European Central Bank (ECB).  Source: Finbold

China, EU to hold high-level economic and trade dialogue: Media

EU to fund China study in Europe

Editor's Note: Welcome to the CCCEU Weekly Update! This edition will focus on fresh Sino-EU trade data, the EU's "Dealing with a Resurgent China" project, and key China-EU dynamics. Enjoy reading and have a restful weekend. 

Let us begin with the much-anticipated high-level dialogue. According to media reports, the ninth China-EU high-level economic and trade dialogue will take place on Tuesday via video conference between Chinese Vice Premier Liu He and European Commission Executive Vice President and Trade Commissioner Valdis Dombrovskis.

This mechanism on economic and trade talks was established in 2008, and the most recent edition was two years ago. At their April 1 summit, Chinese and EU leaders agreed to continue high-level bilateral talks in green and economic areas. Last Friday, the third high-level climate and environment dialogue was held.

Mr. Liu and Mr. Dombrovskis' meeting on Tuesday is expected to cover a wide range of topics, including global economic challenges such as food security and energy prices, supply chain bottlenecks, bilateral trade and investment issues, and financial services, attracting attention against the backdrop of increased uncertainty in the global economic outlook and the current geopolitical situation.

The bilateral talks will come in the shadow of downward pressure on both economies. The summer economic forecast released by Brussels on Thursday painted a challenging picture for the economic growth and inflation of the 27-nation EU and the Eurozone, which will soon include Croatia as the 20th member starting in 2023. Chinese official data, on the other hand, showed the country's economy grew 2.5 percent in the first half of this year.

In the meantime, trade between China and the EU has remained resilient. According to Eurostat, the EU exported 92.6 billion euros of goods to China in the first five months of this year, a 0.1 percent increase from 92.5 billion euros in the same period last year; and imported goods from China totaled 247.9 billion euros, a 73.1 billion euro or 41.8 percent increase from the same period last year.

Between January and May, China was the bloc's largest goods trading partner, followed by the United States. During the same period, EU exports to the US totaled 203.1 billion euros, a 29.6 percent increase, while imports totaled 134.9 billion euros, a 50.2 percent increase. The EU's trade with China was 2.5 billion euros higher than its trade with the US.

In Brussels, the European Parliament's international trade committee gave the green light to the just-concluded political agreement on the EU foreign subsidies regulation on Thursday. The text of the political agreement can be found here.

It is noteworthy that Brussels, recognising that there is a lack of Chinese research in Europe, has quietly launched the "Dealing with a Resurgent China" project, a 4-million-euro Horizon Europe initiative that brings together nine universities and think tanks from seven EU member states to advance Chinese research and serve as a resource for EU policy-making. The three-year project is anticipated to begin operations in November 2022, according to reports.

The project will be coordinated by Denmark's Copenhagen Business School and participated by another eight institutions including France's Asia Centre - Centre Etudes Asia and Fondations Nationale des Sciences Politiques、the Brussels-based Bruegel、Germany's MERICS and Ruhr-University Bochum、SWPS Universytet Humanistycznospoleczny in Poland、Universidad Autonoma de Madrid and Italy's Universita del Piomonte Orientale.

On the website of the project "Dealing with a Resurgent China," the Commission said China as a top tier great power is changing the world, and the EU needs to develop a long-term approach based on knowledge to engage strategically with "the resurgent and increasingly assertive China" as well as the global changes unleashed thereby, including the process of selective ‘de-coupling' and persistent US-China tension.

In the commission's telling, the project will cover key areas including society and culture, politics, economy and foreign policy. "Furthermore, this consortium will prioritise impact and dissemination for the EU, the corporate world, the media and the wider public across Europe. The building up of independent knowledge on a resurgent China will enable the EU to better deal with it."

Science|Business reported that the project will produce policy briefs, podcasts and seminars on China, among other things, "to make up for years of neglect in China studies across the EU."

EU politicians have been concerned for years that they lack insight into countries that have transformed themselves into global superpowers within 20 years, the report said, citing a 2018 report for the German government taking stock of China expertise, which pointed out far more resources were allocated to understanding the US than China.

