Trade essential for growth

Updated: 2012-02-06 10:15

By Feng Zhongping (China Daily)

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China's cooperation with EU will help promote eurozone and solve the debt crisis in a sustainable and long-term way

Premier Wen Jiabao made clear the Chinese government's stance on the European debt crisis during German Chancellor Angela Merkel's fifth official visit to China since taking office.

Wen expressed the urgency and importance of solving Europe's debt crisis and said China is considering "involving itself more deeply in" efforts to address the debt issue.

Europe's debt crisis has been fermenting for more than two years. However, due to its complicated causes, it is very difficult to find a solution that can address both short-term and long-term interests and satisfy all the parties concerned.

At present, Germany's proposal for dealing with the crisis has the upper hand, as it has gradually gained the support of France, another important country in the eurozone. The two have decided to work together to promote the financial integration of the eurozone.

At the summit of the European Union leaders held on Jan 30, all the EU member states, except for the United Kingdom and the Czech Republic, signed a new fiscal treaty designed to ensure tighter deficit and debt discipline, and a consensus was reached on launching the European Stability Mechanism in July.

This is the result of concerted collaboration between Germany and France, suggesting that the EU has the political will to overcome the current crisis, and is willing to make every effort to sustain the eurozone.

With its current heightened debt burden, a policy of austerity is necessary for the EU, but this is far from enough to form a fundamental and effective solution to the debt crisis in Europe. The EU must find ways to promote economic growth.

On January 13, Standard & Poor's downgraded the debt ratings of nine eurozone countries, partly because the eurozone was focusing on budget austerity while ignoring measures to promote economic growth.

The growth prospects for the European economy this year are grim. The Organization for Economic Cooperation and Development has forecasted that economic growth in the 17 countries using the euro will slow to 0.2 percent in 2012, and the 27 members of the EU will register a growth of only 0.6 percent.

The European Commission has put forward the Europe 2020 Strategy in a bid to get out of the crisis and prepare a sustainable and inclusive EU economy for the next decade. Some politicians in Europe have also advocated continuing to explore the potential of the single market, increasing investment in energy and infrastructure, and expanding international trade, and so forth.

There are a number of ways China can help EU countries escape the quagmire of the debt crisis.

At a joint press conference with visiting Chancellor Merkel, Premier Wen said Europeans' own efforts should play a vital and fundamental role in resolving the crisis, and the EU, as a whole, should continually push forward systematic, structural and fundamental fiscal and financial reforms in addition to adopting emergency bailout measures, and feed the international community with more uniform and defined ideas to solve the problem

On the other hand, he said Chinese authorities are studying and assessing more proactive efforts to resolve Europe's debt issue by financing the IMF and through the European Financial Stability Fund, the European Stability Mechanism and other channels.

Without doubt, China's offer of bailout funds and the purchase of European bonds are what European countries want most. But this is not the only way that China can lend a hand. For many European countries, including Germany, the expansion of international trade is essential to maintain economic growth.

In 2010, the Sino-German bilateral trade volume reached $142.4 billion, comprising nearly 30 percent of China's total trade volume with the EU. It is worth noting that German exports to China increased by 34.9 percent. The strong growth momentum of its exports of automobiles, machinery and chemical products to China strongly fueled Germany's economic growth. Last year, the bilateral trade volume reached a record $169.1 billion.

At a Sino-German business meeting with the participation of a number of German and Chinese entrepreneurs in Guangzhou, Premier Wen and Chancellor Merkel discussed initiatives to further promote bilateral economic and trade relations.

Merkel said that Germany welcomes Chinese companies increasing their investment in the country. But in return China wants Germany to open up its technology market, and Germany and other European countries to improve their investment environment, and refrain from politicizing economic behavior.

Overall, Sino-EU relations have witnessed healthy development in recent years. As two of the world's most important economies, strengthening economic cooperation will also have a significant impact on world economic growth.

The author is the director of the Institute of European Studies at the China Institutes of Contemporary International Relations.