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China Daily Globa

Countries must maintain trade relations based on mutual benefits, laying the foundation for positive development

The European Union summit, which took place about one month ago, and  one of the main topics for discussion was an assessment of the EU-China  relationship on several levels and the EU's strategy for the future.  However, geopolitical developments and developments in the world economy  "overruled "this intention and other issues took center stage. Two  weeks later, the NATO summit was held, focused on Sweden's accession and  the Russia-Ukraine conflict.

Today, the Russia-Ukraine conflict goes far beyond the conflict  between two neighboring countries. It has a significant impact on the  transformation of geopolitical power relations, the speed of the  realignment, the peaceful or conflictual mode of regional development,  in addition to its impact on the world economy. According to the Kiel  Institute for the World Economy, a German research institute, until May  31, 2023, the total amount of aid to Ukraine for various purposes was  about $180 billion. And the US alone gave more than $75 billion in  assistance, of which about 61 percent is military-related.

The past 20 years have seen changes in the global economy, with the  faster than expected emergence of globalization in supply chains, the  rapid spread of e-commerce, and the globalization of financial  transactions, which the US could no longer control or, in many cases,  influence as it wished. For example, with the emergence of cross-border  financial transactions, the related regulations remained at the national  level and could not follow the developments, which resulted in the  economic crisis in 2008-2009.Against this backdrop, a new factor  appeared on the scene: China.

At the same time, it became clear that the European Union as an  "entity" was unfortunately unable to play this role for a number of  reasons (a detailed description of which is beyond the scope of this  commentary). China has developed steadily over the past 20 years as a  result of economic policy decisions and reforms taken in the 1990s, and  this development has made the country the world's second-largest  economic power by 2010. However, it should not be overlooked that the US  and Western European multinationals have outsourced some parts or all  of their production to China, mainly for profit-growing reasons, as part  of their expansion. At the end of the day, the result is that the  interdependence of countries in the trade and services is now a fact  that must be called irreversible.

For decades, the US and the EU, as well as Western institutions, worked to strengthen the free international trading system.

However, the economic development of China has prompted an actively  protective response from Western countries, who are increasingly  reviving industrial policy as traditionally understood. It is an old  experience that "action is always followed by reaction", but in many  cases the reaction is greater than is necessary or justified. The US has  acted almost immediately by starting to provide substantial incentives  to support domestic production in a number of high technologies. In  contrast, the EU's various framework programs have overlapping areas of  application and very complex bureaucratic procedures for their  implementation. In recent years, the Western world has seen the return  of an active industrial policy to its economic policy vocabulary. This  180-degree turn may therefore reshape the EU's economic environment.

In my opinion, in the current complex and sometimes unexpected  geopolitical situation, the US wants to continue to exert pressure on  the EU and its member states, and as a result, events are taking place  on two levels: political and economic. Political statements and  resolutions often have primarily domestic political significance and aim  for short-term political advantage, but at the same time the economic  decisions of companies are motivated by rationality and economic  benefits that can be realized in the longer term.

Therefore, for example, German Chancellor Olaf Scholz said after the  EU summit that "there are also issues where China and the EU have  different positions, so it is important that we do not exclude such  issues in our negotiations. For example, on human rights." At the same  time, a number of large German companies have decided to establish  factories and production plants in China, for example, BASF is building a  $11 billion chemical factory in China, while they have closed a  fertilizer factory and a few other plants in Germany.

Finally, Europe can be reached from China by rail, benefiting Western  member states of the EU.The number of China-Europe freight train  services increased by 16 percent year-on-year to 8,641 trips during the  January-June period, according to the China State Railway Group. Some  936,000 20-foot equivalent units of goods were transported via freight  trains, up 30 percent.

In conclusion, I would like to quote Péter Szijjártó, Hungary's  minister of foreign affairs and trade, saying in an interview on the  occasion of the Summer Davos Forum in Tianjin this year: "Both  decoupling and de-risking would be a suicide committed by the European  economy." According to Eurostat, China-EU trade reached about 856  billion euros ($942 billion) in 2022, accounting for 15.3 percent of the  EU's total trade.

It is necessary to maintain trade relations between countries based  on mutual benefits, because this will move the world forward and lay the  foundation for the positive development of our lives.

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