreement between China and the EU are appropriate for a number of reasons. For Bulgaria it also has a huge significance. The economic potential is large and it will still realize its impact on bilateral trade in goods and services.
This would be positive for both GDP and jobs in the EU and China, respectively, and very important for Bulgaria. Strategically, the free trade agreement will have a reversing effect on the market, as it will raise probably with 100% the level of trade in each country. It will be realized when China implements reforms that it has announced and changed its role into state-owned enterprises.
In this sense, a comprehensive free trade agreement would be more useful for China at the current stage of economy development and to EU opening huge potentials. For the European Union, the largest and most significant step in trade policy towards the dynamic East Asia’s market will be made and utilized.
For Bulgaria, this means opening up an already well-prepared market to China, supported by an excellent political dialogue, bringing extraordinary benefits and prospects for the state and the business community.
