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Present and Future Cooperation between China and Europe on Industrial Investment

[Editor’s Note: The following People’s Daily article, authored by the Deputy Director of the National Development and Reform Commission, Xu Xianping, gives details on China-EU economic cooperation, as part of the two parties’ strategic relationship. The translation of excerpts relating to several points from the article follows.] [1]

Just after the New Year, Li Keqiang, the Vice Premier of China and member of the CCP Politburo Standing Committee, began a trip to Europe in which he would make official visits to Spain, Germany, and Britain. This is a major initiative toward building close relations between China and Europe. It will have significant impact on strengthening bilateral, pragmatic cooperation. China is the world’s largest developing country; Europe contains the largest number of developed countries. The deepening of mutual understanding and increased cooperation in industrial investment in multiple high-level fields between the two major economic powers will lay an important foundation in the consolidation and development of a comprehensive, strategic partnership between China and Europe. …

The first is that investments in both directions have grown significantly. Europe has become China’s fourth largest source of foreign investment. As of the end of 2009, the 27 countries in the EU had set up total of 31,874 enterprises in China, with actual investment reaching US$68 billion. From January to November of 2010, the EU established 1,491 new enterprises in China, with an actual investment US$5.964 billion, a year-over-year increase of 13%. As of the end of 2009, China had used government preferential loans from 20 European countries, with a cumulative amount of US$21.4 billion. dollars. The loans were used mainly in the fields of infrastructure, climate change, conservation and environmental protection, energy, transportation, education, health, public safety, and so on. In recent years, as the scale of China’s investments in Europe expanded rapidly, the level of those investments has also been rising. As of the end of 2009, China’s foreign direct investment covered all 27 EU member states, with US$6.277 billion of cumulative investment. China has set up nearly 1,400 enterprises with direct investment, employing 1.5 million local workers. In 2009, China invested US$29.7 billion in Europe, accounting for 5.3% of China’s total foreign investment, 5.35 times higher than the previous year. China’s investment and cooperation in Europe includes many areas, such as business services, manufacturing, financial services, etc., and is gradually expanding to include some very large projects, for example, the Hamburg – Shanghai tourism center project by Shanghai’s Yuyuan in Germany, the R & D centers and the machinery manufacturing base that Sany Heavy Industry Construction set up in Germany, the cooperative projects between China’s Chalco and Rio Tinto, Bluestar Corporation’s acquisition of the carbon fiber business projects of the World Fiber Group in the UK, and the recent approval of cooperative projects between China’s CITIC Heavy Industries and Spain’s Gandara Corporation.

Secondly, there have been quite a few successes in major projects involving cooperation. In the field of civil aviation, the Airbus A320 assembly line in Tianjin was the successful example of an industrial investment project involving cooperation between China and Europe. Planes have been delivered to users and put into operation. Chinese enterprises have also successfully participated in an A350 aircraft project, becoming the sole suppliers for rudder, elevator, and the belly fairings. They will also carry out a 15-year helicopter development project with Eurocopter. The cooperation in industrial investments between China and Europe, as represented by Tianjin’s Airbus A320 final assembly line project, has played a leading role in promoting economic and trade cooperation between China’s aviation industry and Airbus. From 2005 to 2009, China purchased a total of 410 Airbus A320 aircraft in bulk. In November 2010, during President Hu Jintao’s state visit to France, China signed a purchase agreement with Airbus for another 102 aircraft. In the railway industry, China’s cooperation with Siemens and other companies has vigorously accelerated the rapid development of high-speed railway construction. The two parties carried out extensive cooperation in railway rolling stock, communication signals, traction power supply system, system integration and high-speed switches, electrification, engineering consulting and supervision, and other areas. It was very significant for us that we were able to learn from the advanced international technology and management experiences in railways and improve our own system. This also provided a good foundation for China’s railways to “go global” and explore the international market. In the field of automobiles, China and Europe used their respective advantages. Thus there has been considerable progress in implementing the strategy of integrating foreign trade and foreign investment. China’s auto parts have gotten into the European market and effectively lowered the cost of their local manufacturing of automobiles and auto parts. From January to October of 2010, China exported a total of US$9.497 billion of auto parts to Europe, accounting for 36.7% of our total exports of auto parts. Many Chinese and European automobile companies have merged or restructured, and positive effects are emerging. In March 2010, Geely Automobile Company acquired Volvo Car Corporation, achieving a win-win situation for the two companies. In the field of petrochemicals, during the “Eleventh Five-Year Plan” period, three ethylene production lines were completed: the Shanghai Secco (jointly by China and Britain), Nanjing YPC (jointly by China and Germany), and the South China Sea Shell in Huidong, Guangzhou (jointly by China and Britain). The capacity of these three lines accounts for 20% of our total ethylene production capacity. In the steel industry, Anshan Steel and Bao Steel each had joint ventures with Germany’s ThyssenKrupp and built the Dalian Galvanizing line and the Shanghai stainless steel production line, respectively. The Dalian Galvanizing line’s #1 and #2 lines have already been put into operation and have the capacity to produce 80 million tons of galvanized sheets. Anshan Steel now has the ability to produce the cold rolled board for the surface plate of BMW and other luxury cars. The cold rolling section of the Shanghai stainless steel production line has also been completed and put in operation.

Thirdly, cooperative ventures have been expanding steadily. China and Europe have carried out active and fruitful cooperation in R & D, standards development, equity investment, market development, personnel training, etc. The economic and technological cooperation forum between China and Germany facilitated a high-level communication platform for the enterprises of the two countries and contributed to over 70 projects involving cooperation, including the TD-SCDMA, Shanghai maglev and Guizhou-Guangzhou DC power transmission line. The areas of cooperation have been extended to information technology, biological technology, environmental protection, and so on. Chinese enterprises such as Huawei, ZTE, Lenovo, and Haier are all cooperating meaningfully with enterprises in the UK, France, Germany, Spain, Italy, and other European countries. This is effectively enhancing our brand awareness in Europe. France Telecom, Vodafone, Siemens, Alcatel-Lucent, Telefonica, Nokia, Ericsson, and other companies, have also increased their investments in China, valuing the Chinese market as an important part of their global strategy. …

Currently, the international community is increasingly willing to work together to address the profound impact of the global financial crisis. At the same time, the transition of the world economy is accelerating and the industrial structure is optimizing and upgrading. These are all great opportunities that China and Europe should utilize in further cooperating with each other. The two parties should have mutual trust and mutual respect, sincerely cooperate with each other, focus on breaking all kinds of anachronistic barriers, respect each other’s core interests, further tap the cooperative potential, look for the most beneficial mutual interests, and foster new opportunities for cooperation. Europe should recognize the status of China’s full market economy as soon as possible and effectively relax its export restrictions on high-tech products to China. China will further strengthen intellectual property protection, standardize and perfect the trade and investment environment, actively push the industrial investment cooperation between China and Europe to a new level, and create favorable conditions for real economic revitalization and development as well as industrial transformation and upgrading.

The author is the Deputy Director of the National Development and Reform Commission (Xu Xianping).

[1] Source: People’s Daily, January 4, 2011