Looking ahead to the New Year

Editor's Note: Looking back on the year 2022, under the overlapping impact of "Black Swan" and "Grey Rhino", China-EU relations are still resilient in the chaotic, and bilateral economic and trade cooperation is developing rapidly. Over the past year, China-EU trade and investment have risen against the trend. The number of China-EU scheduled trains has reached a new high. The first 100 products from both sides under the China-EU Geographical Indications Agreement have been included in the protection list. A number of infrastructure projects undertaken by Chinese enterprises, such as the Pelješac Bridge in Croatia, have been completed and put into use. Last week, CCCEU reviewed the major events of China-EU relations in 2022. The year 2023 marks the 30th anniversary of the establishment of the single market in EU. This week, we will look ahead to the new climate in China-EU trade and economic cooperation in 2023 with you and share work guideline of CCCEU. Thank you for reading. For the subscription of bilingual version, please write to info@ccceu.eu. Happy New Year!

Last week, Ambassador Fu Cong, the new head of the Chinese Mission to the European Union, pointed out in an exclusive interview with the reporter of the South China Morning Post that maintaining and resuming contacts and exchanges at all levels between China and the EU, promoting practical cooperation, strengthening coordination and cooperation in dealing with global issues, and enhancing cultural exchanges are his priorities. It should be noted that, as two major forces for maintaining world peace, two major markets for common development, and two major civilizations for promoting human progress, despite differences in history, culture, level of development, ideology, and even different views on some specific issues, China and Europe do not have fundamental strategic differences and conflicts. Mutual benefits and win-win cooperation are in line with the common interests of China and the EU, and are also the fundamental for the stability of bilateral relations.

However, "long-term uptrend" can be overshadowed by "short-term twists and turns". Since the first half of 2021, China-EU relations, which used to be relatively simple and stable, have obviously entered a new period of adjustment (Feng Zhongping, 2022). In the EU's triple positioning of "partner, competitor and systematic rival" to China, the latter two have been consciously strengthened. Some EU practices aim directly to China, such as initiating sanctions against China for the first time in 30 years and freezing the China-EU Comprehensive Investment Agreement; Some practices are actually targeted at China and/or China may suffer serious negative impacts. These practice include the 5G security "toolbox", foreign direct investment review, foreign subsidy review, anti-monopoly review, corporate sustainability reporting, export control of dual-use items, international procurement instrument, and anti-coercion tools that have been intensively implemented in recent two years. On September 14, 2022, European Commission President von der Leyen said in her annual State of the Union Address at the European Parliament that, considering that 90% of the world's rare earths and 60% of lithium are processed in China, the European Union will copy the successful experience of the "European Battery Alliance" and the European Chip Act, promote the legislative process of the Critical Raw Materials Act, and seek the safety of the whole supply chain of key raw materials from extraction to refining and from processing to recycling, ensure that "the future of industry is made in Europe". In general, the EU often pursues the oriented diplomacy through environment, climate, human rights, sustainable development, etc. with trade and investment, tries to justify its trade and investment restrictions by demonstrating the rationality of these civil values, and then regularizes and legalizes them, thus concealing in essence its trade protectionism. From the perspective of motivation, on the one hand, these measures help to weaken the competitive advantage of other parties, including China, in key areas, and maintain and foster the EU's own industrial competitiveness; meanwhile, they are also conducive to its external promotion of its own values and political system (Cheng Weidong, 2021). According to the annual report of CCCEU, the business environment of Chinese enterprises in Europe has been deteriorating for three consecutive years.

However, the EU's adoption of the above measures also stems from profound and complex changes in the external environment and internal conditions. First of all, in the context of the continued downward and sluggish recovery of the world economy, the United States has employed unilateralism and protectionism by the industrial reshoring that began in Trump Administration to the Inflation Reduction Act and the Chip and Science Act signed by Biden Administration this year. By encouraging the localization of production links through subsidies, the United States has threatened the industrial competitiveness of Europe, thus triggering a series of chain reactions in the EU. At the same time, the spillover effect brought by the Federal Reserve's radical interest rate increase also affected Europe. The euro fell below parity versus dollar for the first time in nearly 20 years, significantly weakening the purchasing power of the euro zone. Secondly, the Russian-Ukrainian conflict since February this year has not yet showed signs of ending. On the one hand, it has posed a great challenge to the Eurasian geopolitical pattern, exacerbated the risk of "chain breaking" of the global industrial chain, forced all parties including the EU to put economic security ahead of efficiency, on the other hand, it has exposed the EU's energy dependence on Russia. The high energy prices driven by war, sanctions and alliances have made the EU pay more attention to "strategic autonomy" in the economic field, which is also one of the priorities proposed by the European Commission as early as 2019. In addition, the EU is also facing a growing crisis of division. The influx of refugees, one-way aid from the rich to the poor, and the wave of populism constitute the main centrifugal force of the EU's unified currency zone and the single market. Member States at different levels of development hold their own interests, which has significantly increased the difficulty of policy coordination and efficiency losses within the EU.

