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Remarks by H.E. Ambassador Song Zhe at the Plenary Session of the European Parliament Committee on International Trade
Seize the Opportunity of Economic Development Pattern Shift toExpand Mutually Beneficial Cooperation

Chairman Vital Moreira,

Members of the European Parliament,

I'm very happy to once again address the plenary session of the European Parliament Committee on International Trade. It's a pleasure to exchange with you on the development of China-EU business ties. I recall that in September last year, I spoke here to the members of the International Trade Committee on the challenges brought to China-EU economic and trade relations by the international financial crisis. We discussed possible measures to meet those challenges. Now a year has passed. I'm happy to see that our business cooperation has withstood the double tests of both the financial and sovereign debt crisis. Our cooperation has demonstrated sound growth momentum and has become an important pillar for us both as we lift our economies out of the crisis.

Our bilateral trade has recorded a fast rebound, outstepping the pre-crisis level. In the first 10 months this year, China-EU bilateral trade registered a 32.9% increase, reaching 388 billion US dollars. This is 8% higher than the trade volume of the same period in 2008, before the crisis broke out. European export to China grew by 39% in the first eight months this year. China is the fastest growing export destination among the EU's top five export markets. Media and economists in Europe find the soaring Chinese demand for mechanical equipment and high-end consumer goods an important driving force for economic recovery of many European countries.

Our two-way investment is growing steadily to an increasing number of areas. By the end of October, the EU has in total invested 5.5 billion US dollars in China this year, 10.5% higher than the previous year. More European companies are shifting their investment from manufacturing business to service sector. There are more mergers, acquisitions and risk investments. For China, in the first three quarters, Chinese direct investment to Europe grew by 5.2 folds. These investments have brought hope to a lot of European enterprises trapped in difficulty. The COSCO investment in the Greek port of Piraeus and Geely's Volvo purchase helped create large number of jobs. We are encouraged to see that our business cooperation has reached a historical new height.

Although the shadow of the international financial crisis has never left us and the world on the whole is still going through a slow recovery, the economic complementarity, mutual benefit, and win-win progress between China and Europe have constituted an important basis for the fast growth and achievements of our economic and trade cooperation. Yet there is one more thing that I find most important above all-China and Europe have always kept close communication and strong policy coordination to maintain open markets. During this year's 13th China-EU Summit, leaders from both sides reached important agreements to promote bilateral trade and remove trade barriers. The 6th China-EU Business Summit has built an effective platform for entrepreneurs of the two sides. The joint feasibility research for China-EU bilateral investment agreement opened up a new chapter for business investment. During the bilateral meetings between China and EU member states, the leaders proposed to further tap our business potential. China's purchase of Greek and Spanish government bonds helped stabilize the European financial market and consolidate economic recovery. We have taken concrete steps to support hi-tech industry in Europe by making another huge order for Airbus planes. Business facilitation delegations sent by the Chinese government brought new business opportunities to Europe. The European Union has launched a SME Center in China to provide all-dimensional support for small and medium European enterprises to expand their China business. Because of our strategic planning and practical measures, confidence of the business community was further boosted, and one after another, we are encouraged to see the signing, implementation and profiting of large business deals between China and Europe.

Admittedly, as we deepen our cooperation, disputes may arise as a result of perception gap. For instance, some people may take a simplistic approach to interpret the trade imbalance between China and Europe as China gains more from cooperation while Europe suffers loss. But if we take a comprehensive perspective to analyze both trade and investment, we will find that China-EU business ties are balanced, win-win and mutually beneficial. The fast growing Chinese market has provided European companies with impressive investment returns. Some scholars from Europe calculated that from 2004 to 2008, the EU investment in China recorded an average 10.1% profit ratio, way higher than its 6% of investment return ratio in OECD countries. In 2009, European enterprises in China earned 341.3 billion US dollar sales revenue. This is 1.4 times of the Chinese export to Europe and 2.7 times of European export to China. Particularly during the financial crisis, investment returns in China has become the fundamental support for many European multinationals to stay in the black or simply to stay afloat. The story of Volkswagen is a typical example. The Chinese auto market absorbed 14% of the company's total global sale but contributed to 80% of its total profit in 2009. What I want to emphasize is that China always supports mutually beneficial and win-win business relations. We will never sacrifice the interest of others for our own good.

When this crisis is finally over, the world economy will embark on a fresh path of reform and adjustment. A profound shift will take place in the economic development pattern and industrial structure across the world. In this sense, for both China and Europe, our performance in the next five to ten years will largely determine our future path in the long run. The European Union has adopted the EU 2020 Strategy to adapt to such developments. In the next decade, Europe will work towards smart, sustainable and inclusive growth. In China, we will soon begin to implement the 12th Five Year Plan. To accelerate the shift of economic development pattern will be our primary goal in the next five years. The specific plans that we are about to formulate under the umbrella of our ambitious strategy and plan will certainly create enormous opportunity for China-EU business cooperation. In my view, the 12th Five Year Plan brings development opportunities to China-EU business ties in four aspects.

First, consumer market. The Chinese government will take active and steady steps to promote urbanization, improve income distribution, and upgrade social security. We are committed to boosting domestic demand, especially the consumer demand. The best scenario is that consumption, investment and export will all contribute evenly to our economic growth. To achieve this, we need to further expand domestic market and foster an enabling environment for people to change their spending behavior. Some experts forecasted that end consumption in China will become the world second biggest by 2015 with 5 trillion US dollars of business. And China will grow into the world's largest market for luxury goods. Europe is home to many famous luxury brands. Lots of companies in Europe have unique advantages in the design and manufacturing of high-end consumer goods. There's no doubt that these companies will be the most immediate beneficiaries of the Chinese government's policy to promote consumption at home.

