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People's Daily Online>>Opinion

Expert: EU needs self-reliance and innovation

By Ding Chun (Global Times)

16:55, September 19, 2011

Edited and translated by People's Daily Online

Italy is reportedly asking China to buy its bonds in order to help it out of its debt woes. It is not the first time to hear the news that European Union (EU) member states ask for China’s help, but EU countries should not regard China as its sole “life-saving straw,” and must depend on innovation and systematic reform to get out of their current financial predicament.

The EU is facing with a series of structural obstacles including imbalance between fiscal and monetary policies, impacts of globalization and aging population, over-burdened welfare systems, ossification of labor markets, shortage of research and development vitality, as well as problems of effective power transfer at the national level and beyond. It is hard to resolve all these problems in a short period.

Externally, the global economic situation is not good. In contrast, China enjoys an economic growth rate of 9.6 percent, which is significantly better than Europe and the United States although it is still facing inflation pressure. This, in addition to its large volume of foreign reserves, has made China to be considered to “certainly” have the ability to provide assistance to others.

To help Europe is a win-win for China. As the world’s second largest economy, China has significantly integrated into the world economic system. All members are bound to rise or fall together. EU is China’s largest trade partner. China would be impacted if Europe faces economic recession as they are on the same boat. Moreover, to buy European bonds can help China disperse investment risks, promote diversification of foreign exchange reserves and add channels to maintain or increase the value of foreign exchange reserves. A stable euro can reduce the pressure of U.S. dollar as the dominant international currency and promote the stability of the international financial system. Therefore, China has showed repeatedly its confidence in and support to Europe.

However, China should get back normal returns on its investments while helping others.

Chinese Premier Wen Jiabao has urged the European Union to recognize China’s full market economy status during the just-concluded 2011 Summer Davos Forum held in northeast China's Dalian City. Europe has still set restrictions on its high-tech exports to China as well as on Chinese nvestments in the continent.

Although China is the country with the largest amount of foreign exchange reserves, it is only the fifth largest source country of outbound investments. Exporting goods before making outbound investments is a path undergone by developed countries and one of the means of China to balance its surplus in the current account. Europe should lower the threshold for Chinese enterprises’ investments there. Furthermore, simply insisting on RMB appreciation will undermine China’s exports, dramatically lift unemployment and slow down economic growth, which will not only hurt China’s economic development and social stability but also do harm to Europe’s economic recovery.

The words “collectivity” and “responsibility” mentioned by political leaders and entrepreneurs from various countries during the Summer Davos Forum have implied that each country must take their share of responsibility when stressing cooperation.

The European Union should help itself and solve its problems instead of just appealing for helps from China. China has just achieved industrialization and is facing unique structural economic and social issues of its own. The European Union must address the European debt crisis by mainly making self-sustained economic growth through dynamic systems and technological innovations, adopting a series of profound economic and social institutional reforms, including welfare reform, and promoting equal and close economic cooperation with all emerging economies.

Email|Print|Comments(Editor:刘晓宁)

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Whooper at 2011-09-2194.79.103.*
To help Europe is a win win for China. As a European I suggest you lecture us about the failings of excessive democracy. I am sure Chinese leaders have endured many lectures from us, it in not inappropriate. Greek democracy has utterly failed, and Italian democracy is not much better. What chance does Europe have on its current trajectory? None I guess. We need more professional management, and a few years of technocracy would be a good test. Please send that message, these Western leaders need to confront the political failings of democracy, as long as they remain blind to that we are all in deep danger.
  

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