EXCLUSIVE / Shi Mingde, China’s ambassador to Germany, spoke to EURACTIV Germany about trade relations with the EU, Market Economy Status and the planned economic development of his country.
Shi Mingde spoke with euractiv.de’s Editor-in-Chief, Ama Lorenz.
Is the perceived economic change of direction in China really the reality and if so, what will the consequences of it be?
We have entered a new phase of development in China. With a GDP of more than $10 trillion, we find ourselves as the second biggest economy in the world. But our economic model for the last decade was based primarily on the use of raw materials. The phase of double-digit growth is over. We cannot and actually do not want to grow in this way anymore.
How then will you achieve the 6.5% growth targeted by the Five Year Plan?
We want growth through more innovation, not through the use of raw materials. We want to move away from quantity towards quality and efficiency. As a result, the new Five Year Plan has the following priorities: innovation, coordination, ecology, openness and joint participation.
The Chinese government took the decision a while ago to restructure the economy and reinitiate a phase of consolidation and balanced growth. The over-producing, energy-intensive and polluting industries are going to be dismantled and abolished.
On the issue of overproduction, there are hundreds of thousands of European steelworkers who feel threatened by the Chinese steel industry. Are their concerns unjustified then?
First of all, China is always blamed for the overproduction problem. Steel exports from China to Europe, last year, accounted for 18%. Most steel imports, some 40%, come from Russia and the CIS nations.
China’s annual production totals 700 million tonnes and has a global market share of 46%, making it the largest crude steel producer in the world.
Nevertheless, the blame is misplaced. Everyone has a problem with overproduction. The Americans, the Europeans and us. The finger shouldn’t be pointed at us, but at the difficult economic situation the world still finds itself in. We’ve had this deterioration of the economy for years now. Demand has waned and caused problems for everyone, us included.
We have already been working on a programme of reducing excess production. Not just in the steel industry, but in the cement and glass-producing sectors. In the steel industry alone, the government has managed to reduce production by 90 million tonnes over the last five years. For the next half-decade, a further reduction of between 100 and 150 tonnes is planned.
When you consider that about 350,000 people are employed by the European steel industry and that several million are employed in the same sector in China, you can appreciate what this means for the Chinese people. Something still not being considered in Europe is that over a million people are going to have to be laid off.
So is that why innovation and ecology are on the agenda?
We committed ourselves at the COP21 climate summit to increase the share of renewable energies from 10 to 20% by 2030 and to reduce CO2 emissions by 60 to 65% per GDP unit. An emissions trading scheme is planned for the coming year.
They are very ambitious targets, which are linked to major challenges. Hundreds of thousands of factories will have to close and as many jobs will have to be compensated. 70% of China’s energy comes from coal. We have committed to building no new power plants and to modernising the existing ones. It means that the Chinese government has got big social problems to overcome, which have to be solved. We have no choice.
China’s environmental problems have become so severe that they are no longer just ecological in nature, they have become social and political problems. We can’t go it alone, so that’s why we need cooperation with the international community.
Presumably the government will be displeased with the European Parliament’s decision to vote against granting Market Economy Status to China then.
We are talking about two concepts here. For the past 35 years, China has successfully run a socialist market economy. The very concept of Market Economy Status was come up with by the European countries and the US. I ask myself what criteria the EU attaches to the granting of MES. I haven’t managed to find out what those criteria are or what the definition is. In my opinion, China already has a market economy status, whether granted to us by the EU or not.
Some European governments now fear what China’s reaction will be. How are things going to develop?
The dispute in the solar industry is a good example. Two years ago, the EU, without consulting with us, imposed punitive tariffs, provoking our government into taking countermeasures. As the situation threatened to escalate, both sides managed to find a compromise. This example should be followed with the problems currently facing us.
In 2001, China was classified by the WTO as a “non-market economy” by Article 15. This expires in December of this year. Can a compromise be found here too?
China and the EU came to an agreement on WTO accession 15 years ago. Now it’s about to expire and for us it is now a question of political credibility. Temporary problems shouldn’t derail the entire packet.
We are willing to talk about these current problems, which do not necessarily affect the entirety of a relationship. It’s a matter of will and ability now.
…and of having to do it probably.
We are all members of the WTO and are committed to the regulations. When we reach a difference of opinion, a complaint can be made within the framework of the WTO. The decisions of the WTO are binding on all of us.
So China would raise a complaint if necessary then?
We’ve been successful in some processes and we’ve lost others. We are interested in liberalising trade, open markets, fair competition and good economic relations with the EU. We’ve been working towards it for a number of years.
It’s only normal that difficulties and frictions crop up in the wake of rapid economic development. How will we deal with these problems is the real question.
That was the question.
We are all for talking and compromising, not protectionism or sanctions. The latter are signs of helplessness and lack of competition.