Frankly speaking, if these internal and external factors remain active, it is obviously difficult to forecast that China-EU relations will undergo structural mutation in the new year. However, it does not mean that the leaving the space for cooperation between the two sides is getting narrower and narrower. Instead, China-EU need to face reality, explore the depth of cooperation in a more pragmatic manner, and exert economic and trade cooperation as a "cornerstone" in bilateral relations. According to the press from China Belt and Road website, since December this year, business delegations from Hubei, Jiangsu and other provinces and cities, consisting of government business officers, enterprises and agency representatives, have gone to Europe to carry out economic and trade promotion activities. European enterprises have mentioned that the investment opportunities and market prospects brought by Chinese partners are too huge to be missed.

First, in the field of green economy. China has initiated the goal of achieving carbon peak by 2030 and carbon neutrality by 2060, while the EU has proposed the goal of achieving carbon neutrality by 2050 through the European Green Deal, and issued a "Fit for 55" emission reduction package, which aims to make the EU's climate, energy, land use, transportation and tax policies meet the goal of reducing net greenhouse gas emissions by at least 55% from 1990 levels by 2030, Specifically, it includes many new laws such as expanding the proportion of renewable energy, stopping the sale of fuel vehicles, imposing aviation fuel tax, and establishing carbon border tax. The strategic vision of China coincides with the EU in the field of green transformation and China-EU have great potential for cooperation. In December this year, the European Parliament and governments within European Union reached an agreement on the reform plan of the European Union's carbon emissions trading system (EU ETS), disclosed the relevant details of the carbon tariff bill, and determined that the carbon border adjustment mechanism will be formally implemented in 2026. In 2023, the European Commission plans to start revising the internal power market rules in the first quarter, exploring the proportion of railway travel in the second quarter, start revising the combined transport directive, promote the establishment of the EU Hydrogen Bank in the third quarter, initiate review the directive on road vehicle emissions and safety, and promote the revision of the REACH system and other rules on chemicals around the requirements of sustainability and zero pollution in the fourth quarter.

Second, in the field of digital economy. According to the China Digital Economy Development Report of the Chinese Academy of Information and Communications, the scale of China's digital economy reached 45.5 trillion yuan in 2021, accounting for 39.8% of GDP, more than double that of 2016; The scale of digital industrialization reached 8.4 trillion yuan; The scale of industrial digitalization reached 37.2 trillion yuan. In recent years, the EU has successively issued a series of development strategy outline documents in the digital field, emphasizing the multi-level and multi-angle comprehensive improvement of the EU's competitiveness in the digital field from the aspects of sovereignty, security and development. In 2022, the Council of the EU successively approved the Digital Market Act and the Digital Services Act, hoping to take the opportunity to break the monopoly of the American Internet economy giants, claim back European digital sovereignty, and enhance the international position of the European Union in terms of digital rules and discourse rights. According to the survey on Chinese enterprises in Europe by CCCEU in 2022, 70% of Chinese enterprises believe that in the long run, China-EU partnership in the digital economy will become closer. China and the EU have a solid foundation for cooperation in the process of digital development, and each side has its own advantages in development and application. In 2023, the European Commission plans to launch the legislative process for critical raw materials in the first quarter, review the single market rules for the digital economy, further expand and improve the use of digital tools and processes in company law, put forward the virtual world initiative (such as the metaverse) in the second quarter, launch the compulsory licensing of patents and standard essential patent (non-)legislative process, discuss the common European mobility data space, initiate the "digital euro" legislative process, In the third quarter, the legislative process of the hyperloop framework is expected to be launched, the river information service rules will be revised in combination with the digital development, and the digital label specification will be introduced into the textile label rules in the fourth quarter.

The year 2023 marks the 30th anniversary of the establishment of the single market in the EU. China is also pro-actively building a national unified market. By actively carrying out five high-level dialogue mechanisms, namely strategy, economy and trade, digital, environment and climate, and people to people and cultural exchanges, to coincide with China's "the Belt and Road" initiative and the EU's "Global Gateway" strategy, China EU relations are expected to add new highlights in the new year. On December 1 this year, Chinese President Xi jinping held the meeting with President Michel of the European Council and pointed out that "the two sides should strengthen the coordination of macroeconomic policies, strengthen the complementary advantages of market, capital and technology, jointly build new growth engines such as digital economy, green environmental protection, new energy, artificial intelligence, and jointly ensure the security, stability and reliability of the supply chain of the industrial chain", illustrating the prospects for China-EU economic and trade cooperation in the next year and further. In an interview with the media after the meeting, Michelle said that "open contact with China in all aspects is the only way forward", and disclosed that "the two sides agreed to continue to keep communication on the next EU-China Summit in 2023". Although it may be too early to discuss the summit, at this moment, the wintersweet in the northern hemisphere have diffused a faint fragrance, which hints spring is coming.

For the new year, always bearing in mind to serve the core interests of Chinese enterprises, CCCEU will focus on increasing contacts with Chinese enterprises around Europe, strengthen dialogue and communication with all EU stakeholders, continue to pursue to improve business environment for Chinese enterprises in the EU, be more vocal on behalf of Chinese enterprises, and resolutely safeguard the interests of Chinese enterprises in Europe.

