China’s 40-year journey of reform and opening-up remains unparalleled – and continues to intrigue, fascinate and impress a closely-watching world.
The historic decision taken four decades ago to engage in wide-ranging market reform and open up the country to foreign competition and investment has transformed China’s economic – and societal – landscape and made the country's economy the world second-largest.
But times are changing. China’s rise may still be admired but it is also the cause of some anxiety, especially in the United States. There are complaints about difficulties in entering the Chinese market, investment restrictions and the faltering reform efforts.
As the world enters a more volatile and turbulent era, China is under increasing pressure to speed up ongoing reforms and to open up more quickly to the world.
China’s help is also needed to strengthen the fraying multilateral rules-based order, especially (but not only) when it comes to international trade.
The stakes are high. The world is braced for a damaging global trade war and a slide into protection as too many countries turn inward and public opinion in many Western countries sees only threats and risks from trade and investment liberalization.
The mood today is very different from 40 years ago when China’s reforms coincided with an era of increasing globalization and countries worked together to create a more open global trading environment by reducing tariffs and tackling non-tariff barriers and other forms of trade protection.
The reforms, driven by various rounds of multilateral trade negotiations under the auspices of the General Agreement on Tariffs and Trade and, later, the World Trade Organization, led to increased global trade and strong world economic growth.
It was also a period of regional trade liberalization through arrangements such as the Asia-Pacific Economic Cooperation.
The European Union, at the same time, made great strides forward as it focused on establishing a border-free single market, created a single currency and embarked on a game-changing process of eastward enlargement.
The EU, as well as European governments, exporters and investors were also active participants in China’s growth and reform trajectory. The EU and China established formal diplomatic ties in 1975 and, since then, have been working to step up their engagement through sectoral dialogues, high-level ministerial meetings and summits.
China is recognized as a strategic partner by the EU. Trade and investment flows between Europe and China are buoyant and Beijing and Brussels are negotiating a comprehensive agreement on investment as a possible stepping stone toward a free trade agreement.
The EU also played a key role in China’s accession to the WTO in 2001. Often described as a watershed moment in China’s trade and economic reform efforts, the country's accession to the WTO acted as an additional driver for a raft of domestic reforms, lifted investor confidence at home and abroad and precipitated rapid growth in China’s contribution to world trade.
Today, China is an undisputed regional and global trading power. EU-China trade and investment flows remain dynamic. In Asia as well as in Africa and Latin America, China’s role and influence has grown ever stronger.
However, we now live in troubled and troubling times. China’s rise is seen with anxiety and suspicion by the US.
In addition, the multilateral rules-based order is under threat. Unilateral US trade tariffs, disregard for the WTO and withdrawal from key international agreements have further made fragile an already-weakened global trading system.
If – as many fear – there is an all-out trade war between the US and China, the impact will be felt throughout the global economy. Every country and region will be hurt. Global growth will falter. Jobs will be lost.
Reassuringly, where the US appears to be in retreat from the multilateral trade order it helped establish, European and Asian governments are stepping in.
The recent Asia Europe Meeting held in Brussels reaffirmed strong support from both regions for preserving and strengthening the rules-based multilateral trading system centered on the WTO.
Leaders underlined their joint commitment to open, free, and non-discriminatory trade as a prerequisite for long-term growth and prosperity. And they reiterated the need to further strengthen and reform the WTO to help it meet new challenges and improve its transparency, monitoring, dispute settlement mechanisms, and its rulemaking functions.
ASEM also committed to ensure free and open trade on a level playing field and fight all forms of protectionism, including protectionist unilateral measures and unfair trade practices.
These promises now have to be turned into reality.
Going forward, the EU and China must work together to avoid further disruption and prevent a damaging, all-out global trade war. Europe can also be an important partner for China’s ongoing reform efforts.
Such cooperation should center on three fronts: WTO modernization, global connectivity and investment liberalization.
Most trade experts agree that reforming and modernising the WTO should be a priority. The Geneva-based organization which now has 164 members is in desperate need of an overhaul. Given their interest in fighting protectionism and preserving the WTO, the need for Europe and China to join forces to try and update the organization's content, rules and processes is obvious.
It will not be easy. This time, leading Asian countries will – very rightly - want to have a say in any redrafting of the rules. The reality is that WTO reform will have to be co-designed and co-crafted by a large number of countries, not just by “like-minded” Western countries. This will be a difficult process – but it can be done.
The good news is that China and the EU have set up a joint working group to look at ways of working together on WTO reform. Given the uncertain global trade landscape, however, the discussions should not drag on for too long.
Second, connectivity. Europe has watched with a mixture of confusion, curiosity and concern as China has embarked on its ambitious Belt and Road Initiative worldwide including Europe. The EU's recently-unveiled connectivity guidelines have been called a response to the BRI - but they are more than just that.
