China's reform positively influence Sino-European relation: Chinese scholar

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China's reform positively influence Sino-European relation: Chinese scholar

By Marzia De Giuli, Song Jian (Xinhua) 08:18, November 18, 2013

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MILAN, Italy, Nov. 17 -- China's course for reform unveiled after the 3rd Plenary Session of the 18th Central Committee of the Communist Party of China (CPC) will have positive influence on the Sino-European economic relation, a Chinese scholar told Xinhua in a recent interview.

Under the reform plan, the market will play a "decisive role," which according to Ding Yifan, deputy director of the Institute of World Development under the State Council's Development Research Center and vice chairman of the China Society of World Economics, means that "fundamentally the economy will be run by the market, will be self-regulating."

"The government will withdraw from its intervention in the market," Ding went on explaining on the sidelines of a gathering of international experts in Italy's business capital Milan.

"The state-owned enterprises (SOEs) are still the backbone of China's economy," he noted.

Ding pointed out "there will be a healthy competition between private enterprises, SOEs and other structures of companies. We will try to make them compete on an equal footing, which means the government will not continue to provide some fiscal or financial advantage to SOEs."

He said the Chinese government is trying to promote economic growth by innovating institutions, which means "in the future foreign investors will face more stable investment environment."

"If you make investment environment more transparent, you can expect that more foreign investors will come to your market. In the past, the Chinese government tried to attract foreign investments with fiscal advantages. It will be different in the future," the scholar highlighted.

The good message for the European Union (EU), which is considered by China as a "crucial, strategic partner in the world," lies in China's will to find "some new incentive for its future economic development," Ding said.

"I am sure all these reforms put into practice will give some new momentum to Chinese development and growth, and if China can continue to grow healthily, it will provide big opportunities for European business," he explained to Xinhua.

The world's second-largest economy is "encouraging its firms to go and invest abroad" and "China's investment in Europe, especially in the eurozone, is growing fast, which is very helpful for the eurozone's recovery from the economic crisis," he added.

China is a big contributor to the stabilization of the eurozone's public finance. "Despite the pressures on some member states' debts, China is buying those debts," Ding said adding that as China is the country with the largest foreign reserves, its behavior has a "huge psychological impact on markets."

"Not as much the amount of debt that China could buy in the future, but rather its decision to continue to buy the European debt will give markets a signal that China will support the EU," he added.

Cultural understanding also plays a fundamental role, Ding stressed. "We need more communication. European countries should encourage more Chinese people to come to Europe and we should encourage the Europeans to go more often to China to observe its evolution and to find out why China will be very friendly to Europe and help its recovery.

The scholar was confident about the EU's "healthy though slow movement on the way towards solving the inner contradictions in its institutions."

He observed that the European debt crisis was triggered by some member states' accumulation of debts. "The European debt load is not as high as that of the U.S., and far less important than the Japanese one. So why Europe has been attacked but neither the U.S. nor Japan?" he said.

It was because "fundamentally Europe has some interior contradictions such as the existence of different ministries of finance and a unique central bank, which creates some 'free rider behavior' that causes much more domestic conflict," Ding explained.

In his view, in order to solve its problems, the EU has to move forwards for "a more unified fiscal policy, with the creation of a kind of European institution for public finance in order to supervise the member states' public finances that have to be in line with its monetary policy."