(1) In line with bilateral agenda to better serve China-EU economic and trade relation

CCCEU will serve China-EU trade and economic cooperation and in line with bilateral agenda, actively promote China-EU trade and economic development by hosting China-EU business leaders' dialogue, entrepreneurs' dialogue, being more interaction with counterpart pf EUCCC offering more lectures and so on, promote exchanges between China and EU business communities, explore more channels for political and commercial communication, and help China-EU trade, investment and business relations develop steadily and further.

(2) Be more vocal on behalf of Chinese enterprises in Europe and safeguard their interests

CCCEU will take the annual flagship report as the starting point, expand communication with all sectors of the EU, and promote the optimization of the EU business environment. CCCEU will closely follow the progress of EU's unilateral economic and trade policies, such as the EU's 5G security toolbox, foreign direct investment review, foreign government subsidies, international procurement instruments, sustainable corporate governance, anti-coercion tools, and bank supervision, pay close attention to the dynamics of the EU-US Trade and Technology Council (TTC), and follow up China-EU legislation and cooperation in digital, green, economic and trade aspects, so as to speak for Chinese enterprises and fully safeguard the rights and interests of Chinese enterprises.

(3) Have more publicity by telling the stories of Chinese enterprises

CCCEU will use various platforms and channels to publicize the examples and images of Chinese and European enterprises in fulfilling their social responsibilities, which have benefited the local people. We will strengthen exchanges and communication with local European media to enhance their understanding of China through exclusive interviews and field interviews. Publicize the vivid practice of China and EU enterprises in economic and trade cooperation, and aim at mutual benefit and win-win results by releasing official data, professional reports and information bulletins.

The year 2023 is coming! Let's continue to "work together for our shared future"!

EU institutions agree on joint priorities for 2023 and 2024

On 15 December 2022, the Presidents of the European Parliament (EP), the Council and the European Commission (EC) signed a Joint Declaration on EU legislative priorities for 2023 and 2024. The declaration was signed by EP President Roberta Metsola, Czech Prime Minister Petr Fiala, for the Council of the EU, and Commission President Ursula von der Leyen.

The Joint Declaration sets out a shared European vision for a stronger and more resilient Europe in the face of Russia's unprovoked, brutal aggression against Ukraine and its wide-ranging impact, while at the same time tackling other serious challenges such as the climate crisis and economic headwinds and accelerating the twin green and digital transitions.

Spokesperson: China's COVID measures to facilitate cross-border travel, int'l exchanges

According to Xinhua, China's continual refining of its COVID-19 policies and its shift to managing the virus based on measures aimed at Class-B infectious diseases will better facilitate the safe and orderly cross-border travel of Chinese and foreign nationals and international exchange and cooperation, as well as being a boon for the global economy, a Foreign Ministry spokesperson said on Wednesday.

Boost of EU agri-food trade in September 2022

EU agri-food exports and imports are both on the rise in September 2022. EU exports have been increasing since the beginning of the year and reached €20.9 billion that month. The value of EU imports was €15.6 billion, which resulted in another positive trade balance for the EU at €5.8 billion. It is also the highest value in 2022. These are the main finding of the latest monthly agri-food trade report published on 21 December 2022 by the European Commission.

EU economy emissions in 2021: -22% since 2008

According to Eurostat, In 2021, greenhouse gas (GHG) emissions generated by economic activities of EU resident units stood at 3.6 billion tonnes of CO2 equivalents (CO2-eq). Compared with 2008, there was a 22% decrease.

What are experts talking about?

An interview with People's Daily on the new round of EU sanctions against Russia by Sun Yanhong, Researcher, Institute of European Studies, Chinese Academy of Social Sciences. Sun pointed out that the EU economy is on the verge of recession, the pressure on people's livelihoods is highlighted, protest marches are taking place, and the incentive for EU member states to provide military aid to Ukraine is waning. Recently, the Italian government has been forced by domestic public opinion to decide to suspend military aid to Ukraine. "In the future, as the economic and social situation in Europe further deteriorates, the space for EU member states to reach consensus on the issue of increasing sanctions against Russia will become even narrower."

Five Things to Watch in 2023 by Matthew P. Goodman, etc. After another tumultuous year in 2022 that upended some of our predictions this time last year, the CSIS Economics Program is ready to try again to make sense of the year ahead. Here are five things CSIS will be watching in 2023:

1. Global Economy: Global economic growth is likely to slow next year amid persistent, albeit probably moderating, inflation.

2. U.S. Economic Statecraft in Asia: Progress over the coming year in the Biden administration's Indo-Pacific Economic Framework for Prosperity (IPEF) will be a test of the White House's broader Asia and economic strategies.

3. Technology Export Controls: The next year will bring an expansion in the use of export controls as the Biden administration increasingly focuses on protecting and promoting critical technologies against the backdrop of intensifying strategic competition with China.

4. Infrastructure and Development Finance Policy: Global infrastructure will remain a core element of the Biden administration's foreign policy in 2023.

5. Climate Finance: Expecting strengthened efforts in 2023 to boost investment in climate mitigation and adaptation globally.

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.