{"id":92796,"date":"2016-07-12T14:39:32","date_gmt":"2016-07-12T18:39:32","guid":{"rendered":"http:\/\/countingpips.com\/?p=92796"},"modified":"2016-07-12T14:39:32","modified_gmt":"2016-07-12T18:39:32","slug":"why-the-eu-china-summit-must-succeed","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/07\/why-the-eu-china-summit-must-succeed\/","title":{"rendered":"Why the EU-China Summit must succeed"},"content":{"rendered":"
July 12, 2016<\/div>
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\"beijing_PD\"<\/a><\/p>\n

By Dan Steinbock<\/strong><\/p>\n

The annual China-EU Summit is a great opportunity for Beijing and Brussels to align complementary investment agendas. Failure is no longer an option.<\/p>\n

The annual EU-China Summit will take place in Beijing in mid-week. The high stakes are reflected by high-level participation, which includes the European Council President Donald Tusk, European Commission President Jean-Claude Juncker and Federica Mogherini, the EU high representative for foreign affairs and security policy.<\/p>\n

The Summit will be followed by another with G20 finance ministers and central bankers in Chengdu, Sichuan province.<\/p>\n

After Brexit, positive results are vital to both Brussels and Beijing. Success would contribute to brighter global prospects.<\/p>\n

The timing is opportune. The Summit follows last weekend\u2019s G20 meeting in Shanghai where trade ministers representing the world\u2019s largest economies agreed to trim global trade costs by 15%, to establish a new coordinated global investment policy, to ratify the WTO\u2019s trade facilitation agreement by the year-end and to extend a pledge to cut trade protectionism.<\/p>

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In the past half a decade, the plunge of the world trade has been painful to Europe\u2019s open trading economies \u2013 particularly after the UK Brexit referendum.<\/p>\n

Need for complementary investments<\/strong><\/p>\n

Today, China is the EU\u2019s second-largest trading partner and one of the biggest markets for the 28-member bloc. Last March, the debate over China\u2019s market economy status (MES) divided European countries and industries.<\/p>\n

According to Luxembourg\u2019s Finance minister Pierre Gramegna, China\u2019s huge \u201cOne Belt, One Road\u201d (OBOR) initiative to deepen economic links from Southeast Asia and the Middle East to Europe will be high on the EU-China Summit\u2019s agenda.<\/p>\n

Reportedly, Beijing is interested in looking into the \u20ac300 billion infrastructure fund in the EU and to eventually participate in the same way that many EU members have joined the Asian Infrastructure Investment Bank (AIIB).
\nMore importantly, in the aftermath of the UK EU referendum, the world looks very different, thanks to extraordinary economic uncertainty, market volatility and political risk. Financially, Brexit shock has boosted safe havens, including US dollar and Japanese yen, just as it has penalized riskier equities, British pound and the euro.
\nBut much more is still be ahead. As risk-averse investors are increasingly cautious with capital, Europe may have to cope with recessionary headwinds, increasing political division and ever-more volatile markets.<\/p>\n

Time is running out<\/strong><\/p>\n

Only a week ago, the International Monetary Fund (IMF), which is not known for superlatives, gave a bottom line warning to Brussels. The euro area is at the crossroads and there is no time for complacency.<\/p>\n

Despite recovery, the region\u2019s medium-term outlook is weak, if not bleak.<\/p>\n

In the current status quo, the kind of muddling through that has been the rule in the past half a decade is no longer an option. The UK has navigated to economic uncertainty. In France, reforms linger amid popular opposition. In Italy, a banking crisis could pave way for the next euro shock; Rome\u2019s constitutional referendum over Italexit. In such circumstances, Spain\u2019s expansion would splutter, while Germany\u2019s growth deceleration would materialize faster than expected.<\/p>\n

After Brexit, likely spillover channels (trade, investment and financial linkages) will virtually ensure that Ireland, Luxembourg, the Netherlands \u2013 Europe\u2019s traditionally open, free-trade economies \u2013 will be most exposed to the UK contagions.<\/p>\n

In contrast, Russia and Eastern Europe, along with France would be least affected by adverse spillovers. Further integration cries for collective action within Europe and accelerated cooperation with investment partners.
\nHowever, China is significantly less exposed to the Brexit. As Beijing has only begun critical financial reforms, it is not as vulnerable to British portfolio flows or bank claims as the US; except through Hong Kong.<\/p>\n

Nevertheless, Brexit pressures have potential to amplify discouraging trends in world trade and investment. World export volumes have been falling for half a decade. Foreign direct investment (FDI) has been stronger but it is not immune to new headwinds and remains behind the pre-financial crisis high.<\/p>\n

Higher stakes, new opportunities<\/strong><\/p>\n

In light of the Brexit, US election risks, immigrant turmoil, geopolitical threats and global economic downgrades, the EU-China Summit offers a high-level opportunity to reassess challenging issues, including the post-Brexit review of joint economic goals, Europe\u2019s need for investment capital, China\u2019s OBOR initiatives and new development banks (AIIB, NDB), and Beijing\u2019s quest for market economy status.<\/p>\n

New crises mean new opportunities. The UK\u2019s actual exit from the EU could reduce China\u2019s strategic benefits from deepening economic ties between London and Beijing, but it would elevate stakes and opportunities in China-EU cooperation. A post-Brexit UK remains important to China, but not as vital as a non-Brexit UK. A pre-Brexit EU is important to China, but a post-Brexit EU is critical.<\/p>\n

In an increasingly uncertain global economy, deeper cooperation between a recovering Europe, despite its medium-term challenges, and growing China, despite its medium-term deceleration, would pave way to greater stability, lower volatility and lesser risk.<\/p>\n

About the Author<\/em><\/strong><\/p>\n

Dan Steinbock is the founder of Difference Group and has served as research director at the India, China and America Institute (USA) and visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Centre (Singapore). For more, see www.differencegroup.net<\/a><\/p>\n

The original version was published by EUobserver on July 11, 2016<\/p>\n

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By Dan Steinbock The annual China-EU Summit is a great opportunity for Beijing and Brussels to align complementary investment agendas. Failure is no longer an option. The annual EU-China Summit will take place in Beijing in mid-week. The high stakes are reflected by high-level participation, which includes the European Council President Donald Tusk, European Commission […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-92796","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/92796","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=92796"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/92796\/revisions"}],"predecessor-version":[{"id":92798,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/92796\/revisions\/92798"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=92796"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=92796"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=92796"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}