eu-china 2014

12
EU- CHINA A New Era of Cooperation and Understanding NEW EUROPE A SPECIAL REPORT ISSUE#1068 FEBRUARY 2014 LONG GUOQIANG LI LIN HOU YONG ZHI LI JUNRU CAI YUEZHOU GONG SEN LI PING GUSTAAF GEERAERTS DUNCAN FREEMAN WANG XIAOCHU FRASER CAMERON YANG YANYI DACIAN CIOLOș Against the backdrop of recent strategic decisions in Beijing and the EU-China summit that marked the beginning of a new 10-year cooperation agreement, New Europe is focusing on this new era in the relationship between two of the world’s major actors. PHOTO: BY FRIENDSOFEUROPE

Upload: new-europe-newspaper

Post on 21-Oct-2015

157 views

Category:

Documents


0 download

DESCRIPTION

EU-CHINA 2014

TRANSCRIPT

Page 1: EU-CHINA 2014

EU-Chinaa new Era of Cooperation and Understanding

NEW EUROPE

A SPECIAL REPORT ISSUE#1068 FEBRUARY 2014

Lon

g g

uo

qia

ng

Li L

in

Ho

u Y

on

g Z

Hi

Li Ju

nr

u

Ca

i Yu

eZH

ou

go

ng

Sen

Li P

ing

gu

Sta

af

gee

ra

ert

S

Du

nC

an

fr

eem

an

Wa

ng

Xia

oC

Hu

fra

Ser

Ca

mer

on

Yan

g Y

an

YiD

aC

ian

Cio

Loș

Against the backdrop of recent strategic decisions in Beijing and the EU-China summit that marked the beginning of a new 10-year cooperation agreement, New Europe is focusing on this new era in the relationship between two of the world’s major actors.

Photo: by FriendsoFeuroPe

Page 2: EU-CHINA 2014

02 FEBRUARY 2014

NEWEUROPEwww.neweurope.eu

EU-Chinaa nEw Era of CoopEration and UndErstanding

I have been privileged to visit China three times, in 2011, 2012 and in 2013. I also welcomed the Chinese minister of agri-

culture during one of his visits to Europe, aim-ing to facilitate a better mutual understand-ing of our agricultures and rural areas, of our strengths and potential of cooperation. These exchanges provide building blocks for stronger cooperation in the future.

This matters not only because China and the EU are key trading partners – including in food products – but also because agriculture is of strategic importance for us both in address-ing the core challenges we face as economies and societies in the decades ahead: ensuring food security, fighting climate change, and achieving a balanced development of rural territories. Following the 2012 agreement for a cooperation plan on agriculture, that has already started producing concrete results, I believe there is still an enormous potential for development for the benefit of both parties.

We are stepping up our collaboration in eight areas identified as common priorities, from the quality policy and the Geographi-cal Indications (GI) to the quality and safety of food products, from the sustainable use of natural resources to rural development and diversification, from a better repartition of the added value in the food chain to animal health. We are also working on sectors such as wine, milk and agro-tourism and setting up a com-mon platform for research and innovation. Our cooperation is about enhancing mutual trust and dialogue on norms and standards of production and also about increasing trade.

In Europe, we like to say that Necessity is

the Mother of Invention. Over and over again, we, as humans, have shown a formidable abil-ity to be inventive and innovative when faced with new challenges. In China, a lot more has to be done in the field of agriculture. The task ahead is huge: China has to feed 1.4 billion people – over 20% of the world’s population, with only 8.5% of the world’s arable land and 6.5% of world’s water reserves. The situation is further complicated by the internal migration from rural to urban areas.

The demographic challenge on global food demand is staggering: we have to get ready, by 2050, to feed 9 billion people on planet Earth – hopefully offering better living conditions and secure access to safe and quality food to our people. The impact of certain farming techniques, leading to the over-exploitation of natural resources and to negative impacts on the environment, has certainly been damaging, even if the costs of these collateral effects are difficult to evaluate.

So, to cut a long story short, we must pro-duce in a better way. We must learn to con-sume differently, to reduce food waste in the food chain. Fundamentally, this implies a shift towards a different growth path. This is the path taken by the new Common Agricultural Policy that entered into force on the 1st of January this year. But on this path, we should not walk alone. We need to meet this challenge together, or we will fail together.

Climate change and environment-related uncertainties require a combined investment in best practice to achieve a global step change in our approach to agriculture. We will all in-vest massively in agricultural innovation and

we can learn from each other. Economic in-security also affects all of our farmers and un-dermines their capacity to plan and invest. The unprecedented volatility of the markets, and the difficulty this creates for rural communities that are dependent on agriculture further exac-erbates the growing gap between the standard of living in rural and urban areas. These three uncertainties create instability and call for ac-tion at local, national and international level.

The cooperation between Europe and China, two of the largest agricultural produc-ers in the world is a key for success on all these fronts. During my official visits there I under-stood better how broad the field of our coop-eration could be. From sustainable resources management - priority of the European Inno-vation Partnership - to reducing disparities be-tween rural and urban areas, and to improving food quality, food safety and healthy lifestyles, we can achieve more together than alone. I am very pleased that the first steps have been taken. During the last EU-China Summit we signed a Letter of Intent on cooperation in the area of research in food, agriculture and biotechnologies. This new initiative will mean EU and China have committed themselves to develop joint research initiatives, scientific exchanges and projects using their respective programmes in this area.

Of course, all the facets of this special rela-tionship with China will always be viewed by both of us as a whole. So our trade relationship must be part of this picture. In agriculture, figures are showing that the relationship to date is a posi-tive one and we are seeking to build on this. We have started a very successful dialogue on qual-

ity products which led to the registration of 10 Chinese GI quality food products in Europe and 10 European GI quality food products in China. Negotiations on a possible bilateral agreement on Geographical Indications are ongoing. The ex-changes continue on the EU– China organic food equivalency arrangement, and steady progress is being done on the roadmap agreed in 2012. Last year, we signed in Beijing a letter of intent regarding fighting counterfeiting in trade in GI al-coholic beverages. Both parties acknowledge the growing importance of bilateral trade in alcoholic beverages, realize the importance of origin iden-tification and see the need to cooperate closely in combating counterfeiting in this sector. This will have positive effects on the economic and trade aspects, but also regarding public health and food safety. It will bring benefits not only for produc-ers, but also for consumers who will continue to enjoy safe, diverse and quality products.

Sometimes, while working together, we see that we have different approaches, as we are also supporting our specific interests. But to sort out these differences it’s important to build on the elements of trust we have, to make efforts to understand each other in a frank manner, looking at building a long term relationship.

I strongly believe that we can work through these challenges and build on these policy ini-tiatives to deliver the win-win potential which certainly exist for us both in the area of agricul-ture. I am committed to this and to a long term relation with China. And strongly believe that the broader strategic challenges facing global agriculture mean we must succeed, together, in this common endeavour.

EU – China cooperation - A new ambition for a knowledge-based agriculture

EU Agriculture Commissioner Romanian Dacian Ciolos (R) visits Spanish cheese factory Casa Macan, in Lugo, northern Spain. EPA/ELISEO TRIGO

EU Commissioner for Agriculture and Rural Development

By Dacian cioloș

The demographic challenge on

global food demand is

staggering: we have to get ready, by 2050, to feed 9 billion people on

planet Earth

Page 3: EU-CHINA 2014

EU-China03

FEBRUARY 2014

NEWEUROPEwww.neweurope.eu

A New erA of CooperAtioN ANd UNderstANdiNg

China has unveiled a master plan for a new round of comprehensive reforms that include opening the country’s

markets up to the world. Approved at the Third Plenum of the Communist Party’s Cen-tral Committee last November, the new reform programme will not only have profound influ-ence on China’s development, but also create opportunities for cooperation with Europe and beyond.

The magnitude of the reform is unprec-edented, as the Third Plenum has identified more than 300 measures to achieve 55 main objectives across 15 areas. Some of the objec-tives, such as sustainable development and in-novation, are shared by China and the EU.

The new reform drive has the following features:

First, it is extensive, covering economic, political, cultural, social and environmental di-mensions. This five-in-one approach is imper-ative as China is navigating “uncharted waters” in its reform process.

Second, it has clear priorities. Economic reform is the centrepiece, accounting for over half of all the objectives. This is because the problems China faces are all linked to develop-ment, and therefore ensuring sustainable eco-nomic development remains our top priority.

