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Trade and Economic Cooperation Between China and CEE countries(first parte)

Release Time: 2015-11-23 16:30:41   Author:Chen Xin   Source: 中译外   View Count:

The trade and economic cooperation between China and CEE countries enters into a new era. The latest 20 years showed different development path for CEE and China. CEE countries returned to Europe, and with the accession to the European Union their economies deeply integrated into the European internal market. China steady follows the Reform and Openness policy, and with joining to the WTO, China's economy successfully integrated into the global market and benefited from the globalization. The Financial Crisis brought shocks to the CEE countries, and they started the process to adjust their development path, try to attract more investment and explore markets beyond EU. China is facing the challenges of sustainable development, and along with the "Go-Out Strategy" China is searching the destination for its investment. The traditional relationship and new common interests could bring China and CEE countries together to further enhance the trade and economic cooperation.

 

An overview on China-EU trade

 

In order to have a accurate picture about the China-CEE trade and economic relations, we need to have an understanding on the China-EU dimension.

 

China had benefited from the globalization, which is especially represented in the trade figures. As Graphic 1 shows, China's external trade had experienced a very low speed development during the 1980s and 1990s. By the end of 1990s, China's trade had no less than 500 billion USD. After joining the WTO, the situation had been changed dramatically. We can see the very beautiful take off, both export and import had increased consistently till 2008. The Financial Crisis occurred negative impact for Chinese external trade, and we had a drop in 2009, but soon reached a recovery in 2010. By 2011, China's trade volume reached 3642 billion USD, with 1900 billion USD for export and 1743 billion USD for import. China becomes the second biggest trading country in the world, and biggest export state.

 

Graphic 1   China's external trade 1980 - 2011

In 100 million USD. Resource: China Customs.

 

Graphic 2.    China-EU trade 1980-2011

In 100 million USD. Resource: China Customs.

 

China-EU trade had a similar track, as shown by Graphic 2. China-EU almost traded nothing before 1980s, and after 20 years slow preparation, real fast growth started in the early 2000s. The bilateral trade volume passed 100 billion USD in 2003, and by 2011 it reached 567 billion USD, the highest record of the China-EU trade against the background of European Sovereign Debt Crisis going on. China's export to Europe in 2011 was 356 billion USD, and import was 211 billion USD. The growth rate for export is 14%, for import is 25%. The faster growth of import also means China's support for Europe to overcome the debt crisis.

 

Although China-EU trade reached the highest level in 2011, but we can see a slight decrease of the EU's weight in China's trade since the Financial Crisis, as shown in Graphic 3. The bilateral trade volume in 2009 took the highest share of China's external trade in recent 20 years, with 16.5%, since then it turns down, and in 2011 it was 15.6%. For China's export, EU's share reach the peak in 2008 with 20.5%, and also turned down since then. In 2011 it represents 18.7% of the China's export. For the import, EU's share had up-and-downs in the latest 20 years. In 1995 it reached 16.1% with the highest figure, and also it had 9.7% in 2002, the lowest. After a small increase in 2009 with 12.7%, it stabilized in 2010 and 2011 with 12.1%. The weight changes do not necessarily mean EU is less important for China, but mean China's trade expanding in other markets, which reflects China's multi-market strategy.

 

Graphic 3    EU's weight in China's external trade

 

For EU side, there is an interesting tendency happening. From the bilateral point of view, EU is China's biggest exporting market, and at the same time China is EU's biggest import resource. And if we put US in the picture, an interesting tendency appears, which is shown in Graphic 4 and 5. Based on the data from Euro Stat, for the share of EU's import, China obviously has a steady expanding, with 10% increase from less than 8% in 2000 to more than 18% in 2010. At the same time we can see that US share in EU's import is almost in a down turn, with 10% decrease from close to 21% in 2000 to near 11% in 2011. In 2006, China first time surpassed US and became EU's biggest import resource. On the other hand, for share of EU's export, in the latest 10 years, US share has been experiencing a similar 10% dramatic drop, from 28% in 2000 down to 18% in 2010. And in 2011 it is 17%. And at the same time, China's share in EU's export has a consistent expansion, from 3% in 2000 reached close to 9% in 2011.

 

Graphic 4    China and US in EU's share of import

Resource: Euro Stat.

 

Graphic 5    China and US in EU's export share

 

Resource: Euro Stat.


Graphic 6 provides a very sharp comparison on EU's trade with US and China. In 2000, EU-China trade was around100 billion Euro, and by 2011 it turns to more than 400 billion Euro. However, EU-US trade had some waves around 400 billion Euro in the latest 10 years. China's catching-up in trade is in a so fast pace, which leads China will soon become EU's biggest trading partner, and in the next 10 years China will be the EU's biggest export market.

 

What does it mean? It means that the trade and economic interdependence is going deeper and deeper. And also it means that it does not only China count on Europe, but also Europe count on China either. China does matter for EU.

 

Graphic 6     EU's trade with US and China (1999-2011)

In Million Euro. Resource: Euro Stat.

