Oct. 26th, 2005

Article in "EU-China Special 2005" edition of ChinaContact by Prof. Dr. Markus Taube

"No Longer Passive Agents"

In the course of the last quarter century China has become a major player in the global economy and today seems to be on a trajectory towards even greater prominence. The dramatic rise of China raises reminiscences to the ascendancy of Japan to an economic superpower only a few decades ago. And just like then, the question arises in how far the economic viability and competitiveness of the European economies as well as the welfare of its peoples are in danger. Is there a win-win constellation possible or will China rather just take away European jobs, absorb the technologies and know-how of its enterprises and eventually push them aside or even acquire these very enterprises? Looking at some media reports, the latter outcome seems to have the higher probability. But let’s have a closer look at the realities of EU-China economic interaction.

China certainly does have a formidable starting position to challenge the established patterns of the world economy. Its supply of cheap unskilled labour seems unexhaustable while productivity is rising fast. With a savings ratio of 35-40% plus huge FDI inflows, the economy is anything but scarce of capital. Foreign investors enrich the economy with a steady inflow of new technologies and know-how. The institutional framework is highly business oriented and seems to have lost all relation to a communist ideology. And a large pool of highly committed entrepreneurs is taking up any business opportunity offered.

On the foundation of these assets the Chinese economy has risen to become the EU’s second largest trading partner, absorbing 5.0% of EU-25 exports (48.0 bn €) and supplying 12.3% of EU imports (126.7 bn. €). On first sight, there is nothing negative about this phenomenon, especially when taking into account that more than 50% of these export / import transactions are conducted with foreign invested enterprises located in China. I.e. a good deal of EU-China trade is conducted between European players and strengthens the global competitiveness of the companies involved...


You can find the complete article on page 8 and 9 of the "EU-China Special 2005" of ChinaContact.