China and the EU agree on tighter economic cooperation

BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/28

​While deeper economic ties were the theme of premier Li Keqiang’s visit to Brussels last week for the annual EU-China summit, talks were also launched on several fronts, including environment and visa issues. China would like to have practical cooperation with the EU on environmental issues. For its part, the EU said it was opening 15 new visa centres in China to ease Chinese holiday and business travel to Europe.

The biggest attention-getter was China’s decision to invest in the European Fund for Strategic Investment (EFSI). The decision was based on the synergy benefits arising from EFSI’s €315 billion investment package and China’s €38 billion Silk Road Fund. EFSI’s mission is to develop both infrastructure and communications and transport connections within Europe. The Silk Road Project aims at connecting Asia and Europe. The size of China’s investment in EFSI has yet to be announced, but could be in the range of several billion euros. China’s participation could also increase the willingness of other groups interested in investing in EFSI. China has also welcomed new foreign investors to the Silk Road Fund.

The EU has been China’s top trading partner for over a decade. After the US, China is EU’s second largest trading partner. Besides foreign trade, investment flows between China and the EU have grown rapidly in recent years, even if they still have a much smaller significance than trade. In 2014, the value of China’s EU exports was $370 billion and the value of EU imports $240 billion. Chinese foreign direct investment flows to the EU remained below $20 billion, even if it doubled from the previous year. Chinese FDI still account for only a few percent of all FDI received by Europe.

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