Complementarity and rivalry in EU-China economic relations in the twenty-first century

Abstract:

Economic dynamism in the People's Republic of China over the past two decades, in contrast with sluggish growth in an enlarged European Union, makes the examination of contemporary and future EU-China economic relations all the more relevant. This examination is done by highlighting complementary and opposing forces between the two regions. It underlines the asymmetry in the trade relationship - with a growing EU trade deficit - and a declining share of EU foreign direct investment since the peak years in the late 1990s.

In terms of trade patterns, a certain degree of complementarity still exists between the two regions, with China relatively engaged in low-knowledge-intensive industries (such as office machinery and computers), although the move up the value chain is rapid. This still leaves scope for a manufacturing-services complementarity. Areas of possible rivalry include the perception, by the EU, of an 'unfair' Chinese competition, the opacity of the Chinese market, and allegations of dumping by Chinese firms, an issue related to its non-market economy status.

In the future, the fifth enlargement may lessen the complementarity (and therefore increase the level of competition), thus generating another challenge. Faced with these numerous challenges, a number of solutions are proffered, among which are multilateralism and cooperation on energy issues.