Third, it has a strong mechanism for ef-fective enforcement. A Central Task Force on Deepening Reform has been established and many reform measures rolled out. We are moving faster to reform the administrative ap-proval system and abolish the system of re-ed-ucation through labour. In addition, the Third

Plenum has set a clear timetable to complete the reforms by 2020. The Central Economic Work Meeting held last December placed re-form and innovation at the centre of China’s economic and social development.

The new reform programme aims to re-dress the lack of balance, coordination and sus-tainability in China’s development, and resolve issues of immediate concern to the public. It also endeavours to improve administrative ef-ficiency and promote fairness and justice to uphold social harmony and stability.

The EU has been carrying out massive re-forms to tackle the sovereign debt crisis and advance European integration. I am delighted to note that the reforms are paying off and that the EU economy is recovering and growing. As a firm supporter of European integration, China welcomes further progress in this area.

The reforms in China and the EU testify to their resolve to restructure their economies and promote balanced and sustainable devel-opment. These efforts will provide new op-portunities for greater cooperation between China and the EU.

On the economic front, both China and the EU are committed to promoting open and transparent markets and fair competition. China’s efforts to build a modern market econ-omy that is open and rule-based will provide a level playing field for European companies in China and boost two-way trade and invest-ment. Trade between China and the EU grew by 2.1% to over $559bn in 2013 and the first round of negotiations on a bilateral investment agreement has been concluded. This gives us

full confidence in future cooperation in trade and investment, the engines of development for both sides.

In science and technology, both China and the EU are committed to achieve innovation-driven development. China’s efforts to further reform its science and technology manage-ment system will offer incentives to companies to innovate and boost productivity. The EU, a world leader in science, technology and inno-vation, has recently launched Horizon 2020, the world’s largest research and innovation programme.

If we can strengthen cooperation in re-search and development between businesses, universities and research institutes, we will be better-positioned to meet challenges in the fields of energy, food security, agriculture, bi-ology, aviation and water scarcity and give new impetus to bilateral relations.

In urbanisation, the China-EU Partner-ship on Urbanisation will be a new highlight. China is making rapid progress on this front. Its efforts to improve integrated urban-rural development and promote people-centred urbanisation represent a new powerhouse for China’s sustainable economic growth. As a forerunner, the EU has a wealth of expertise in this area, and there is enormous potential for cooperation between us. The two sides are set to intensify dialogue on urban planning, infra-structure and urban-rural integration, and ad-vance pragmatic cooperation between cities, parks and companies in a bid to upgrade urban development.

With regards to environmental protection,

green growth will be the strategic priority for both China and the EU. China will improve its environmental policy, set the bar of ecological protection high, build a market-based system for allocating natural resources and imple-ment an ecological compensation policy. In the framework its 12th Five-Year Plan (2011-2015), China will invest over €600bn in en-vironmental protection, ushering in a “golden era” of green growth. It is important that China and the EU work together to establish a strate-gic policy framework for green and low-carbon growth and launch more flagship programmes of cooperation in green industry and environ-mental protection. In so doing, the two sides can maximise the synergy between China’s en-vironmental initiative and the EU’s strategy for resource and energy efficiency, and thus better mitigate climate change and protect the envi-ronment.

In 2014, China will jumpstart its compre-hensive reform programme, while a new politi-cal and economic landscape will take shape in the EU. The China-EU 2020 Strategic Agenda for Cooperation has charted the course for our cooperation and set the stage for the next dec-ade of our comprehensive strategic partner-ship. This year will also see frequent high-level visits and interactions.

It is such an honour and pleasure to serve as China’s ambassador to the EU at a time when opportunities of cooperation abound. I am confident that with concerted efforts we will embrace a more rewarding decade in bi-lateral relations and contribute more to peace, development and prosperity worldwide.

Reforms in China and the EU offer new opportunities of cooperation

Reform and sustainability have been on the Beijing and Brussels agenda. EPA/HOW HWEE YOUNG

Ambassador of People’s Republic of China

By Yang YanYi

The reforms in China and the

EU testify to their resolve

to restructure their economies

and promote balanced and

sustainable development

Page 4: EU-CHINA 2014

04 FEBRUARY 2014

NEWEUROPEwww.neweurope.eu

EU-Chinaa nEw Era of CoopEration and UndErstanding

What is Chinese Dream? President Xi Jinping, of China pointed out

that “the greatest aspiration of the Chinese peo-ple since the modern age has been to achieve the great rejuvenation of the Chinese nation. This is what we call the “Chinese Dream”.

Anyone familiar with the modern history of China knows that after the Opium Wars in China in 1840, the Chinese nation was subject to bul-lying and oppression by the big powers. But the Chinese people never gave in. At the beginning of the 20th Century, Dr. Sun Yat-sen, the fore-runner of democratic revolution in China, first came out with the slogan “to revive China”, and the Chinese people, generation after generation, had fought hard and fearlessly, leading to the founding of the People’s Republic, achieving na-tional independence. And then, after ceaseless efforts, China embarked on the road of reform and opening-up, starting the course of moderni-sation. Therefore, we believe the Chinese Dream is a historical process, which is deeply rooted in the Chinese history.

Then what is the connotation of today’s Chi-nese Dream? It includes the prosperity of the country, the rejuvenation of the nation and the happiness of the people. According to this, China has set two goals. First, from 2010 to 2020, to double its GDP and average per capita income, establishing, as the Chinese say, a well-off soci-ety in all aspects. China’s GDP in 2010 is about 6 trillion US dollars and it is expected to reach 13 trillion by 2020. Second, by 2050, to build China into a modernised socialist country which is prosperous, strong, democratic, and harmoni-ous and China would catch up with moderately developed countries.

The Chinese Dream is a dream of the nation and, at the same time, a dream of each and every Chinese. The starting point and ultimate goal is to offer all Chinese access to better education, more stable jobs, better income, more reliable so-cial protection, better medical care, better living conditions and a more beautiful environment. It provides opportunities for Chinese people to grow up with the country and realise their indi-vidual dreams for a better life.

This is why, when the idea of Chinese Dream was put forward by the new Chinese leadership, it was immediately embraced by the general public and has become a grand goal that unites all forces in China. This Chinese Dream is deeply rooted in Chinese history crossing 200 years, it takes great scale involving 1.3 billion people, and it cov-ers extensively all aspects of people’s lives. Thus, it is not an empty slogan, but a vision of the nation, an aspiration of the people, a goal for hard work, and guidance for the government.

How to realise the Chinese Dream?President Xi Jinping pointed out: “To make

the Chinese Dream come true, we must follow the Chinese path, we must foster the Chinese spirit, and we must pool the country’s strength”.

With 35 years of reform and opening to the outside world, China has sustained high-speed development. The GDP increased from 268.3 billion US dollars in 1978 to 8,355 billion US dollars in 2012, and China turns into the sec-ond largest economy in the world. The country has resolved the long-standing problem of food and clothing supply, lifted over 200 million people out of poverty, universalised nine-year compulsory education, built up a social security system with 1.3 billion people in basic medical insurance and 800 million people in basic old-age insurance, which is the largest social security system in the world. The 35 years of reform and opening-up has found China a development ap-proach compatible to its national conditions, an approach we call socialism with Chinese charac-teristics. Only through this way can the Chinese Dream come true.

Of course, as the largest developing country, China is faced with many grave challenges in its course of development. While its economy is the second in the world, its per capita GDP is still positioned behind the 80th. Although it main-tained fast economic development, emerging problems become more prominent, including resources bottleneck, environmental pollution, traffic congestion, and food safety. While its soci-ety is full of vitality, it also faces challenges such as the urbanisation of 600 million rural population, employment for 25 million new entrants each year in urban labour market, and more conflict of interest in different social groups. The Chinese leadership clearly recognised these challenges, and therefore put forward a scientific outlook on development featuring putting people first. They stress the importance of economic development, and call for comprehensive and coordinated de-velopment in economic, political, cultural, social and ecological fields, transforming the develop-ment pattern. Efforts will be made to stabilise growth, adjust structure, expand domestic de-mand, secure employment, improve people’s

well-being and safeguard social justice, as well as to promote industrialisation, informatisation, ur-banisation and agricultural modernisation.

The 3rd Plenary Session of the 18th Central Committee of the Chinese Communist Party concluded a few weeks ago has made the decision to deepen reforms in all fields. It calls for further reform of economic system, focusing on ensur-ing market to play the decisive role and further opening of the economy. It also outlines the road maps for reforms of political, cultural, social and ecological systems. The decision has opened a new chapter for China’s reform and will strongly promote development in the country to make Chinese Dream come true.

What does the Chinese Dream mean to Sino-Europe relations?

I think it means opportunities for develop-ment and cooperation.

