China-Germany/EU Industry & Investment Workshop

Information

Experts from the German Development Institute (DIE), the Kiel Institute for the World Economy, the Cologne Institute for Economic Research (IW), the University of Würzburg (JMU), Economics Ministries of North Rhine-Westphalia and Hessen, CDI, the Chinese Academy of Social Sciences (CASS), and the Shanghai Institutes for International Studies, discussed developments in industry and foreign investment of interest from a Chinese and German/EU perspective and identified opportunities and challenges for increased cooperation in the areas of industrial policy and foreign investment between China and Germany/EU.

Date: June 3, 2019

Venue: DIE, Bonn, Germany.

Host: CDI, DIE

Theme: Strengthening Industrial Alignment and Deepening Investment Cooperation

Program

11:00-12:30 Strengthening Synergy Of Industrial Policy Between China-Germany/EU

Sun Yanhong, Research Fellow, Institute of European Studies, Chinese Academy of Social Science

Cao Zhongxiong, Executive Director, New Economy Research Department, China Development Institute

Doris Fischer, Professor of China Business and Economics, Universität Würzburg

Q&A

12:30–13:30 Lunch

13:30–14:45 Removing Barriers To Investment Cooperation Between China-Germany/EU

Axel Berger, Head of G20 Policy Research Group, German Development Institute

Guo Wanda, Executive Vice President, China Development Institute

Pan Xiaoming, Research Fellow, Institute for World Economy Studies, Shanghai Institute for International Studies

14:45–15:00 Closing Remarks

Highlights

Promoting the upgrading of industrial cooperation against the backdrop of “re-industrialization”

The current external situation of China-German/EU industrial cooperation is undergoing changes. On the one hand, the European debt crisis has burdened emerging industries in Europe with “funding shortage”. This provides an opportunity for Chinese capital to enter the European market for strengthened cooperation on industrial production capacity and technology development. On the other hand, in recent years, China has come a long way in the transformation and upgrading of its manufacturing sector, becoming increasingly competitive in areas such as digitalization and information technology, as well as high-speed locomotive manufacturing.

Differences in understanding can easily pose an obstacle to China-German/EU industrial cooperation. Fundamentally, the EU industrial policy is market-oriented. Government policies encourage competition, promote innovation and technological revolution, and correct market failures caused by ill-guided coordination. The EU industrial policy emphasizes creating favorable conditions to enhance industrial competitiveness and opposes the strong intervention of government authorities. In the view of the EU, China’s industrial policy is more about the government’s support for specific industries with preferential market access and tax policies, with the purpose of facilitating the fast development of certain emerging industries so as to transform and upgrade the country’s industrial structure.

Compared with the German/EU industrial policy, China’s industrial policy still needs adjustment and transformation. In recent years, China’s industrial policies have been adapted to the requirements of the WTO and international standards. These efforts are reflected in the introduction of competition- and market-oriented mechanisms, more funding channeled towards basic science, generic technologies and SMEs, as well as the optimization of business environment.

Dealing with the main challenges of investment cooperation under new situations

The negotiations on China-EU Bilateral Investment Agreement launched in 2013 are considered to be the key to maintaining an open, fair and transparent business environment between China and the EU. Many core concerns of the EU, including the “competitive neutrality” of state-owned enterprises, dispute settlement mechanism for investors and host countries, regulations on environmental and labor sustainability, are issues that China needs to consider in future negotiations.

China should do its own job well and push for progress in negotiations. Firstly, China should improve market access for foreign investment by opening up even wider to the world. Currently, the potential “negative list” of the China-EU Bilateral Investment Agreement concentrated on certain sectors. China should propose a “reciprocal” list acceptable to both sides on the basis of the need and ability of domestic enterprises and its domestic industrial interests. Secondly, it is essential for China to respect “competitive neutrality” and support private businesses. Based on the principle of market access in the agreement, China can encourage competitive SOEs to compete with private and foreign-funded businesses in the marketplace, while exploring opportunities to cooperate with EU’s SMEs and enabling its own SMEs to play an important role in technological innovation. Lastly, China should seek to enhance alignment with the EU in intellectual property protection.