Finance and Pensions & Investments Blog

The European Union has gone to see an economic bonanza in China as a threat and adopt a protectionist position, as derived from the doctoral thesis of Maiza Andoni, an economist at the University of the Basque Country (UPV / EHU) has analyzed the political public adopted by the EU since 1978. The work raises a number of forecasts and recommendations for the future.

The thesis defines the strategy of the EU to China as “reactive and short-term” because of the lack of vision to its rapid economic expansion. When you lay the foundations for this expansion in the 80s, the EU is in the process of internal consolidation. Maiza explains that because this incident occurred a delayed reaction, “so early in the decade of the 90 European companies have a smaller presence in China than other powers.”

It is only then begin to implement mechanisms for cooperation, not responding to a predetermined, although it has consolidated the role of EU leadership in China during the last years of the 9’0 and early new millennium.

However, the EU has taken over the last five years a more protectionist against China. As explained in the research, European countries, especially those of greater technological (Germany, France, UK, Sweden and Finland), understand that China has benefited more from the EU than vice versa.

This is due to the slow pace of political and economic reforms expected by the EU and other world powers in China. Now “European countries face difficulties in accessing the Chinese market and insufficient protection of intellectual property rights, which means that Chinese producers are profiting from European technologies for controlled world markets,” the job.

A lack of security or increased competition?

Maiza considers that the EU’s protectionist policy with China is justified to problems such as dumping, lack of safe toys and drugs or counterfeiting. However, the economist asks whether this approach attempts to conceal some structural deficit of the European economy in managing the increased competition in the new international economic stage.

The thesis provides a greater rivalry between China and the EU in strategic sectors, and a possible greater role of protectionist policies. Maiza is recommended that the EU poses a strategy away from confrontational politics, which is the U.S. attitude to making the Asian giant. Due to internal problems that the proposed reforms could bring to China, the author of the thesis warns that his government will act slowly.

“The European public policy must focus on a few priority issues to demand and make a joint approach with countries that are not listed as threatened by China,” says the expert. It stresses the need for a common strategy across the EU, far from the practices carried out so far, in which some of the major European powers have acted unilaterally and cyclical.

The expert believes that the European economy may take a specialization course to meet competition from China. Specifically, “producing high-end goods in the case of products such as footwear, automotive parts, or providing after-sales services for industrial equipment.” Also considered feasible in the future the introduction into the Chinese market for European companies specializing in environmental and recycling technologies.

A report brought to our attention by credit card review site Credit Card Watch reveals that China’s economy faces persistent inflationary pressures as the Government seeks to achieve a stable and rapid economic growth, according to an official report.

“While the factors driving the prices stay up, will remain significant pressures on inflation,” China said in a report submitted to the World Trade Organization.

The document, which is part of a regular review of trade policy of China to the WTO, was released today but dated May 7 five days before the Beijing issued that inflation accelerated to 8.5% in April near its highest level in 12 years.

The Chinese premier, Wen Jiabao, said that inflation is still the most complex economic problem for his country, even when the earthquake that devastated the city of Sichuan last week has created new economic uncertainties.

The report to the WTO reaffirms Beijing to balance its economy a boost to consumer demand, rather than simply rest on investment and exports as engines of growth.

China noted that its currency, the yuan, had appreciated 13.3% against the dollar between July 2005 and late 2007. The pace of the currency rises accelerated this year, he said.

However, the document gave no signal on the future exchange rate policy. Critics of China in the United States and Europe say Beijing keeps artificially low value of the yuan to give an advantage to its exports in international markets.

The WTO has said that China would benefit by having a more flexible exchange rate, as this would allow you to fight inflation more effectively.

“A more flexible exchange rate could enable China to operate a more independent monetary policy, which would be adequate to ensure low inflation and stable”