President Xi Jinping has stated: “China will unswervingly follow the path of peaceful devel-opment, and unswervingly follow the win-win strategy of opening-up.” In today’s world, the de-velopment of China could not be separated from that of the world, and vice versa. The realisation of the Chinese Dream can only be a process of peaceful development, a road of opening-up and cooperation, and through the strategy for mutually beneficial and win-win result. China is determined to cooperate with other countries to find a new approach to the peaceful rising of a big country.

I believe the process to achieve the Chinese Dream will bring opportunities for Sino-Europe relations at least in three perspectives.

First, a more prosperous China will greatly broaden economic cooperation and trade be-tween China and Europe. In 2003 the bilateral trade was only 125.2 billion US dollars and in 2012 it grew to 546 billion. In 1985 China pur-chased its first Airbus plane, while, in 2012, 853 Airbus plans were flying in the mainland, and another 60 were ordered by China in 2013. The

further expansion and development of Chinese economy, especially with its focus on expanding domestic demand, will provide greater market opportunities for European companies and give stronger impetus to our relationship in economy and trade.

Second, a more open China will provide broader platforms for a China-EU comprehen-sive strategic partnership. In recent years, China-EU cooperation features higher level, wider cov-erage and closer contact. The establishment of over 60 consultation and dialogue mechanisms stands as proof. The 16th China-EU Summit was just concluded with fruitful results. In re-alising the Chinese Dream, we are required to learn from all human civilisations and to pursue dreams together with Europe and the rest of the world to achieve win-win outcomes. The further expansion of China’s opening-up will continue to broaden and deepen the cooperation between China and Europe.

Third, a more harmonious and stable Chi-na will better support China-EU cooperation in responding to global challenges and safeguard-ing regional and world peace. China-EU rela-tionship is among the most important bilateral relationships in the world. To strengthen China-EU cooperation is beneficial, not only for the two parties, but also for world peace, stability and prosperity. A more harmonious and stable China will give stronger support to China-EU coordination to meet challenges, to involve closely in international economic governance, and to promote the establishment of a more fair and rational international economic and politi-cal order.

In conclusion, I would like to stress that the Chinese Dream is not only a dream of rejuvena-tion and development, but also a dream of har-mony and peace. It is our sincere wish that with mutual respect, China and EU could join hands in building a peaceful and prosperous 21st Cen-tury where everyone’s dream can come true.

Chinese dream and Sino-Europe relationship

Chinese President Xi Jinping met with Claude Bartolone, President of the French National Assembly, in Beijing on 23 Jan. 2014. The meeting marked the 50-year anniversary of France establishing diplomatic ties with China. AFP PHOTO/GOH CHAI HIN

Vice Chairman of the Foreign Affairs Committee of the National People’s Congress of China

By Wang Xiaochu

a

Page 5: EU-CHINA 2014

EU-China05

FEBRUARY 2014

NEWEUROPEwww.neweurope.eu

A New erA of CooperAtioN ANd UNderstANdiNg

China’s choice for a modernisation strategy based on export-led growth has turned China largely into a trad-

ing state heavily dependent on commerce and economic cooperation with other major econ-omies in the world. The way the Sino-EU rela-tionship has developed over the past three dec-ades is most illustrative of this development.

From the very start, this relationship was based on prospects of profitable trade and eco-nomic complementarity between a develop-ing and developed economy. This division of labour was at the basis of a solid and fast devel-oping economic and trade relationship. While three decades ago, China and the EU traded almost nothing, now they form the second-largest economic cooperation in the world.

However, the logic of the Sino-EU relation-ship has been changing. The Great Recession has laid bare the imbalances of both the EU-China trade relationship and China’s growth model. The Eurozone crisis – in tandem with the slowdown in the United States – has dis-closed that China cannot count indefinitely on rising trade surpluses to absorb the growing distortion between what it produces and what it consumes. The challenge for China’s leader-ship is to rebalance aggregate demand, shifting the economy away from fixed asset investment and exports towards domestic consumption. Pushing through such fundamental restructur-ing would not only be in China’s interest, as it would create avenues for sustainable domestic growth. A growing domestic market would also offer new export and investment oppor-tunities to European businesses, thus creating possibilities for alleviating the EU’s trade defi-cit with China and shaping the boundary con-ditions for a more balanced trade relationship.

While the Third Plenum of the 18th Party Congress on November 12 has indicated once more that it has become widely accepted in policy-making circles in Beijing that China must make the transition to a growth model that is more consumption-driven, much will depend on whether China’s leadership is able to muster the required political support for a change-over from export- and investment driven growth to a new growth model, one that is labour intensive, consumption-oriented and driven by rapid expansion in the services sector.

The main issue is that a sustainable growth model necessitates sharp reductions in credit expansion and investment so as to increase household wealth and income, thus enhanc-ing domestic consumption. In other words: a sizeable slowdown in GDP growth cannot be avoided, unless Beijing would like to walk the disastrous road of ever-rising debt. A major hurdle to take are the main beneficiaries of im-balanced growth, i.e. the export sector, state-owned enterprises, coastal provinces, the real estate and construction industries, and China’s banks. These stakeholders have gathered an ever-stronger influence over economic policy and are most resistant to policy reforms aim-

ing at reducing or reversing household wealth transfers. In their view, limited administrative tweaking will suffice to improve consumption levels without any real necessity to lower in-vestment growth.

Judging by the 60-point “Decision on Sev-eral Major Questions about Deepening Re-form”, the odds are that the new leadership is determined to side-step opposition from con-servatives and vested interests and has set out an ambitious agenda to restructure the roles of the government and the market. Already now, many analysts and commentators have sug-gested the reform plan is potentially historic and may become of a similar magnitude as the Third Plenum in 1978, which instituted Deng Xiaoping’s economic reforms to put China on the path to becoming the world’s second-biggest economy. Potentially, it is also on a par with the Third Plenum in 1993, where market reforms were installed that further modernised China’s economy and paved the way for mem-bership of the World Trade Organization.

A major pledge of the reform plan is to give markets a decisive role in key areas of the economy such as pricing of resources and the financial system. In this vain, it repeated the party’s earlier pledges to let the market de-termine prices of key resources such as water, oil, natural gas, electricity and transport, and called for an “acceleration” of moves to let the market determine interest rates. And while the reform outline does not challenge state-owned enterprises directly it envisages making them more efficient and more profit-oriented, turn-ing them into private-like economic entities. Moreover the reform package opens avenues

for the private sector, both domestic and for-eign, to compete with state-owned enterprises. That is a necessary move if China wants to make its economy more efficient and ultimate-ly more innovative.

The plan also included steps to boost Chi-na’s urban population. In Beijing’s judgement, helping hundreds of millions of rural dwell-ers migrate to the cities is key to inject a more sustained development path in the world’s second-largest economy – its advance up the value chain and wealth creation. It envisages a relaxation of the controversial household reg-istration (Hukou) system and thus commits the central government to managing most of the country’s pension systems, health care, education and social security programmes.

Most importantly, Xi Jinping’s programme essentially calls for the government to retreat from its role in allocating the basic resources of capital, energy and land, a move that is bound

to substantially boost economic efficiency. However, it will come at the cost of depriving the central government of an important tool of macro-economic management, and local governments of treasured channels of patron-age. To counterbalance this retreat from direct market interference, the reform plan spells out the areas in which public goods provision by the government must be improved: macro management and regulation, public service delivery, management of social stability, and environmental protection. The vision seems to be for China to move closer to an economy where the government plays a regulatory, rath-er than a directly interventionist role. In short: a socialist welfare state with Chinese charac-teristics, the success of which must ultimately corroborate Beijing’s model of responsible government.

The reform programme reveals Xi Jinping as a powerful and visionary leader, who is lead-ing the Party to redefine the basic functions of market and government, and in so doing has chosen to step in the pragmatic footsteps of Deng Xiaoping. The Third Plenum’s approval of the formation of two high-level Party bodies, a Central Leading Group for Overall Reforms, and a State Security Commission to oversee the nation’s pervasive security apparatus, indi-cates that Xi Jinping is adroitly establishing the institutional conditions for overcoming resist-ance and achieving his aims. Whether he can deliver on these grand ambitions, and whether his approach will be successful in redirecting China’s economic model, remains to be seen. But one thing is crystal clear: Xi Jinping has taken up the gauntlet.

The third plenum: a boost for the EU-China relations?

