China, EU part­ners in re­form

China Daily (Canada) - - COMMENT -

As we be­gin 2014, Europe has reached a turn­ing point. The fi­nan­cial sec­tor is more sta­ble. The re­cov­ery of the Euro­pean Union econ­omy is ex­pected to gather some speed this year. We are near to com­plet­ing the “Bank­ing Union”, which will en­sure we have a com­pre­hen­sive frame­work for deal­ing with bank crises and break the neg­a­tive link be­tween sov­er­eigns and fail­ing banks. EU mem­ber coun­tries are do­ing what they need to do to re­pair their pub­lic fi­nances. Europe must im­ple­ment a wide-rang­ing pro­gram of nec­es­sary re­forms and im­prove the com­pet­i­tive­ness of the Euro­pean econ­omy.

With new lead­er­ship and re­newed guide­lines for re­form, China, too, is poised to roll out com­pre­hen­sive and deep re­forms. The Third Ple­nary Ses­sion of the 18th Com­mu­nist Party of China Cen­tral Com­mit­tee in Novem­ber and the Cen­tral Eco­nomic Work Con­fer­ence in De­cem­ber paved the way for sig­nif­i­cant eco­nomic, fi­nan­cial, fis­cal and so­cial re­forms in the coun­try.

Both the EU and Chi­nese lead­er­ships will need de­ter­mi­na­tion to adopt the rel­e­vant mea­sures in a holis­tic and con­sis­tent way so that, de­spite the pos­si­bil­ity of the process of change be­ing painful, peo­ple at all lev­els of so­ci­ety can feel the ben­e­fits. This will hap­pen if peo­ple in both economies can be served by greener, more bal­anced and more in­clu­sive eco­nomic growth.

The EU and China are strongly in­ter­con­nected. As a re­sult, the state of our economies and the so­cial, eco­nomic, fi­nan­cial and po­lit­i­cal re­forms we un­der­take have an im­por­tant im­pact on the other’s ter­ri­tory. We need to move for­ward to­gether; move to­gether in the con­text of our part­ner­ship in the G20 and in the World Trade Or­ga­ni­za­tion; and move to­gether in our close bi­lat­eral co­op­er­a­tion, the lat­est ex­pres­sion of which was the EU-China Sum­mit in Novem­ber.

Over the last five years, we have taken rad­i­cal steps in Europe to bet­ter reg­u­late the fi­nan­cial sec­tor, re­turn pub­lic fi­nances to health, and im­prove the gov­er­nance of the eu­ro­zone. None of this has been easy. It has been a painful but nec­es­sary process, one in which Europe’s peo­ple have made real sac­ri­fices and faced re­duced pub­lic ser­vices and lower in­comes. This has af­fected con­sumer spend­ing which, in turn, has had an im­pact on the world, in­clud­ing on China.

Europe needs to com­plete the re­cov­ery and re­store do­mes­tic de­mand by mak­ing the sin­gle mar­ket work even bet­ter, boost­ing its vi­brant ser­vices econ­omy and bring­ing a new dy­namism to its in­dus­trial sec­tor.

And as China de­vel­ops its re­form agenda, it too is aim­ing to re­gain bal­ance in a num­ber of ar­eas, such as the bal­ance be­tween in­ter­nal and ex­ter­nal de­mand, be­tween eco­nomic growth and en­vi­ron­men­tal sus­tain­abil­ity, be­tween ur­ban and ru­ral ar­eas, and be­tween the State and the mar­ket. While it is clear that State-owned en­ter­prises will con­tinue to play an im­por­tant part in China’s econ­omy, the ap­proach an­nounced at the plenum that the mar­ket is to play a “de­ci­sive role” in al­lo­cat­ing re­sources is wel­come. It will be a piv­otal fac­tor in China’s growth strat­egy and we in Europe will be watch­ing with in­ter­est to see how this pol­icy is de­liv­ered in prac­tice.

The Cen­tral Eco­nomic Work Con­fer­ence iden­ti­fied greater open­ness as one of six pri­or­ity tasks. This ap­proach is wel­come in­deed. Euro­pean stake­hold­ers have ex­pe­ri­enced re­stric­tions be­cause of a piece­meal open­ing of mar­kets and con­trol of for­eign in­vest­ment. In key sec­tors such as fi­nan­cial ser­vices, China would ben­e­fit from more open­ness given that for­eign banks had a mar­ket share of less than 2 per­cent in China in 2012.

Euro­pean stake­hold­ers re­main com­mit­ted to the Chi­nese mar­ket, and sup­port the de­vel­op­ment of do­mes­tic con­sump­tion, ser­vices and in­no­va­tion. China con­tin­ues to be a pri­or­ity in global strate­gies. There are high ex­pec­ta­tions for new de­vel­op­ments, such as the China (Shang­hai) Pi­lot Free Trade Zone.

The last EU-China Sum­mit marked the be­gin­ning of a new strate­gic agenda for co­op­er­a­tion and the launch of in­vest­ment agree­ment ne­go­ti­a­tions. We need to make sure that mar­ket play­ers from one coun­try or re­gion can in­vest safely in another and sup­port fair ac­cess to mar­kets.

The EU also sees China’s ac­ces­sion to the WTO Gov­ern­ment Pro­cure­ment Agree­ment as mu­tu­ally ben­e­fi­cial. The ac­ces­sion process should be ac­cel­er­ated. The time has now come to en­sure broader mar­ket ac­cess to China’s pub­lic pro­cure­ment. This would be in the in­ter­ests of the Chi­nese peo­ple, giv­ing them bet­ter value for their money as China’s in­fra­struc­ture is be­ing im­proved to meet the chal­lenges of ur­ban­iza­tion.

As all th­ese re­forms are rolled out, it is cru­cial that we do not cre­ate new im­bal­ances in trade, fi­nan­cial reg­u­la­tion, pub­lic fi­nances or cur­ren­cies that could spark a new cri­sis. This re­bal­anc­ing must be co­or­di­nated in global fo­rums, where both the EU and China have a key role to play.

The G20 has emerged as the pre­mier fo­rum to de­velop joint re­sponses to global eco­nomic chal­lenges. Thanks to the de­ter­mi­na­tion shown by world lead­ers in that fo­rum, many of the nec­es­sary rules have now been agreed, par­tic­u­larly in fi­nan­cial ser­vices. Now we turn to the dif­fi­cult task of im­ple­ment­ing them. As we do so, we need to co­op­er­ate closely, for in­stance through peer re­views, to make sure our im­ple­men­ta­tion is co­her­ent and the rules in place in each ter­ri­tory are equally ro­bust and can be rec­og­nized as equiv­a­lent when ap­pro­pri­ate.

But we need to co­op­er­ate more closely in other ar­eas too, is­sues that touch our peo­ple in their daily lives, such as im­prov­ing our per­for­mance on the en­vi­ron­men­tal front and food safety. And we need to fo­cus our at­ten­tion on sus­tain­able, “green” growth, and on find­ing ways to pro­tect in­tel­lec­tual prop­erty rights and ex­ploit their value as a real as­set and driver of eco­nomic progress.

With pru­dence and de­ter­mi­na­tion, we need to build on our new strate­gic agenda for co­op­er­a­tion, come out of the cri­sis stronger and lay the foun­da­tion for a more sus­tain­able, more bal­anced path to fu­ture growth. The au­thor is mem­ber of the Euro­pean Com­mis­sion, re­spon­si­ble for In­ter­nal Mar­ket and Ser­vices.

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