"The funding for research and teaching on the US is huge, and China it's very small," Matthias Stepan, a research associate at network member Ruhr-University Bochum, was quoted as saying. This neglect could be "disastrous" for German understanding of one of its biggest trading partners, he warned.

In addition, the German Mercator Institute for China Studies announced its participation in the project, saying that one of the main objectives of this knowledge base is to provide European decision-makers with information needed to develop joint positions on policies vis-à-vis China in various fields. The consortium will receive funding of up to 4 million euros over three years and is reported to start its work in November 2022.

China's GDP rises 2.5% year-on-year in H1

According to Chinadaily, China's economy grew by 0.4 percent in the second quarter of 2022 compared with a year earlier to post a 2.5 percent growth in the first half of the year, the National Bureau of Statistics said on Friday.

Figures released by the NBS showed value-added industrial output, a gauge of activity in the manufacturing, mining and utilities sectors, grew by 3.9 percent in June from a year earlier after a 0.7 percent rise in May.

The NBS said China's economy is gradually recovering from recent shocks as a series of policies on stabilizing the economy took effect.

More efforts will be made to implement a package of stimulus policy measures and keep the economic operation within a reasonable range.

Euro falls below parity against U.S. dollar

According to Xinhua, the euro on Wednesday briefly slipped below parity against the U.S. dollar in intraday trading after data released by the U.S. Department of Labor showed that the Consumer Price Index (CPI) surged 9.1 percent from a year ago in June.

The exchange rate on Wednesday plunged to 0.9999 dollars for the first time since December 2002.

The U.S. inflation data, a fresh four-decade high, fueled investors speculation of further aggressive interest rate hikes by the Fed, which led the U.S. currency to strengthen, according to Der Spiegel, a German weekly news magazine.

Croatia set to join Eurozone 

According to the European Council, July 12, the Council adopted the final three legal acts that are required to enable Croatia to introduce the euro on 1 January 2023. This completes the process in the Council which will enable Croatia to become a member of the euro area and to benefit from using the EU's common currency, the euro, as of next year.

One of the three legal acts sets the conversion rate between the euro and the Croatian kuna at 7.53450 kuna per 1 euro.

EU Cuts GDP Forecast

The European Commission's summer forecast for the EU economy, released on July 14, projects that the EU economy will grow by 2.7% in 2022 and 1.5% in 2023. Growth in the euro area is expected at 2.6% in 2022, moderating to 1.4% in 2023. Annual average inflation is projected to peak at historical highs in 2022, at 7.6% in the euro area and 8.3% in the EU, before easing in 2023 to 4.0% and 4.6%, respectively..

"The upward revision in 2022 reflects mainly the strong recovery in the first quarter of this year. The weaker external environment and tighter lending conditions, combined with the weaker real wage growth, explain the downward revision for 2023," the EC said.

China's foreign trade saw a double-digit growth pace in June

According to Xinhua, China's foreign trade saw a double-digit growth pace in June, a positive indicator that the world's second-largest economy is recovering from the headwinds of COVID-19 outbreaks.

China's foreign trade growth accelerated to 14.3 percent in June, compared with 9.5 percent in May and 0.1 percent in April, showed data from the General Administration of Customs (GAC) on Wednesday.

"Overall, China's imports and exports showed strong resilience in the first half of the year," said Li Kuiwen, spokesperson for the GAC.

 What are experts talking about?

"The European (geo)political community and enlargement reform: Two important but separate discussions" published by EPC points out the recent ideas put forward by French President Emmanuel Macron and European Council President Charles Michel for a ‘European (geo)political community' mark the start of a collective reflection on how to expand the EU's geopolitical reach beyond enlargement. With war raging on the European continent, a global geopolitical race and "a tectonic shift in European history" underway, such proposals are timely contributions to rethinking how the EU should engage with its vicinity.

"Is Euro-Dollar Parity A Good News or Bad News?" published on Reference News on 14th of July combined the views of several experts and noted that a stronger dollar is good news for Americans considering a vacation to Europe or buying goods abroad. This could drive down the price of commodities such as food and may ease ongoing inflation. But experts say the euro's depreciation also hints at a slower pace of global trade, fueling fears of a recession.

Please note: the English version of this issue is slightly different from our Chinese one. The views and opinions expressed in this article do not necessarily reflect the official position of the CCCEU.