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China Key to Europe's Recovery

Speaking on the eve of the eleventh EU-China summit to be held in Prague, European commissioner for external relations Benita Ferrero-Waldner highlighted the central role China will play in Europe's economic recovery.

"China is one of our most important partners in meeting the challenges of today and tomorrow," Ms Ferrero-Waldner told policymakers and diplomats gathered in Brussels for a conference on EU-China relations organised by Friends of Europe and the Security and Defence Agenda, a pair of Brussels think-tanks.

While Wednesday's (20 May) summit is to touch on a number of topics, including climate change and human rights, it is clear that the huge volumes of trade between the two sides form the backbone of their relationship.

On Monday, the EU's statistics office, Eurostat, released new figures showing the marked increase in trade volumes between the two sides over the last nine years.

Exports from the EU's 27 member states to China rose to €78 billion in 2008 compared to €26 billion in 2000, while its imports from China rose from €75 billion to €248 over the same period.

Yet despite the substantially increased trade deficit, the economic crisis is causing some EU policy makers to see China as part of the solution to the current economic downturn.

"The increasing Chinese middle-class is an attractive market for EU goods," said Ms Ferrero-Waldner, citing figures contained in a recent report published by the European Ideas Network that predicts China and India will account for 50 percent of the world economy by 2060.

The commission's director-general for trade, David O'Sullivan, also re-iterated this idea, saying that while competition with China in the coming years would be great, it would not result in a "zero-sum game," where one side's gain implicitly meant the other side's loss.

At the summit on Wednesday, Chinese premier Wen Jiabao is likely to renew calls for the EU to relax constrictions on high-tech exports and also reduce anti-dumping measures, while the EU will repeat its concerns over market access.

"This has the potential to create future friction if it is not dealt with in the correct way," said Mr. O'Sullivan on the issue of market access.

China's stimulus package

While the EU looks for greater access to China's growing domestic market, Chinese policy makers are beginning to question the very basis of their current economic model, based primary on the export of low-added-value goods.

Zhe Song, Chinese ambassador to the EU, said his country's exports were in great trouble, adding: "We all fear the economic recession might cause social strife."

However, he also said his country's economic fundamentals remained in good health and that the massive economic stimulus plan was starting to take effect.

At over €400 billion, China's stimulus plan as a percentage of its GDP dwarfs all others currently deployed around the world, amounting to 14 percent of 2008 GDP.

However, some analysts question whether this massive stimulus spending will bring about the necessary reforms to secure long-term growth levels once the current spending package comes to an end.

For European companies, the real question is to what extent they will be allowed to bid for projects under the Chinese stimulus plan.

Director for Asia in the commission's external affairs department, James Moran, says this is one area where the EU will be seeking greater assurances at Wednesday's summit.

China as a political actor

The interdependence between the EU and China means Europeans should not be perturbed by China's future economic growth, says Mr. Moran.

More of a question is China's willingness to take on a greater role as a political actor around the world, considering the country's previous reluctance to get involved in global disputes.

Two areas where China holds particular sway have come to increasing public attention in recent weeks.

"We would like to say how sad we are over the ongoing casualties in Sri Lanka and the recent arrest of [human rights activist] Aung San Suu Kyi in Burma," said commissioner Ferrero-Waldner on Tuesday, in an apparent bid to prepare the ground for Wednesday's discussions.

Provided by EUobserver—For the latest EU related news

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