The EU blueprint helps set transparency, sustainability and governance norms for international infrastructure, transport, digital and energy projects at a time when the world desperately needs such networks but only China has the money and appetite to invest in them.
Third, investments. Openness to international trade and investment has been integral to Chinese economic transformation over the past four decades. Recently, statements by President Xi Jinping, including at the Davos World Economic Forum in 2017, have led to both excitement and expectation about Beijing’s commitment to further liberalization.
But many complain that the reality is different. The overarching concern is that China’s promises of further liberalization and better access for investors and exporters are not being translated into action. European companies are demanding more ambitious market liberalization and reforms in China.
At the same time, anxieties about the rapid increase in and the special character of Chinese investment, with its preponderance of State-owned enterprises in many areas, have triggered more restrictive approaches to Chinese investment.
This is reflected in EU calls for reciprocity in openness to investments and the screening of foreign investments in enterprises with key technologies.
Given the lack of a global investment regime, the focus is on negotiations for an EU-China Bilateral Investment Treaty which is expected to create a more level playing field for EU investors and new market opportunities for both sides. The EU is also hoping that the agreement will encourage China to advance its economic reforms and give the market a more decisive role.
After a slow and painstaking start, negotiations on the investment treaty are picking up speed, with both sides recently exchanging market access offers. Once again, given the volatile geopolitical landscape, such negotiations should not be allowed to slow down.
The focus on these three areas of cooperation should be complemented by EU-China discussions on creating a rules-based system for e-commerce and the free and secure movement of digital data across borders.
The EU and China are two of the world’s largest trading powers. Their relationship and their voice count on the global stage. Over the years, they have had agreed on most trade issues and disagreed on others. In most cases Europe and China have managed to find common ground and helped each other to confront shared challenges.
That give and take is more essential today than ever before. The road ahead will not be easy. Twenty years ago, Europe worked with China to ease its entry into the WTO. As clouds now darken over global trade, Europe and China can join forces to safeguard the multilateral trading system. And, if both Brussels and Beijing play their cards right, Europe can once again be an important partner in China’s efforts to further reform and open-up.
Shada Islam is director of Europe and geopolitics at Friends of Europe, a renowned and influential independent think tank based in Brussels and a Solvay Fellow at the Vrije University Brussel (VUB). In 2017, Islam was selected as one of the 20 most influential women in Brussels by the magazine Politico.
This article is selected from a book, The Sleeping Giant Awakes, jointly published by China Daily’s communication-led think tank China Watch and Guangdong People's Publishing House.
The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
Shada Islam
China’s 40-year journey of reform and opening-up remains unparalleled – and continues to intrigue, fascinate and impress a closely-watching world.
The historic decision taken four decades ago to engage in wide-ranging market reform and open up the country to foreign competition and investment has transformed China’s economic – and societal – landscape and made the country's economy the world second-largest.
But times are changing. China’s rise may still be admired but it is also the cause of some anxiety, especially in the United States. There are complaints about difficulties in entering the Chinese market, investment restrictions and the faltering reform efforts.
As the world enters a more volatile and turbulent era, China is under increasing pressure to speed up ongoing reforms and to open up more quickly to the world.
China’s help is also needed to strengthen the fraying multilateral rules-based order, especially (but not only) when it comes to international trade.
The stakes are high. The world is braced for a damaging global trade war and a slide into protection as too many countries turn inward and public opinion in many Western countries sees only threats and risks from trade and investment liberalization.
The mood today is very different from 40 years ago when China’s reforms coincided with an era of increasing globalization and countries worked together to create a more open global trading environment by reducing tariffs and tackling non-tariff barriers and other forms of trade protection.
The reforms, driven by various rounds of multilateral trade negotiations under the auspices of the General Agreement on Tariffs and Trade and, later, the World Trade Organization, led to increased global trade and strong world economic growth.
It was also a period of regional trade liberalization through arrangements such as the Asia-Pacific Economic Cooperation.
The European Union, at the same time, made great strides forward as it focused on establishing a border-free single market, created a single currency and embarked on a game-changing process of eastward enlargement.
The EU, as well as European governments, exporters and investors were also active participants in China’s growth and reform trajectory. The EU and China established formal diplomatic ties in 1975 and, since then, have been working to step up their engagement through sectoral dialogues, high-level ministerial meetings and summits.
China is recognized as a strategic partner by the EU. Trade and investment flows between Europe and China are buoyant and Beijing and Brussels are negotiating a comprehensive agreement on investment as a possible stepping stone toward a free trade agreement.
The EU also played a key role in China’s accession to the WTO in 2001. Often described as a watershed moment in China’s trade and economic reform efforts, the country's accession to the WTO acted as an additional driver for a raft of domestic reforms, lifted investor confidence at home and abroad and precipitated rapid growth in China’s contribution to world trade.
Today, China is an undisputed regional and global trading power. EU-China trade and investment flows remain dynamic. In Asia as well as in Africa and Latin America, China’s role and influence has grown ever stronger.