Second, adjustment on industrial structure. We will follow the new type of industrialization with distinct Chinese characteristics. The key to upgrade manufacturing industry is to grow emerging industries of strategic importance. We will speed up the development of service industry, modern energy industry, information technology, marine economy, and comprehensive transportation system. Finance, medical care, biomedicine, health service, logistics, and information industry will all be priorities of our reform. There is huge untapped potential here. We are willing to learn form the European enterprises advanced technologies and experiences in these sectors. I believe that both China and Europe could reinforce our international competence through joint venture, service outsourcing, and equipment import.

Third, green economy. In the next five years, the Chinese government will work hard to build an energy saving and environment friendly society. Efforts will be made to address climate change, develop circular economy, conserve resources, and protect environment. It is estimated that between 2011 and 2015, 3 trillion RMB Yuan will be spent in China for environment protection, accounting for 1.5% of the total GDP. There is no doubt that Europe's world renowned clean energy and environment protection companies will find themselves a substantial market in China. To my knowledge, some European companies have already launched cooperation programs with Chinese companies to develop electric cars. We hope to see more of such programs in the low carbon and green economy in the future.

Fourth, science and technology advancement. Science and technology is the most fundamental driving force for long term economic growth. Over the next five years, we will concentrate our energy to improve S&T innovation capacity and institutions. Here I wish to clarify that our purpose to strengthen innovation is not to develop a parallel competing system in isolation from the world. What we are trying to do is to make improvement on the basis of the best achievements of all other economies. It is a process of assimilation and improvement. So our innovation initiatives will drive demand for foreign technology, equipment and mechanic parts. It is certain that China will become a big buyer of hi-tech products from European companies. In fact, European companies producing digit control machine, precision instrument, and production line equipment have already benefited over the past several years from China's massive programs for technology innovation.

Having said these opportunities, we still need to remain sober minded, because what I've said are after all possibilities rather than certainties. China and Europe need to work together to translate these possibilities into concrete results. Next, I would like to share with you four recommendations.

First, we should strengthen strategic mutual trust and accommodate each other's concerns. China and Europe are so much interdependent to each other in this globalised world. For both of us, we cannot achieve development without the support of the other. China and Europe are comprehensive strategic partners, so we should support each other as friends. Whenever we come across disputes and differences in our economic and trade ties, we should fully consider the interests and sentiments of the other. Blaming and escalating conflicts will not do any help. Only dialogue and consultation could enable us to find a mutually acceptable solution. Our past experience made us see one thing clearly-the disputes and problems we have couldn't hold back our steps to develop mutually beneficial cooperation. We should always bear in mind the spirit of equality, friendship, mutual benefit, and win-win. We need a comprehensive and long-term perspective to build consensus, remove misunderstanding, and constantly move forward our business cooperation.

Second, we should increase policy coordination to create a favorable environment. Business cooperation cannot prosper in the absence of a stable and supportive political environment. Today, we have more than 50 exchange mechanisms including the Summit, High Level Strategic Dialogue, and the HED. These mechanisms are stabilizers and propellers of our cooperation. Over the next several years, both China and Europe need to change the goal of macroeconomic policy from crisis handling to development promotion. In this process, we have all reasons to make the best use of existing mechanisms to ensure an orderly transformation via increased policy coordination. Policy conflict serves the interest of no one if it undercuts growth in business ties. From the global perspective, the international monetary system reform, commodity and financial market stability, Doha Development Agenda all have major bearing on our business cooperation. I firmly believe that stronger cooperation under multilateral frameworks such as the G20, IMF and WTO will contribute to a stable and open trading environment for the whole world.

Third, we should oppose trade protectionism and maintain our markets open. It's true that whenever we have a crippling economy, trade protectionism will crawl back. The voices for free trade could be easily muffled by the massive calling for domestic industry protection. Policy makers need a clear and strategic vision. They need to overcome the difficulty by upholding open trade instead of resorting to beggar-thy-neighbor policies. I think both China and Europe have done a good example to the rest of the world during the financial crisis. We maintained open markets, promoted mutually beneficial cooperation, and gathered sound momentum for investment and trade. In the future, China will open up further, attach equal importance to import and export, and promote basic balance in trade. We will further open our finance, logistics, and other service industries, and take steady steps to open sectors like education, medical care, and sports. We encourage European investors to seize the opportunity of the Chinese market. We hope that our European friends will exercise prudence in using trade safeguarding measures, and we are willing to work together with you to uphold the integrity of our free trading regime.

Fourth, we should expand mutual benefit to motivate stronger cooperation. China is committed to sharing development opportunities with our business partners. We have no interest to be the only winner of globalization. The government of China takes very seriously the protection of the lawful rights and interests of foreign companies and investors. We regard all businesses, foreign or local, as equals in our government procurement programs and recognition of technology innovation. We are working unceasingly for better IPR protection. Currently, there is a massive 6-month-long campaign going on in China to crack down on IPR infringement, counterfeit and fake goods. We hope that the measures we take will refill the confidence of European companies to cooperate with China, so that we can consolidate a stronger basis for our cooperation in hi-tech areas. We hope that the EU will promote hi-tech exports to China, and facilitate business traveling of Chinese nationals to Europe.

Dear Friends,

For years, the European Parliament, particularly the Committee on International Trade, has played an exceptional role in the fast growth of China-EU economic and trade cooperation. After the Lisbon Treaty went into effect, the European Parliament has gained codecision rights on the common trade policy. Your positions and decisions will largely shape the European trade policy and the outlook of China-EU business ties. It is my sincere wish that all of you, experts of international trade and China-EU business relations, will continue to uphold the principle of open markets and free trade, and make greater contribution to China-EU business ties.

Thank you!

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