A container ship arrived at the port of Qingdao on 20 Jan. 2014. Future reforms may see a downturn in Chinese exports, which would affect China’s coastal cities. CHINA OUT AFP PHOTO

Director, Brussels Institute of Contemporary China Studies (BICCS), Vrije Universiteit Brussel (VUB)

By Gustaaf Geeraerts

A major pledge of the reform

plan is to give markets a

decisive role in key areas of the

economy

Page 6: EU-CHINA 2014

06 FEBRUARY 2014

NEWEUROPEwww.neweurope.eu

EU-Chinaa nEw Era of CoopEration and UndErstanding

IntroductionDespite the official rhetoric EU-China

relations are a long way from fulfilling their potential. But two events last November may have opened the door to a much closer and substantial relationship. The first event was the historic third plenary session of 18th CPC Central Committee which took a number of far-reaching decisions on economic reform. The Chinese leadership was well aware of the dangers facing the Chinese economy and the plenary agreed reforms which, if implemented quickly and efficiently, will move China more towards a market economy and thus respond to people’s needs. This in turn will open up new prospects for closer EU-China coopera-tion.

The second event was the EU-China sum-mit that agreed to open negotiations on an investment treaty and also adopted the EU-China 2020 Strategic Agenda for Cooperation, a visionary document that sets out common aims and objectives in a number of important areas. The summit was also characterized by a new openness in the dialogue between leaders. In contrast to previous summits when leaders usually read prepared statements, the Novem-ber summit saw a genuine dialogue with the tone and style of the meeting being quite dif-ferent to a decade ago. This is encouraging.

The third plenary – impact on the EUMany of the economic decisions of the

CPC plenary will have repercussions for Eu-rope. The overriding motive was to reduce state involvement in the economy and give more focus to the market. The transforma-tion of the Chinese economy into one driven

by domestic consumption will be beneficial to European companies and especially the ser-vices sector. But this will not happen overnight given the many vested interests surrounding the state owned enterprises. Indeed perhaps the key question concerns the speed and ef-fectiveness of implementation of the reform programme. In some areas, such as the interna-tionalization of the Yuan, China has shown it prefers to move cautiously. In other areas, such as green growth, China has moved ahead with great speed.

The spectacular growth rates in China have resulted in considerable damage to the environment, a fact acknowledged by the new leadership. The plenum stressed that green growth was essential for sustainable develop-ment. EU-China cooperation in this area is already creating new business opportunities for Chinese and European companies. The potential is huge and both sides should ensure this continues to be a top priority for coop-eration. Green growth has implications for climate change and energy policy. It also is a main feature of urbanisation and here the EU and China are already cooperating in a use-ful way through the EU-China Urbanisation Partnership Forum. More Chinese are living in cities than ever before and this very useful Forum is designed to share experience on ur-ban planning and design as well as urban socio-economic issues.

The EU and China both face many com-mon challenges including youth employment, social welfare, demographic ageing, as well as migration flows and cross-country mobility. The reforms announced at the plenum should provide further opportunities for EU-China

cooperation in these areas.The principal driver of the bilateral rela-

tionship, however, will continue to be trade and investment. The EU and China enjoy one of the world’s biggest and most dynamic trad-ing relationships. Both sides share responsibil-ity for ensuring that their economies remain key drivers for global economic growth and providing prosperity for all. At the November summit, it was agreed to start negotiations on a comprehensive EU-China investment agreement that will provide for the progres-sive elimination of restrictions for investors to each other’s market. The investment treaty negotiations will be a major test for EU-China relations. It will require both sides not only to establish the rules of the game but also to engage in a much needed dialogue about the definition of a market and the extent of the state’s role in the economy. To quote Herman van Rompuy how can we develop a level play-ing field for European and Chinese economic operators? China accounts for less than one per cent of ODI in Europe, a tiny figure given the size of the Chinese economy. Chinese and European companies often complain about al-leged discrimination in each other’s markets. A good investment agreement should go a long way to resolve these issues.

Following the plenum, the menu for EU-China economic cooperation is large and cov-ers areas such as customs, taxation, intellectual property, standardisation, the stability of fi-nancial markets, e-commerce, consumer safe-ty, energy efficiency, agriculture, transport and information technology. While the bilateral relationship is hugely important it is important not to forget the multilateral dimension. In De-

cember the WTO had an important success at Bali. China and the EU need to build on this success and redouble their efforts to achieve a conclusion to the Doha Development Round.

The Summit and the 2020 AgendaIt was fortuitous that the plenum was fol-

lowed soon after by the EU-China summit. This not only gave the EU leaders an early op-portunity to hear the future course of Chinese policy from the horse’s mouth but it also pro-vided the launch pad for a new era of coopera-tion. Under the 2020 agenda both sides agreed to intensify cooperation on major issues. The first was peace and security where cooperation has been steadily growing in recent years. The High Level Strategic Dialogue will be the main platform to build common ground in tackling difficult issues such as nuclear proliferation, cyber security, organized crime and regional conflicts. As a first step the summit identified the importance of enhancing the bilateral dia-logue on Africa, Central Asia, Latin America and the respective neighbourhoods of the EU and China. Both sides also agreed to reinforce cooperation in regional and multilateral fora such as the UN, ASEM and ARF. Another use-ful step will be deepening cooperation on de-fence and security issues, especially maritime security, counter piracy and disaster relief.

Other priority areas under the 2020 agen-da include sustainable development, trade and investment, and people to people exchanges. There are encouraging signs of progress in all these fields and with the goodwill generated by the last summit the prospects for EU-China relations have never been better.

Prospects for EU-China relations

A luxury sports car store readies for its grand opening in a Beijing shopping mall on 17 Oct. 2011. The third plenary session of 18th CCP Central Committee last November looked to reform the Chinese economy and put a greater focus on domestic consumption. EPA/ADRIAN BRADSHAW

A former British diplomat and senior EU official, is Director of the EU-Asia Centre in Brussels.

By Fraser Cameron

The High Level Strategic Dialogue

will be the main platform to build

common ground in tackling difficult is-

sues such as nuclear proliferation, cyber security, organized crime and regional

conflicts

Page 7: EU-CHINA 2014

EU-China07

FEBRUARY 2014

NEWEUROPEwww.neweurope.eu

A New erA of CooperAtioN ANd UNderstANdiNg

China has laid out the map for the path of its future reform. Successfully im-plementing the reforms proposed at

the 3rd Plenum of the 18th Central Commit-tee of the Chinese Communist Party (CCP) will be a difficult and complex task for China, but they will also represent a challenge for Europe.

The Decision on Major Issues Concern-ing Comprehensively Deepening Reforms adopted following the 3rd Plenum set out broad principles of reform as well as identifying spe-cific areas that will be targeted. The challenge to achieve results will be considerable, and not just because China’s leadership recognized that there are many areas that require urgent reform. The CCP has given itself a deadline of 2020 for achieving significant results in reform and it is already 2014. If that deadline is to be met, then there is little room for delay or mistakes.

As is often the case with such policy docu-ments in China, the details are left to be devel-oped later. However, if the reforms outlined are successfully carried out, they will amount to a transformation of China in a number of important areas. They will potentially have an impact on the same scale as the reforms that have transformed China in the last 30 years. In-deed, from the point of view of the CCP, they are being portrayed as the launching of a new era of reform in the same way as happened at the 3rd Plenum of the 11th Central Commit-

tee in1978. Though arguably this time there is greater clarity about the path forward, since in 1978, no such document was produced.

A number of key points have been widely noted. The role in theory given to the market has been augmented. It is now should have a “decisive role”. In theory this has major im-plications, although in practice what this may really mean is still not clear. Two reforms that have already been enacted have received wide attention, the abolishment of the labour reeducation system and the reform of the fam-ily planning policy. This last, while attracting considerable press coverage outside China, will have only marginal economic impact. However, there are other areas, which have re-ceived much less attention, but are potentially more important.

One of the questions the 3rd Plenum De-cision raised is property rights. The issue of property rights is a fundamental and neglected issue in both the urban and rural economies. It is related to reform of state owned enterprises and expansion of the role of the market, but

also development of the agriculture sector. In each case the lack of clarity and certainty of property rights is a key impediment to devel-opment.

Another fundamental question raised at several points in the Decision is the divide between urban and rural China. The 3rd Ple-num Decision includes a commitment to re-duce the barriers between the rural and urban economies in China. This touches on issues such as land ownership, real estate markets and movement of labour in the household regis-tration system (hukou). The removal of this fundamental divide will have a huge impact on future development in both rural and urban China, especially on urbanization, which is in-tended to be a key driver of economic growth.

