BOFIT Viikkokatsaus / BOFIT Weekly 2017/23

The main themes at the 19th EU-China summit held in Brussels on June 1–2 were trade policy and environmental issues. However, differences between the parties prevented them from issuing a joint statement after the meeting. The EU says that China continues to give preferential treatment to its domestic firms, forcing foreign firms to submit to stricter regulation. The EU, in contrast gives Chinese firms relatively free rein in its domestic markets. China responded that the EU needs to stop withholding market-economy status now that China has completed 15 years of WTO membership. Moreover, China considers the EU's anti-dumping tariffs imposed on Chinese steel to be protectionism. The EU and China were more closely in agreement on climate issues.

Just before the summit, the EU Chamber of Commerce in China released its annual Business Confidence Survey. The findings support EU's claims that China coddles its domestic firms. For the fourth year in a row, over half of the survey respondents reported that foreign firms tend receive unfavourable treatment compared to domestic firms. In particular, firms reported barriers to investments and disproportionate enforcement of environmental regulations. The survey noted that implementation of the EU-China Comprehensive Agreement on Investment would relieve some of the problem. Even so, only 15 % of firms expect regulatory barriers to diminish in the near future, while 40 % expect the regulatory burden to grow heavier. Thanks to improved corporate profitability, the majority of European firms were more optimistic about the near future than in earlier surveys. The long-term outlook of the European firms, however, remained negative.