In 1978, after decades of isolation, China embarked on a journey of reform and opening up. Nobody at that time could have imagined how far-reaching this undertaking would be for China’s subsequent development. It was the starting point of a catching up process which is unprecedented in history and which has transformed China beyond recognition.
GDP per capita in 1978 amounted to 360 USD in terms of today’s prices. In 2017, it exceeded 8,500 USD, i.e. 25 times higher. From a country where according to World Bank estimates more than 800 million people lived below the poverty line, China rose to a nation with economic super-power status where extreme poverty has been all but eliminated.
There would be many more ways to demonstrate China’s transformation during these 40 years but the facts are well known and do not need to be repeated here.
As was to be expected, such a far-reaching was far from linear and smooth. It rather went in twists and circles, with phases and moments of acceleration, and others of slowing down and even reversals.
Initially, private and foreign enterprises were only allowed in a few special economic zones. After their large success, by the mid-1980s these zones were extended to more places in China’s coastal regions and, in the 1990s, to most other provincial capital cities.
This and other economic reforms, which were boosted through Deng Xiao Ping’s famous Southern Tour, had strengthened the economy significantly already by the mid-1990s. It allowed China to play an important stabilising role during the Asian financial crisis when it resisted the pressure to delink the Yuan from the USD.
Another crucial moment was China’s accession to the WTO in 2001 which was instrumental in expediting sweeping reforms of China’s state-owned enterprises sector under Premier Zhu Rongji.
WTO accession marks a watershed in China’s development. The changes China has undergone since then are enormous. Today, China is the country which exports more than any other country and it has the largest currency reserves in the world. China’s economy is now the third largest in the world after the US and the EU. China has also greatly improved its position in technology and innovation intensive sectors and is about to become world leader in some of the very advanced high-tech industries.
But on other accounts, China’s development after WTO accession was less encouraging. China’s trading partners had expectations that WTO accession would act as a catalyst for further market-based reforms, less influence of the state in the economy, and thereby fewer market distortions and better market access for foreign companies – or to pu it simply, to become a real market economy.
Commensurate with China’s growing role in the world economy, expectations were also that China would take gradually full responsibility and become a sponsor in driving forward the rulebook of international.
Many foreign actors had high expectation when the reforms of the Third Plenum, calling for a greater role of the market, were announced in 2013, after China’s leadership earlier had talked about China’s growth being “unstable, unbalanced, uncoordinated and unsustainable”.
Since then, progress on market-based reforms has been limited though. On the contrary, to many business representatives feel that the state’s grip on the economy has increased rather than receded.
The situation also remains unsatisfactory in the area of foreign investment, as China’s opening remains partial and selective. While Europe grants almost unlimited access to Chinese companies, European companies in China are still subject to rules which are incompatible with a transparent, open, and fair investment regime. In view of its rapidly growing economic clout, the argument that China is still a developing country is not convincing. Going global cannot be a one-way street under the disguise of a developing country status.
Ladies and Gentlemen, the world economy is currently going through a happy moment of strong synchronised growth. This owes much, in my view, to the reforms that have been undertaken in the aftermath of the Global Financial Crisis, both multilaterally, e.g. in the framework of the G20, and unilaterally.
In the EU for instance, we have doubled our efforts to reform and strengthen our institutions. We can now see the pay-off of these efforts as economic growth and confidence is firmly back.
In China, the growth performance also exceeded expectations, which was due also to the leadership’s efforts to tackle the major risk zones of the economy.
The favourable outlook for the economy constitutes an ideal background for China to move forward on market-based reforms and opening up. We are encouraged by the remarks of Vice-Chairman Liu He at Davos, where he announced China’s further opening up “across the board”. But I hasten to add that we have heard such announcements before, most prominently by President Xi Jinping himself in his Davos speech a year ago.
We would therefore hope that this time action follows the word. This would not only be beneficial for China’s trading partners, it would first and foremost be beneficial for China because it would greatly facilitate China’s moving up the value chain. At least this is the lesson I draw from China’s impressive economic performance which to my view owes much to the decision, 40 years ago, to open its markets to foreign capital.
We would also expect China to play a more prominent and responsible role in global economic governance in line with its economic weight. A strong commitment by China to a rules-based, transparent and open system would go a long way to give new impetus to the international system of trade and investment. This would not only be in the EU’s interest but also to the benefit of China and the global economy at large.
Let me conclude. I believe that the 40-year anniversary of China’s opening up is a good moment for strengthening the bilateral relations between China and the EU. A rapid conclusion of the Comprehensive Investment Agreement between the EU and China would be a clear signal that China intends to walk the talk.
There is a lot of common ground which would allow us to work together and propose common solutions to global problems. Climate change and the environment is just one among many examples where we can already clearly see the benefits of our cooperation.
The EU is also looking forward to deepening its relations with China on connectivity and seeking synergies between China’s Belt and Road and its own connectivity programme. We are ready to engage in a mutually beneficial partnership along the Silk Road on the condition that this is based on openness, transparency, interoperability, fairness and sustainability.
Last but no least we are looking forward to intensifying the cultural exchange with China in 2018, following the inauguration of the EU-China tourism year a few days ago.