Why the EU-China Summit Must Succeed

China and EU Puzzle Pieces - Chinese and European Flag Jigsaw 3D Illustration

By Dan Steinbock

The annual China-EU Summit is a great opportunity for Beijing and Brussels to align complementary investment agendas. Failure is no longer an option.

 

The annual EU-China Summit will take place in Beijing in mid-week. The high stakes are reflected by high-level participation, which includes the European Council President Donald Tusk, European Commission President Jean-Claude Juncker and Federica Mogherini, the EU high representative for foreign affairs and security policy.

The Summit will be followed by another with G20 finance ministers and central bankers in Chengdu, Sichuan province.

After Brexit, positive results are vital to both Brussels and Beijing. Success would contribute to brighter global prospects.

The timing is opportune. The Summit follows last weekend’s G20 meeting in Shanghai where trade ministers representing the world’s largest economies agreed to trim global trade costs by 15%, to establish a new coordinated global investment policy, to ratify the WTO’s trade facilitation agreement by the year-end and to extend a pledge to cut trade protectionism.

In the past half a decade, the plunge of the world trade has been painful to Europe’s open trading economies – particularly after the UK Brexit referendum.

 

Need for Complementary Investments

Today, China is the EU’s second-largest trading partner and one of the biggest markets for the 28-member bloc. Last March, the debate over China’s market economy status (MES) divided European countries and industries.

According to Luxembourg’s Finance minister Pierre Gramegna, China’s huge “One Belt, One Road” (OBOR) initiative to deepen economic links from Southeast Asia and the Middle East to Europe will be high on the EU-China Summit’s agenda.

Reportedly, Beijing is interested in looking into the €300 billion infrastructure fund in the EU and to eventually participate in the same way that many EU members have joined the Asian Infrastructure Investment Bank (AIIB).

Financially, Brexit shock has boosted safe havens, including US dollar and Japanese yen, just as it has penalized riskier equities, British pound and the euro.

More importantly, in the aftermath of the UK EU referendum, the world looks very different, thanks to extraordinary economic uncertainty, market volatility and political risk. Financially, Brexit shock has boosted safe havens, including US dollar and Japanese yen, just as it has penalised riskier equities, British pound and the euro.

But much more is still be ahead. As risk-averse investors are increasingly cautious with capital, Europe may have to cope with recessionary headwinds, increasing political division and ever-more volatile markets.

 
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Dan Steinbock is the founder of Difference Group and has served as research director at the India, China and America Institute (USA) and visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Centre (Singapore). For more, see www.differencegroup.net