Is Europe going its own way?

The European Union and China have agreed on an investment agreement, the Comprehensive Agreement on Investment (Cai). On the basis of the agreement, which has yet to be ratified, mutual market access should be facilitated, the conditions of competition for companies in both countries and the Transfer of technology knowledge should be guaranteed in partnership.

With more than 1.4 billion consumers, China is the second most important economic partner for the EU. While trade with the USA decreased significantly compared to the year 2000, China's share tripled from 5.5% to 16% in the same period.

According to the Stat. The US remains the most important trading partner of the European Union. In 2019, goods worth 744 billion euros (imports and exports) were traded between the United States and the EU. This represented 18% of the total EU trade in goods. When looking at imports and exports separately, the two largest trading partners show differences: in 2019, China ranked first in imports with 19%, followed by the United States (12%). In terms of exports, the United States was ahead of China.

In an Interview with the China Media Group (CMG), Friedhelm Ost, former chairman of the Economic Committee of the German Bundestag, state secretary and press spokesman of the federal government, points out that China has achieved world-renowned economic and social development successes in the period of the 13th five-year plan:

"With the 13th five-year plan, there have been huge successes for China. The country was an important economic engine for the global economy. China has developed into a High-tech country in many areas. Many German companies from the fields of automotive, chemical and Mechanical Engineering have invested extensively in the people's Republic of China – in factories.

You have made good sales there. They have employed many people in their factories. We want to continue to work together with a variety of investments, Joint Ventures and cooperative partnerships. After all, many Chinese companies are also active in Europe, especially in Germany. Their investments strengthen economic growth in Germany, create jobs and add value."

After an energetic Lockdown, Friedhelm Ost believes that China is the only major economy in the world that can already show modest growth in 2020. Not only could the Chinese population feel the improvement in the quality of life, but there would also be more opportunities for global development. The German economy will further deepen the exchange and cooperation in various areas on the basis of a further developing strategic partnership. The global economy, above all Germany, will benefit from the expected economic growth in 2021, which according to the latest forecasts anticipates a growth rate of 6 to 8 percent.

Remarkably, Friedhelm Ost refers in this context to the past five-year plan of China's planned economy.

In its analyses of socialist planned economy, the isw has repeatedly pointed out that the decisive factor in a planned economy is not the implementation of individual plans, but rather the extent to which the Plan is the determining Instrument of the country's economic policy, who plans and for whom plans are made (ISW, Fred Schmid).

With its constitutionally anchored claim to the leadership of the CCP, China can point out that it has consistently and systematically pursued the country's development from poor agricultural land to industrial land and "modest prosperity" for the population: for 42 years-continuous improvement of living standards, increase in real wages, coping with millions of annual Migration from the countryside to the cities (16 million people per year), creation of 12 – 15 million people per year. urban jobs, elimination of absolute poverty, establishment of a Social Security System, leader in renewable energies and energy transition.

In doing so, China has moved from detailed planning to an annual review and concretising rough planning. For example, an enormous housing programme has been approved for the current 14th five – year plan-the status of which will be reviewed at the Central Economic Conference held annually in December. And the market, which is geared towards a target-oriented supply of consumer goods to the population, serves as a supplementary allocation tool (ISW report 119).

Under the leadership of President Xi Jinping, the Chinese government is practicing internationally respected multilateralism, which provides for comprehensive consultations and the joint contribution of Germany and China in particular, thereby promoting the strengthening of the Chinese internal market and granting mutual benefits.

This opens up new opportunities for foreign investors and companies in the people's Republic of China. This applies in particular to climate and Environmental Protection, the energy sector, infrastructure and the health system. With the Silk Road Initiative 'One Belt, One Road' (OBOR, also Belt and Road Initiative-BRI), the people's Republic of China is already demonstrating its targeted commitment to international Engagement. Many states benefit from this (ISW Spezial 32).

Referring to the CAI investment agreement between the EU and China, Xi Jinping underscores China's determination to drive forward the opening of its market at a high level. It will offer mutual investments a better perspective for cooperation through a better business environment and stronger institutional guarantees.

The EU Commission praised the agreement as its "value-oriented" negotiating success and praised the concessions made by China. The outcome of the negotiations is more ambitious than any other agreement China has ever concluded. This would give European investors access to all sectors of the economy, including vehicles, Cloud services, financial services and healthcare. Private hospitals in major Chinese cities, for example, are to relax the joint Venture regulation, which has been implemented for a long time, for example, through the majority shareholding of the automotive manufacturer BMW in China. China also wants to open up the telecom market to European companies. For this purpose, too, the current technology transfer is to be regulated for mutual benefit.

In addition, the pragmatic voices within the EU Commission confirm the Intention of China to promote the" development of the Chinese market into the market of the world". Open cooperation based on multilateral principles is to develop continuously to generate the potential of the Chinese market with its 1.4 billion people and to initiate a demand for goods from all over the world.

EU Commission Vice-President Valdis Dombrovskis points to the resulting economic benefits for the EU: "the agreement will give European companies a massive boost in one of the largest and fastest growing markets in the world".

Since the written agreements have not yet been published by both sides, it remains to be seen how the agreements will be translated into pragmatic policy. Particular attention should be paid to how the economic power of the USA positions itself vis-à-vis the bilateral agreements between the EU and China after the inauguration of the confirmed new president Biden. His staff had obviously intervened in Brussels before the agreement was reached in order to put more pressure on China in future negotiations.

Biden has announced that he wants to take stronger action against China together with the Europeans. As already quoted at the beginning, some are building walls, and the others are building windmills.