An attendant walks past EU and China flags ahead of the EU-China High-level Economic Dialogue at Diaoyutai State Guesthouse in Beijing, on June 25, 2018. (Photo: China Daily)
The novel coronavirus pandemic has had a severe impact on economic globalization, which in turn has created uncertainties for the major economic and trade cooperation agenda of China and the European Union.
The pandemic has affected the overall economic and social environment across the globe, yet it is important for China and the EU to continue promoting multilateralism because that is the best strategic choice for the two sides to deepen economic and trade cooperation.
Because of the impacts of the pandemic, some countries may try to build or strengthen regional or domestic industrial chains and supply chains, while some may resort to trade protectionism and unilateralism, fan nationalism, and/or practice isolationism.
Complicated changes are taking place in economic and trade relations among major powers. And if the pandemic leads to another eurozone debt crisis, the European project may face another major crisis. As for China, the outbreak has created serious challenges for high-level opening-up and further reform, which could affect the country's economic transformation.
At this crucial time, therefore, China and the EU should firmly uphold the principle of multilateralism and deepen cooperation to add much-needed vitality to economic globalization.
The EU as a whole has entered a post-industrial period, while China is entering the later stage of industrialization. In 2018, the EU's per capita GDP was nearly four times that of China, and the service sector accounted for 78.8 percent of the EU's economy, compared with 52.2 percent for China. This shows the Chinese and EU economic structures are complementary and, therefore, more suited for cooperation than competition.
In particular, the full potential of trade and investment between China and Europe, especially for service trade, has not yet been realized. In the next 10-15 years, China's urbanization, and industrial transformation and upgrading will create a huge space for China-EU economic and trade cooperation. Not to forget that since 2010, China has been the fastest-growing market for EU service exports.
The release of Chinese consumers' latent demand for services, and the development of a new pattern of China-EU cooperation with the aim of integrating the two large markets will greatly unlock the potential of China-EU trade and investment.
This will not only expedite the EU's economic recovery and stabilize its development, but also help China realize its huge consumption potential.
Whether or not the two sides can realize the full potential of China-EU cooperation－leading to the integration of their markets－depends on the institutional arrangements for free trade between them. And one major factor preventing the two sides from achieving the desired results is the lack of free trade institutional arrangements.
For instance, to integrate the Chinese and European markets, Beijing and Brussels need to accelerate the negotiation on the China-EU Investment Agreement and work out the details of the China-EU Free Trade Agreement. In fact, the right strategic choice for China and the EU is to deepen economic and trade cooperation.
China and the EU should especially try to complete the negotiation on the investment agreement by the end of this year and initiate a joint study on the feasibility of the China-EU Free Trade Agreement. This will send a strong signal to the rest of the world that the best, rather only possible, way to offset the impacts of the pandemic is to promote free trade and investment, which will inject new confidence into the global economy.