A third area raised at several points is the tax and fiscal systems. Experiments are al-ready occurring with property tax and reform of Business Tax and Value Added Tax, which if implemented will have major implications for government revenue raising and the role of real estate development, as well as the balance of industry and services in the economy. One key problem addressed is the sustainability of local government revenue and expenditure and the relationship between central and local government finance. This will have a huge im-pact on the government itself, but also on the economy, as this is at the heart of the political economy model that has driven the China’s economic development at the local level for many years.

Already details of some of the policies are emerging, as they have even prior to the Ple-num, and the Chinese media are filled with discussions and debates on the next steps for-ward. Many of the reforms have already been previewed in experiments that were begun in

selected localities even before Xi Jinping and Li Keqiang came to power.

The reforms outlined, if successful, will bring about considerable change in China. Since China now has an impact on the world, this will naturally affect Europe, and the re-lationship between the two. The Decision is probably the most important policy document produced by any government in the past year and is far more significant than any of the fal-tering steps produced in the EU to tackle its problems since 2008.

Since the economy is at the core of the relationship between the EU and China, this is where Chinese reform will have the great-est impact. The cumulative impact of the re-forms will be a more market driven Chinese economy, where the state will have a central but more circumscribed role. It will be more open, but also a more competitive economy, both domestically and internationally. It will be an economy with certainly slower, but pos-sibly more stable and sustainable growth.

For the EU, rapid reforms China will be a challenge. While the reforms proposed may help positively change the relationship with the EU, they will not reduce the fundamental challenge that China represents. The greatest challenge for the EU will be in Brussels. Even during the leadership of Hu Jintao and Wen Jiabao, when reform was much slower, the EU institutions have great difficulty in keeping up with the transformation of China, resulting in some cases in major policy failures. The EU will need to think seriously about how the re-forms being proposed will change China and its relationship with Europe. There is of course a risk that reform will not be successfully im-plemented. If they fail, the challenge for Eu-rope will be even greater.

The challenge of changing chinaA man cycles past a demolished hotel in Beijing on 7 Jan. 2014. The hotel, after surviving years of state planning, once symbolized the hope of China’s past market reforms. AFP PHOTO / TOM HANCOCK

Senior Research Fellow Brussels Institute of Contemporary China Studies

By Duncan FreemanWhile the reforms

proposed may help positively change

the relationship with the EU, they will

not reduce the fundamental

challenge that China represents

Page 8: EU-CHINA 2014

08 FEBRUARY 2014

NEWEUROPEwww.neweurope.eu

EU-Chinaa nEw Era of CoopEration and UndErstanding

R eshaping the government-market re-lationship is an integral requirement to transform the economic develop-

ment mode and to build an innovative coun-try. Since technological innovation is featured by high profits, high risk and spill-over effects, we should give full play to the decisive role of market mechanism and the guiding role of the government control. Only by doing so can the quality of economic development be im-proved and the economic development mode transformed fundamentally.

I. Building an Innovative Country Requires Coordinating the Government-Market RelationshipThe purpose of building an innovative

country is to enhance the capability of inde-pendent innovation and make innovative ac-tivities the fundamental support for upgrading the industrial structure and transformation of the development mode. Therefore, it is essen-tial to coordinate the relationship between var-ious players, such as enterprises, governments, colleges and universities, researchers, venture capital and technological intermediaries, and to build and improve the country’s innovative system and pool the resources of the whole so-ciety for the innovative activities.

On the one hand, whether the innovative capacity can be enhanced and the innovative activities can be implemented is determined by enterprises and researchers. Full play shall be given to the role of the market in value dis-covery and the individual actors shall be en-couraged to engage in the innovative activities by incentive motivation, so that more social re-sources can be pooled for innovative activities.

On the other hand, the innovative activi-ties tend to be influenced by market failure, which is represented by spill-over of the inno-vative products and high risk of the innovation process. For the sake of prudence and financial safety, enterprises and researchers choose to avoid the innovative activities in most cases. The risk and cost of the innovative activities cannot be compensated and the market failure

cannot be offset unless we implement such policies as financial subsidies and tax breaks and strengthen the regulation on intellectual property protection.

In addition, sometimes individual actors engage in the innovative activities solely be-cause they are interested in these activities. Therefore, the government departments shall guide effectively to inspire them to be devoted to innovation.

II. The Malfunction and Absence of the Constrains of the Building of an Innovative CountryMalfunction and absence of the govern-

ment has become the institutional obstacle to the construction of an innovative country.

The malfunction and absence of govern-ment has seriously impacted the optimal allo-cation of science funds in basic and theoretical research and exploration. For one thing, the sci-entific management departments fully intervene in approval, implementation and evaluation of the scientific research projects. The complicated declaration and examination process will not only waste the researchers’ time and energy, but also create possibility for the rent-seeking and corruption of the project managerial personnel. For another, when guiding the direction of sci-entific exploration and promoting cooperation between colleges and universities and enterpris-es, governments at all levels cannot provide suf-ficient public services, so that a lot of scientific achievements cannot be applied in industrial production effectively and the supporting role of the science and technology in economic growth is weakened.

In terms of industrialising the scientific achievements, the industrial regulations and rules cannot be adjusted in time to adapt to the change in the development of emerging technologies, which constrains the supporting role of the emerging technologies in industrial development and economic growth. Take for instance the internet of things. Its final product (service) is to provide a comprehensive solu-tion as required by the customer. According to the existing regulations, the enterprise which provides the solution shall have relevant quali-fications, e.g. first-grade certification of the sys-tem integration and computer software stand-ards. However, most companies of the internet of things have the advantage in research and development of radio frequency chip but do not have other qualifications required, there-fore they cannot conduct businesses smoothly.

Besides, innovative activities are severely constrained by overlapping mandates among different government agencies, lack of coor-dination between governmental departments and conflict of interests among them.

III. Government Functions and Policy Choices in the Building of an Innovative CountryIn order to accelerate the building of an

innovative country, efforts shall be made to properly define the government functions, remedy and offset market failure and create a good external environment for the market mechanism to play a decisive role.

Firstly, efforts shall be made to share risks, compensate the cost and correct the market failure caused by high risk and spill-over of the

innovative activities. In terms of specific policy choices, we can offer financial subsidies and tax breaks and strengthen intellectual prop-erty protection. Besides, we can provide more public services for the innovative activities, such as organizing research and development of generic technology, enhancing building of the scientific infrastructure and facilitating op-eration of enterprises, especially the small and medium-sized enterprises.

Secondly, efforts shall be made to perfect relevant systems and mechanisms and remove institutional obstacles in industrial access and factor mobility so as to create a better institu-tional environment for all social resources to be pooled for the innovative activities.

Thirdly, efforts shall be made to encour-age the individuals to engage in innovative ac-tivities by creating a good social environment. People’s scientific literacy shall be raised by popularising scientific education and spread-ing the modern scientific knowledge. More efforts shall be made to stimulate the interest and enthusiasm of teenagers in scientific ex-ploration and technological innovation.

Fourthly, efforts shall be made to create more market demand for the promotion and application of the innovative products and new products. Niche markets shall be created for the innovative products at the early stage of development by government procurement and demonstration projects. The market bar-riers among regions caused by protectionism shall be eliminated. Enterprises shall also be provided with support in policies and informa-tion to expand the international market and participate in the international competition.

Balance government -market relationship Make China an innovative country

Investors watch stock prices at a securities exchange house in Shanghai, China on 02 February, 2009. Stocks around the world tumbled recently as the Chinese government has ordered a further clampdown on excessive bank lending to prevent hyper growth and inflation, signaling the importance of the Chinese economy on the world stage. EPA/QIlAI ShEn

Senior Research Fellow, Director-General , Institute of Quantitative and Technical Economics (IQTE), Chinese Academy of Social Sciences (CASS)

Associate Senior Research Fellow, Institute of Quantitative and Technical Economics (IQTE), Chinese Academy of Social Sciences (CASS)

By Prof.LI PIng & CAI Yuezhou

Malfunction and absence of the

government has become the

institutional obstacle to the construction of an innovative country

Page 9: EU-CHINA 2014

EU-China09

FEBRUARY 2014

NEWEUROPEwww.neweurope.eu

A New erA of CooperAtioN ANd UNderstANdiNg

Since reforms and the process of open-ing up started in the late 1970s and early 1980s, China’s social sector, including

the labour market and social welfare, has un-dergone continuous institutional change. The Third Plenum of the 18th CPC Central Com-mittee in November 2013 outlined a series of specific reform objectives for the next decade, which included major reforms touching upon vested interests.

Social reforms can take many forms. From the perspective of Daron Acemoglu Azeri and James A. Robinson’s notion of an inclusive so-ciety leading to increased prosperity, there are three critical stages of China’s social reforms.

