Cooperation urged to prevent European ‘black swan’

Europe can reduce the risk of encountering an economic “black swan” by cooperating more with China, according to analysts at the China Development Forum.

“The immediate black swan is in Europe,” Joseph Stiglitz, a Nobel laureate and economist at Columbia University in the United States, said at the three-day forum, which was to end Monday.

Black swan refers to an unexpected incident that has a major effect on financial markets and economies. The debt situation in the EU, notably Greece and Italy, for example, is expected to have a black swan effect.

“Many (European) countries have lower GDP than before the (financial) crisis, and for many countries, the downturn is much worse than the Great Depression — unemployment is unacceptably high and youth unemployment in countries like Spain and Greece is as high as 50 percent,” Stiglitz said.

Greece may encounter another debt crisis next year, according to Christopher Pissarides, a Nobel laureate and economist at the London School of Economics. The EU hopes to establish a bank union to ward off risks, but this is yet to happen, he said.

Stiglitz said the lack of a bank union has led to capital outflows. “Europe knows what needs to be done,” he said, “but politics are still not strong enough to create the institutions to make it work.”

Zhao Jinping, director of research on foreign economic relations for the State Council’s Development Research Center, said, “Despite the recent mild recovery of the global economy, the European economy faces new uncertainties and risks.”

Cooperation with China can help Europe to avoid potential crises, he said, calling on them to join hands to safeguard the existing multilateral global economic governance regime and to accelerate free trade talks to boost globalization.

The two sides can also cooperate under the framework of the Belt and Road Initiative, which will create opportunities for enterprises from China and Europe, Zhao added.

Wu Xiaohui, chairman of Anbang Insurance Group, agreed that deepening cooperation would lower the possibility that Europe will experience a black swan event.

“China and Europe have advantages when it comes to bilateral cooperation,” he said. “While Europe has a branding advantage, China excels in processing and production. The combination ... can produce a great atomic effect.”

Chinese direct investment in Europe last year totaled 35.1 billion euros ($37.7 billion), up by 76 percent yearon-year, according to Rhodium Group and the Mercator Institute for China Studies.