However, we now live in troubled and troubling times. China’s rise is seen with anxiety and suspicion by the US.
In addition, the multilateral rules-based order is under threat. Unilateral US trade tariffs, disregard for the WTO and withdrawal from key international agreements have further made fragile an already-weakened global trading system.
If – as many fear – there is an all-out trade war between the US and China, the impact will be felt throughout the global economy. Every country and region will be hurt. Global growth will falter. Jobs will be lost.
Reassuringly, where the US appears to be in retreat from the multilateral trade order it helped establish, European and Asian governments are stepping in.
The recent Asia Europe Meeting held in Brussels reaffirmed strong support from both regions for preserving and strengthening the rules-based multilateral trading system centered on the WTO.
Leaders underlined their joint commitment to open, free, and non-discriminatory trade as a prerequisite for long-term growth and prosperity. And they reiterated the need to further strengthen and reform the WTO to help it meet new challenges and improve its transparency, monitoring, dispute settlement mechanisms, and its rulemaking functions.
ASEM also committed to ensure free and open trade on a level playing field and fight all forms of protectionism, including protectionist unilateral measures and unfair trade practices.
These promises now have to be turned into reality.
Going forward, the EU and China must work together to avoid further disruption and prevent a damaging, all-out global trade war. Europe can also be an important partner for China’s ongoing reform efforts.
Such cooperation should center on three fronts: WTO modernization, global connectivity and investment liberalization.
Most trade experts agree that reforming and modernising the WTO should be a priority. The Geneva-based organization which now has 164 members is in desperate need of an overhaul. Given their interest in fighting protectionism and preserving the WTO, the need for Europe and China to join forces to try and update the organization's content, rules and processes is obvious.
It will not be easy. This time, leading Asian countries will – very rightly - want to have a say in any redrafting of the rules. The reality is that WTO reform will have to be co-designed and co-crafted by a large number of countries, not just by “like-minded” Western countries. This will be a difficult process – but it can be done.
The good news is that China and the EU have set up a joint working group to look at ways of working together on WTO reform. Given the uncertain global trade landscape, however, the discussions should not drag on for too long.
Second, connectivity. Europe has watched with a mixture of confusion, curiosity and concern as China has embarked on its ambitious Belt and Road Initiative worldwide including Europe. The EU's recently-unveiled connectivity guidelines have been called a response to the BRI - but they are more than just that.
The EU blueprint helps set transparency, sustainability and governance norms for international infrastructure, transport, digital and energy projects at a time when the world desperately needs such networks but only China has the money and appetite to invest in them.
Third, investments. Openness to international trade and investment has been integral to Chinese economic transformation over the past four decades. Recently, statements by President Xi Jinping, including at the Davos World Economic Forum in 2017, have led to both excitement and expectation about Beijing’s commitment to further liberalization.
But many complain that the reality is different. The overarching concern is that China’s promises of further liberalization and better access for investors and exporters are not being translated into action. European companies are demanding more ambitious market liberalization and reforms in China.
At the same time, anxieties about the rapid increase in and the special character of Chinese investment, with its preponderance of State-owned enterprises in many areas, have triggered more restrictive approaches to Chinese investment.
This is reflected in EU calls for reciprocity in openness to investments and the screening of foreign investments in enterprises with key technologies.
Given the lack of a global investment regime, the focus is on negotiations for an EU-China Bilateral Investment Treaty which is expected to create a more level playing field for EU investors and new market opportunities for both sides. The EU is also hoping that the agreement will encourage China to advance its economic reforms and give the market a more decisive role.
After a slow and painstaking start, negotiations on the investment treaty are picking up speed, with both sides recently exchanging market access offers. Once again, given the volatile geopolitical landscape, such negotiations should not be allowed to slow down.
The focus on these three areas of cooperation should be complemented by EU-China discussions on creating a rules-based system for e-commerce and the free and secure movement of digital data across borders.
The EU and China are two of the world’s largest trading powers. Their relationship and their voice count on the global stage. Over the years, they have had agreed on most trade issues and disagreed on others. In most cases Europe and China have managed to find common ground and helped each other to confront shared challenges.
That give and take is more essential today than ever before. The road ahead will not be easy. Twenty years ago, Europe worked with China to ease its entry into the WTO. As clouds now darken over global trade, Europe and China can join forces to safeguard the multilateral trading system. And, if both Brussels and Beijing play their cards right, Europe can once again be an important partner in China’s efforts to further reform and open-up.
Shada Islam is director of Europe and geopolitics at Friends of Europe, a renowned and influential independent think tank based in Brussels and a Solvay Fellow at the Vrije University Brussel (VUB). In 2017, Islam was selected as one of the 20 most influential women in Brussels by the magazine Politico.
This article is selected from a book, The Sleeping Giant Awakes, jointly published by China Daily’s communication-led think tank China Watch and Guangdong People's Publishing House.
The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