The first two decades of reform and opening up saw social reforms aiming to gradually remove barriers to labour mobility, and maintain the competitiveness of the national economy while promoting full employment. At this stage, pro-moting efficiency lays at the heart of the govern-ment’s reform effort, given the problems and lack of efficiency associated with excessive egalitari-anism and ‘iron rice bowl’ legacies of the planned economy. Although the system of household reg-istration still exists, these early reforms addressed the main obstacles to labour mobility between regions, notably as regards mobility from rural to urban areas. However, labour and social protec-tion laws and regulations were largely inexistent at this time.

Those in place faced serious challenges to their implementation. Nevertheless, the new highly mobile labour force sustained the com-petitiveness of the Chinese economy to a large extent over the long-term, resulting in more

employment for rural migrant labour and con-sequent poverty alleviation.

According to the World Bank, this in-creased mobility of the labour force has con-tributed at least 20% to the Chinese economic growth over the years, and decreased the num-ber of rural dwellers living in absolute poverty by more than 60%.

In the first decade of this century, the fo-cus was on strengthening social protection to ensure the benefits of reform and opening up are shared across the population. Equality and efficiency were equal priorities for the govern-ment. In terms of human capital, the govern-ment increased its investment in education and health care. As for labour market regula-tion, there were continuous improvements in collective wage negotiations and minimum wage regulations.

China also put in place at record speed a series of social protection measures. In less than two decades, China established a social protection system covering pensions and basic medical care for both urban and rural popu-lations, unemployment benefits, maternity, health and hospitalisation insurance for urban employees, as well as a social relief system that provides basic food and shelter to more than 7 million people. According to the World Bank, the OECD countries spent decades on build-ing comparable social welfare systems, while this achievement is still far off for most middle-income countries.

In recent years, the focus has shifted to so-cial investment and promoting equal opportu-nities. The new Chinese leadership has priori-

tised ensuring a basic level of social protection for all, while avoiding excessive dependence on welfare services.

Although attention should be paid to eco-nomic transformation and the social needs of an ageing society, more attention is required to developing human capital, increasing effi-ciency in the use of human resources, and pro-moting economic growth, fiscal sustainability, social mobility and social justice. The current government is therefore committed to devel-oping social services of supporting the aged and early childhood education, realising the full potential of the labour force, and increas-ing the employment rate. More importantly, the Third Plenum of the 18th CPC Central Committee outlined reforms to be deepened in the areas of education and healthcare based on increased financial investment, aiming at promoting equal opportunities in the devel-opment of human capital and social mobility. As for equal opportunities in education, China has already introduced four major reforms.

The first was to abolish the differentiated categorisation of schools during the period of nine-year compulsory education, and to actively promote a regular exchange system amongst teachers and principals. A second reform was to move from recruiting students to elite high-schools from the city at large to introducing quota per junior high-school on an equal basis.

The third major reform was to allow chil-dren of migrant workers to sit entrance exams in their city of residence rather than of house-hold registrations under certain circumstances.

The fourth was to broaden university recruit-ment from poorer areas. In 2013, the quota for students from such areas will rise to 30,000, from 10,000 in 2012. With regards to promot-ing equal access to medical services, the Third Plenum introduced reform measures on the remuneration of medical staff, establishing a fixed salary system, and ending the artificial link between the prescription of treatment and doctors’ income, which led to cases of un-necessary or inappropriate treatment. The re-forms aim to ensure that new investment in the healthcare system is duly reflected in improved public goods and welfare.

It should be noted that the aforementioned reforms in education and healthcare systems will likely encounter considerable resistance from certain vested interest groups. In order to promote these reforms, the new leadership has ensured oversight by establishing a leading group for reform at the highest level, as well as several high-level working groups for social reforms.

Daron Acemoglu and James A. Robinson pointed out that establishing an inclusive sys-tem is by no means an easy or natural process. They underestimated, however, the determi-nation and capabilities of the current Chinese administration to promote an inclusive soci-ety. Over the last 30 years, starting with Deng Xiaoping, China’s leadership has successfully led the Chinese people from poverty to pros-perity. Over the coming two to three decades, the new leadership will overcome the existing obstacles, establish a prosperous, strong and civilised society, thereby realising the ‘Chi-nese dream’.

Social sector reform in China: building an inclusive system

A Chinese bicycle mechanic sits by his stall on the roadside in a residential district in Beijing. EPA/HOW HWEE YOUNG

Deputy Director, Research Department of Social Development, Development Research Center of the State Council

By GonG Sen

More attention is required to

developing human capital, increasing

efficiency in the use of human resources,

and promoting economic growth,

fiscal sustainability, social mobility and

social justice

Page 10: EU-CHINA 2014

10 FEBRUARY 2014

NEWEUROPEwww.neweurope.eu

EU-Chinaa nEw Era of CoopEration and UndErstanding

The Third Plenary Meeting of the 18th Congress of the Chinese Communist Party noted that the main obstacle to

China’s balanced urban and rural development is the dual structure of town and countryside. The Congress concluded that, to overcome this problem, integrated structures and mecha-nisms are needed, as are efforts to shape new types of industry-agriculture and urban-rural relationships. In this vision, industry will stimulate agriculture, cities will stimulate the countryside, and rural dwellers will partici-pate equally in the process of modernisation and share its fruits. It is therefore imperative to accelerate the development of new types of agricultural management systems, increase property rights for farmers, ensure the equal value of urban and rural production and a bal-anced allocation of public resources, and per-fect healthy urban development systems.

Urbanisation in China bears on the coun-try’s sustainable development and its growth engine. The Nobel Prize-winning economist and former World Bank Vice President Joseph Stiglitz once noted that ‘China’s urbanisation and the United States’ high-tech development will be the two key phenomena that shape the world in the 21st Century’.

China’s rural surplus labour force currently accounts for between 170 and 200 million people. In 2011, China’s urbanisation rate sur-passed 50% for the first time, reaching 51.27%.

It is estimated that by 2020, China’s urbanisa-tion level will reach 60%. In this scenario, Chi-na’s urbanisation rate will increase by 1% an-nually, which means approximately 13 million people will move to cities each year. Such mass migration of rural surplus labour force into the cities is hardly realistic, not only because land and water resources are scarce; the financial re-sources of the State are also under formidable strain as the quality of urban transport, envi-ronment, health, and security, among others, are deteriorating. Thus, it is argued that the urbanisation of the rural population should be encouraged at the prefecture level, into small to medium-size cities and towns rather than into big cities.

The Chinese government’s notion of new ‘people-cantered’ urbanisation emphasises the interests and welfare of farmers through-out China’s industrialisation and agricultural modernisation process. On the one hand, the farmers should be able to increase their dis-posable income through the modernisation of agriculture as well as new rural developments. On the other hand, once adapted to urban liv-

ing and integrated into urban communities, farmers can also be the driving force behind new consumption patterns. Instead of mass-constructing new cities and developing the real estate industry, new urbanisation should reform the existing household registration system, abolish its urban-rural divide, so that migrant farmers can make a decent livelihood as new urban citizens.

For many people, household registration reform and abolishing the division between urban and rural dwellers are preconditions for realising the notion of new urbanisation How-ever, it is not so simple. Research shows that two-thirds of migrant workers do not want to give up their rural household registration. Once they give up their land and homestead, they lose benefits from the preferential poli-cies to which they are entitled. Instead, farm-ers want to have access to better education and healthcare as urban citizens, while keeping the basic benefits based on their agricultural and residential land registration. This is the prob-lem facing policy-makers dealing with urbani-sation, highlighting China’s characteristics as a developing country.

In order to promote the new urbanisation, the implementation of the land transfer system should be comprehensive, allowing farmers who work in cities to legally transfer their land contract to others. This transfer method can take the form of subletting, mortgaging, trans-ferring the contract rights or dividing the rights into shares, all of which must be conducted on a voluntary basis. In 2012, a large-scale rights authentication exercise was conducted across rural China confirming the contractual status of all agricultural land, and that the conditions are in place for the implementation of such a land transfer system. As a result, rural land ownership contract rights and management

rights can be clearly divided and migrant farm-ers can become urban citizens, who no longer run businesses on their contracted land, but can still benefit from their ownership of the land and the income it generates. In conclu-sion, in order to promote new urbanisation, the household registration system not only re-quires reforming, but the land system reform needs deepening.

In future, China’s urbanisation process will develop at three levels. The first level centres around China’s three mega-cities: Beijing as the centre of Bohai Rim, Shanghai as the cen-tre of Yangzi River Delta and Guangzhou as the centre of the Pearl River Delta city clusters.