 

China-CEE trade and economic relations

 

China and CEE had a long traditional trade and economic relations. CEE countries are the first ones who recognized the PRC. During the socialist period, CEE countries had provided a lot of assistance to the China's economic construction and development, including equipments, technology, expertise etc. China also learned a lot from CEE countries on their reform theories and practices in 1980s.

 

Since the end of 1980s, CEE countries and China had chose different economic and social development paths. CEE countries turned to face to West and China turned to face the World. CEE countries declared back to Europe, and took joining EU as the priority. After 20 years, CEE countries had become the EU member states and their economy had deeply integrate into Europe. Some of the CEE countries have more 70-80% trade volume with EU markets, which shows the high dependency with the EU internal market. At the same time, China continue to carry out the Reform and Openness policy, especially after joining the WTO, along with massive FDI rushing into China, China had developed an export driven economic growth path. China became the world biggest export country.

 

China-CEE trade experienced a low pace in 1990s. When CEE negotiated with EU on accession treaty, China worried about the negative impact on trade relations with CEE countries, and even asked for the compensations. After CEE joined EU, as the EU's internal market is getting larger, it provided good opportunities for China to enter into EU via CEE. Since then, the bilateral trade between China and CEE back to a growth shape.

 

In 2011, China's trade with 12 EU's new member states (NMS: 10 CEE country + Malta and Cyprus) reached 54.3 billion USD, which takes close to 10% of China-EU trade and 1.5% of the China's external trade. China's export to 12 NMS is 41.2 billion USD, and import is 13.1 billion USD.

 

Table 1     China's trade with EU and 12 NMS in 2011

In 10 thousand USD. Resource: China Customs.

 

Before CEE countries joined EU, Hungary was China's biggest trading partner in the region. Several years later it was replaced by Poland. And since 2010 Hungary is down to the third place. By 2011, we have Poland leading the first place with 13 billion USD trade volume, follow with Czech Republic and Hungary whereas the trade volume close to 10 billion USD, and Slovakia and Romania are at the next group, more or less 5 billion USD. (Graphic 7)

 

Graphic 7    China's trade with CEE

In Million USD. Resource: China Customs.

 

On the export, Poland is the biggest export market for China in the region, with 11 billion USD in 2011. Czech Republic and Hungary are the second and third one, with 8 and 7 billion USD respectively. Romania is the fourth export market, 3 billion USD. (Graphic 8)

 

Graphic 8     China export to CEE

In Million USD. Resource: China Customs.

 

On the import, Slovakia takes the lead in 2011 with 3.5 billion USD, surpassed Hungary in 2010. The import from Hungary, Czech Republic and Poland is more than 2 billion USD each. Romania close to 1 billion USD. (Graphic 9) The reason of the sudden import jump from Slovakia is that German VW's plan in Slovakia started to export SUV and parts to China in 2011. Actually big European companies and multi-national companies play an very important role in the CEE's export to China, especially in the transportation sector. Not only VW's SUV from Slovakia and Skoda parts from Czech Republic, but also Audi motors and GM gear box from Hungary. The export of national products from these countries is very limited.

 

Graphic 9     China's import from CEE

In Million USD. Resource: China Customs.

 

Chinese investment to CEE region increased dramatically after these countries joined EU. As Table 2 shows, Chinese capital flow to CEE region in 2005 was only 5 million USD, took 2.8% of Chinese FDI in EU. Soon it increased to 18.7 million USD in 2006, and the share increased to 14.5% of the capital flow of the year. The Financial Crisis brought a drop in the Chinese investment in CEE, along with the general drop in Europe from China. From 2009, Chinese investment in CEE started to a rebirth, and only for one year in 2010, Chinese capital flow to CEE reached 416.5 million USD, 7% of the Chinese investment of the year to Europe.

 

Table 2     China's investment in EU and CEE (Capital Flow)

Note: Data for 2005, 2006 include only non-financial outward FDI stock.

Million USD. Resource: 2010 Statistical Bulletin of China's Outward Foreign Direct Investment.

 

On the capital stock, Chinese investment had a similar trend in CEE as capital flow (Table 3). In 2005, there was only 66 million USD Chinese investment in CEE. In 2010 it turned to 828.7 million USD, took a share of 6.6% of Chinese investment in EU.

 

Table 3     China's investment in EU and CEE (Capital Stock)

Note: Data for 2005, 2006 include only non-financial outward FDI stock.

Million USD. Resource: 2010 Statistical Bulletin of China's Outward Foreign Direct Investment.


Table 4 shows the country data on Chinese FDI flows to CEE. Hungary, Poland, Czech Republic, Romania and Bulgaria are the destination for Chinese investment. In 2010, these 5 countries almost absorbed the whole Chinese capital flow to the region, and Hungary itself took 89%.

 

Table 4    China's outward FDI flows into CEE countries 2005-2010, millions of USD


Note: Data for 2005, 2006 include only non-financial outward FDI stock.

Million USD. Resource: 2010 Statistical Bulletin of China's Outward Foreign Direct Investment.