The second level encompasses the medi-um-sized capital cities at the provincial level. These cities will be the growth engines for the development of their provinces. Given that a province in China is comparable in terms of population and area to a country by European standards, it is imperative to allow the prov-inces to take the initiative in promoting urban development, absorbing rural labour and pro-viding impetus to industrialisation.

The third level is that of the township, cen-tred on local counties. Local counties are the principle destination of migrant workers, and this local employment will be a key feature of China’s new urbanisation.

This new pattern of China’s urbanisation reflects a consensus reached in the process of China’s reform and opening-up, as well as how urbanisation has developed in practice over the past decades. It also represents a major policy decision by the Chinese government, to make urbanisation the growth engine for China’s sustainable and healthy economic de-velopment, but also a major channel for Chi-na’s social transformation, and have invaluable influence on China’s modernisation process.

China’s new urbanisation and its challenges

Rows of apartment buildings seen from the air on the approach to Shanghai, China on 01 July, 2011. While China rapidly urbanized from 20 percent in the 1980’s to almost 50 percent today, further urbanization is likely to be slower as a myriad of problems from housing, pollution, to income gap is starting to show their effects. EPA/QILAI SHEN

Member of the 11th CPPCC (Chinese People’s Political Consultative Conference) Standing Committee and the former Vice President of the Central Party School.

By LI JunruIn this scenario, China’s

urbanization rate will increase by 1%

annually, which means approximately 13

million people will move to cities

each year

Page 11: EU-CHINA 2014

EU-China11

FEBRUARY 2014

NEWEUROPEwww.neweurope.eu

A New erA of CooperAtioN ANd UNderstANdiNg

T he recent Third Plenum of the Chi-nese Communist Party issued The Decision on Major Issues Concerning

Comprehensively Deepening Reforms. In this decision, the CCP outlined its strategic target of promoting the rule of law in China, by means of five reform priorities.

The first reform priority is to promote a scientific approach to legislation. This implies developing a legal system with Chinese charac-teristics: improving the coordination of legisla-tive drafting and argumentation review mecha-nisms; enhancing the quality of legislation; and preventing local protectionism and legalisation of sectoral interests. The way the National Peo-ple’s Congress functions also needs improve-ment, including expanding citizen participation in legislative procedures through public hearings and evaluations, responding to social concerns through questionnaires and reviews, and incre-mentally expanding the number of cities with enhanced legislative powers.

The second is to uphold the legal authority of the Constitution. For this, it will be key to im-plement sound constitutional mechanisms and

procedures, while establishing a mature legal system that ensures respect of the Constitution. Equality before the law should be insisted upon, and all violations of the Constitution subject to investigation.

A comprehensive legal advisory system should be established, along with a scientific evaluation index system and standards by which the rule of law can be measured. The fil-ing and consultation system for rules, regula-tions and regulatory documents also requires improvement.

Thirdly, administrative law enforcement reform needs further deepening. The focus should be on centralising enforcement powers to a certain extent, while promoting comprehen-sive legal enforcement. Authority needs to be matched by legal responsibility, and the strength and efficiency of the enforcement mechanism enhanced. Law enforcement administration should be streamlined while the administration

at local level should be strengthened for the key areas of food and drug safety, labour safety, en-vironmental protection, labour protection, and sea and island territories. Administrative proce-dures, and the use and supervision of enforce-ment discretion, should also be improved and standardised. Authorities need to take on com-prehensive responsibility for law enforcement, with the support of public finance instruments. Last but not least, the coordination and coher-ence between the administrative law enforce-ment and criminal justice mechanisms needs to be improved.

Fourth, judicial reforms must go further. The exercise of judicial and prosecution powers must be independent and impartial, as required by law. For this, reforms should promote the cen-tralised administration of local courts and prose-cutors by unifying financial and human resource management. The practical possibility of sepa-rating legal jurisdictions from local administra-tive divisions should also be explored. The sector would also benefit from professional personnel management, with a centralised recruitment and handover system for judges and prosecutors, improved personnel classification, and sound social security benefits. Reform of the Commit-tee of Juries is also needed, and accountability and coordination should be improved between

presiding judges and court investigators. Fur-thermore, the different functions of the various levels of court need to be clarified, and the super-visory relations between high and lower courts standardised. Courtrooms should be opened as much as possible to be public, all court proceed-ings and materials should be archived, and court judgement should be published as they enter into force. Commutation, parole and medical pa-role procedures should be strictly specified and overseen by strengthened supervision processes. The use of public juries and “people supervisors” should be widely promoted.

Finally, the law and judiciary should protect human rights. Seizure, freezing and other pro-cesses related to financial cases should be stand-ardised and the review system needs to enhance its accountability. Other key reforms should prohibit torture, strictly implement rules on the inadmissibility of illegally-obtained evidence, gradually reduce the scope of offences subject to the death penalty, and abolish re-education through labour. A community-based review sys-tem needs to be developed and the national jus-tice and legal aid system strengthened. Last but not least, the rights of lawyers need to be ensured while developing disciplinary measures for ille-gal practices, thus allowing rights lawyers to play their full role within the scope of the law.

Promoting the rule of law in China

Since the founding of the People’s Republic, China’s urban landscape has undergone an extraordinary, albeit uneasy, process of

change. In the age of planned economy, urbanisa-tion in China experienced long-term stagnation, due to the low level of agricultural productivity and the endurance of traditional rural mindsets. Between 1952 and 1978, the rate of urbanisation increased from 12.5% to 17.9%, growing by just under 6% over a period of 26 years. Since China began its process of reform and opening-up, ur-banisation has accelerated with rapid industri-alisation and increases in labour productivity. Be-tween 1978 and 2012, the urban population grew from 170 million to 710 million – increasing by 540 million, and overtaking the combined popu-lation of the United States, the UK, Germany and France together by 2 million. In 2012, China’s urban population reached the world average of 52.6%.

Of course, China’s process of urbanisation has not completed. This figure is still well below the 80.5% of urbanisation rate which is the aver-age of high-income countries; the average rate for middle-income countries – at a comparable stage of development to China – is still 60.6%. Taking away those who are calculated as city-dwellers, but actually do not enjoy full public services in

the cities, the real level of urbanisation in China could be lower than 50%. In this case, the gap be-tween China’s urbanisation and the world aver-age is even greater than it seems at first sight.

Nevertheless, such a gap can represent a great opportunity. Continuing to advance the rate of urbanisation will create a huge demand for economic growth. This will require consid-erable investment. Urban population growth will inevitably call for the development of infra-structure, including factories, office buildings and residential housing. Urbanisation also brings tremendous consumer demand. Thus, popula-tion increases and income growth will be key to strengthening overall purchasing power. Howev-er, such potential should not be taken for granted. Opportunities do not automatically translate into ‘fruitful harvests’.

To reap the benefits of urbanisation, its devel-opment must be modelled to ensure economic prosperity, social harmony and environmental sustainability. Economic development is funda-mental. It is the creation of employment oppor-tunities that underpins sustained urban growth; without it, local governments would not have the financial capacity to provide the required increased public services. Social harmony is an-other premise of urbanisation, without which in-frastructure construction and development pro-jects risk opposition. Last but not least, ensuring a clean environment is an end goal of urbanisa-tion. Without this, cities will slowly reverse their growth, suffering in particular from brain drain, and eventually lose their dynamism.

The path of China’s urbanisation has not been smooth. In some places, it has gone too fast,

neglecting industrial development and leaving many newly-constructed districts uninhabited. A second issue is that large numbers of new city residents do not enjoy the same public service rights as other urban citizens. Third, some cities have implemented models of growth which have been proven excessively polluting. Due to slow progress in the capacity of cities to manage pol-lution, cities are becoming less liveable. Fourth, urban management and governance is lagging behind growth. As a result, urban development is advancing in a legal void without scientific de-sign. Cultural identity is too often neglected, and cities are losing their character.

The Chinese Communist Party’s Central Ur-banisation Conference held in December 2013 was therefore timely, discussing the planning and implementation of China’s future urbanisation. The outcome of this meeting will put China’s ur-banisation on a healthier path.

First of all, the process of urbanisation needs a more solid financial foundation. The Central Urbanisation Work Conference stressed that urbanisation is a historic process and should be left to follow its natural course. Indeed, urbanisa-tion should be based on economic growth, lead-

ing to a matching growth in population, urban economic development, job creation and the development of public services. Cities in China should therefore prioritise industrial develop-ment, which can sustain the growth of the urban population. Secondly, urbanisation should reflect and address the need for social integration.

At the conference, it was noted that urbanisa-tion should be people-oriented. Human-centred urbanisation should be promoted in order to enhance the quality of life of urban citizens. In particular, giving full urban residency rights to those with stable employment should be priori-tised. This will no doubt enhance social harmony across urban communities. Third, environmental protection should be given more attention, with nature and culture both being taken into account when planning urban development.

The Central Work Conference also empha-sised the need to improve energy efficiency, re-duce energy consumption and carbon dioxide emissions. Bio-security should be made a prior-ity. Forests, lakes, wetland areas and other green spaces should be preserved and further devel-oped. Space should also be left for cities to exhib-it and nurture their historic, regional and ethnic characteristics. This will undoubtedly increase their liveability. Forth, urbanisation requires more sophisticated urban management. The Central Urbanisation Work Conference conclud-ed that the focus of urban planning should shift from the expansion of cities to their delimitation, giving more consideration to structure and con-sistency of urban design.

Following this new path, urbanisation in Chi-na will register new growth and development.

The past and future of china’s urbanisationResearch Department of Development Strategy and Regional Economy, Development Research Centre of the State Council

Director for Institute of Law at the Chinese Academy of Social Sciences

By Hou Yong ZHi

By Li Lin

Reform of the Committee of Ju-ries is also needed, and account-ability and coordination should

be improved between presiding judges and court investigators

Human-centered ur-banization should be promoted in order to

enhance the quality of life of urban citizens

Page 12: EU-CHINA 2014

12 FEBRUARY 2014

NEWEUROPEwww.neweurope.eu

EU-Chinaa nEw Era of CoopEration and UndErstanding

Thirty years ago, launching reforms that opened the country to the world, China set up four special economic zones in-

cluding the city of Shenzhen. Upon taking office in 2013, the new Chinese government estab-lished a new zone: the Shanghai Pilot Free Trade Zone, marking the launch of a new round of re-forms. Three decades ago, the special economic zones helped integrate the Chinese economy with the rest of the world; the new zone will drive the Chinese economy further forward.

Striving for new advantages in international competition Thirty years of opening up have successfully

transformed China from a small trading nation relying primarily on commodity exports into the world’s largest manufacturing and trading power. However, China’s foreign trade today faces two major challenges: first, the advantage of low la-bour costs, which has sustained China’s status as a major trading power, is weakening. China needs to gain a competitive edge by climbing up the global value chain, from labour-intensive to capital-value and technologically-driven pro-duction. Second, China’s service industry is seri-ously lagging behind and needs to be bolstered to strengthen China’s international competitiveness in this field. The liberalisation of trade in services is central to the rationale of the Shanghai Pilot Free Trade Zone. China’s lack of openness to for-eign trade and excessive internal market control have been hampered the development of the ser-vice industry. Approving the Shanghai Pilot Free Trade Zone, the State Council responded to 18 sectors covering 6 major areas including finance, shipping, trade, professional services, cultural and social services, which declared themselves ready for a more open market. Entry barriers for foreign investors are also set to be significantly

reduced, with the exception of banking and telecommunication services. Other measures include the suspension or abolition of require-ments on investors, equity ratio restrictions, and restrictions on business operation range. More importantly, the pilot free trade zone will ensure equal access and fair competition between do-mestic and foreign investors. As this Pilot Zone develops, we trust that more service sectors will join the liberalisation process.

Upgrading trade facilities is key to branding Shanghai as an international shipping centre. Adapting to the latest developments in interna-tional trade and logistics industry, the Pilot Zone will introduce a series of reforms making full use of electronic technology to improve the ef-ficiency of custom clearance and supervision. In response to rapid developments in international e-commerce, the Pilot Zone will also establish suitable customs supervision, inspection, logis-tics and other support systems for this trade.

Exploring reforms in cross-border investment systemsMost developed economies apply “negative

inventory balance” to foreign nationals invest-ing in the country. Besides the ongoing Sino-

US negotiations on a bilateral investment treaty (BIT), China is also working towards free trade agreements with a number of other countries and groups, where the issue of management models for foreign direct investors is in each case up for discussion. The Chinese government has so far adopted a positive list-based approach to inven-tory management. Implementing negative inven-tory management implies a change of manage-ment philosophy, but also further reforms in a government’s managerial approach. Indeed, the government is required to give up the greater part of its investment approval authority, and explor-ing innovative business models will greatly stim-ulate the dynamism of enterprises.

The communiqué of the recent Third Ple-num Session of the 18th CPC Central Commit-tee explicitly concluded that a ‘negative inven-tory management’ should be implemented. The Shanghai Pilot Free Trade Zone is pioneering the implementation of such a system, whereby the government’s investment approval authority will be abolished in favour of a more efficient invest-ment service and supervision system. Such a step will also be a valuable experience for China’s fu-ture investment management reforms.

The Shanghai Pilot Free Trade Zone needs

to explore further how to construct an external services trade facilitation system. China is not only a major recipient of international invest-ment; it is also an important source of outgoing international investment. In 2012, Chinese for-eign investment excluding in the financial sector reached 87.8 billion US dollars, putting China amongst the top global investors. Nevertheless, China’s investment management system still bears the imprints of an era of foreign currency shortage, with the government more focused on exercising authority with regards to the approval procedure for foreign investment, rather than on providing services to investors. In order to adapt to rapid developments in the foreign investment environment, the Shanghai Pilot Free Trade Zone will explore how to provide both effective supervision of foreign investment and high-qual-ity services.

Exploring new paths to financial opennessThe experience of many emerging econo-

mies has been that financial openness is often ac-companied by financial risks. In the past, China has been cautious with the liberalisation of its finance sector. As China’s position in the global market changes, such liberalisation becomes inevitable. Striking the right balance between promoting financial liberalisation and effectively avoiding financial risks, however, will be impor-tant. In the Shanghai Pilot Free Trade Zone, such liberalisation will first touch upon RMB capital account convertibility, facilitation of interna-tional exchange, foreign exchange management system reform, the use of RMB for cross-border transaction and cross-border financing. This pro-cess will provide China with valuable experience for further steps in promoting greater financial openness. The Shanghai Pilot Free Trade Zone has already attracted global attention. Three months since its establishment, the Pilot Zone has already received 3,600 company registra-tions, with an average capital of over 20 million RMB, a clear indicator of investor confidence. We therefore are confident that the development of the Shanghai Pilot Free Trade Zone will provide a boost to the Chinese economy.

Shanghai pilot free trade zone: leading the upgrade of the Chinese economy

A motorcycle rider delivers goods in Shanghai on January 10, 2014. China’s annual trade in goods passed the USD 4 trillion mark for the first time in 2013, official data showed, confirming its position as the world’s biggest trading nation. CreDit: AFP PHOtO/Peter PArKS

Director General & Senior Research Fellow, Development Research Centre of the State Council

By Long guoqiang

EU – China cooperation - A new ambition for a knowledge-based agricultureDacian Cioloș, EU Commissioner for Agriculture and Rural Development 02

The third plenum: a boost for the EU-China relations?Gustaaf Geeraerts, Director, Brussels Institute of Contemporary China Studies (BICCS), Vrije Universiteit Brussel (VUB)05

The past and future of china’s urbanisationHou Yong Zhi, Research Department of Development Strategy and Regio-nal Economy, Development Research Centre of the State Council11

Balance government -market relationship Prof.LI Ping & CAI Yuezhou, Senior Research Fellow,

Director-General and Associate Senior Research Fellow, Institute of Quantita-tive and Technical Economics (IQTE)

08Reforms in China and the EU offer new opportunities of cooperationYang Yanyi, Ambassador of People’s Republic of China 03

Prospects for EU-China relationsFraser Cameron, A former British diplomat and senior EU official, is Director of the EU-Asia Centre in Brussels.06

Promoting the rule of law in ChinaLi Lin, Director for Institute of Law at the Chinese Academy of Social Sciences11

Social sector reform in China: building an inclusive systemGong Sen, Deputy Director, Research Department of Social Development, Development Research Center of the State Council09

Chinese dream and Sino-Europe relationshipWang Xiaochu, Vice Chairman of the Foreign Affairs Committee of the Nati-onal People’s Congress of China04

The challenge of changing chinaDuncan Freeman, Senior Research Fellow Brussels Institute of Contemporary China Studies07

Shanghai pilot free trade zone: leading the upgrade of the Chinese economy Director General & Senior Research Fellow, Development Research Centre of the State Council12

China’s new urbanisation and its challengesLI Junru, Member of the 11th CPPCC Standing Committee and the former Vice President of the Central Party School.10

INDEX