Take for example, Joaquín Almunia, European Commissioner for Economic and Monetary Affairs, who gave a speech – entitled: The European Economy and China Common Challenges and Shared Solutions – last week at Beijing's Tsinghua University.

This, let it be said, is more or less the exact same title for speeches given by all visiting European Commissioners, whenever they deem it appropriate to visit China.

We have published the full speech below as an example of how not to address a knowledgeable and engaged Chinese academic audience. In particular, here are three choice phrases that should be avoided:

-  "China is enjoying spectacular economic growth, expanding at around 9 per cent for the last two decades" – Why, on why, would you come all the way to China and risk any credibility you may have by telling people what they already know, and are actually told several times each day by state media?

-  "Since the EU's foundation 50 years ago, we have advanced to a high level of integration" – Note the second part of the sentence, which is a little presumptuous at best.

- Household consumption [in China] is now below 40% of GDP, one of the lowest rates in the world. With a shift to a more consumption-driven growth, households could enjoy higher levels of income and welfare, investment expenditures could become more efficient, the financial system could continue its modernization and reform efforts, and the current account deficit could be reduced decisively – Or, to put another way, "Do it our way, because we know
best. "

The full speech made byJoaquín Almunia is published below:

Ladies and Gentlemen,

It is a great pleasure to be in Beijing, and a particular honour to
address students of one of the world's most prestigious universities.

The EU is China's most important trading partner. We import more from
China than any other nation. But the relations between our countries
have moved far beyond the economic sphere. China is one of the very
few 'strategic partners' for the EU, and today we cooperate on a range
of political, social, environmental and scientific levels.

China and Europe have many similarities. The EU consists of 27 Member
States and we must contend with a level of diversity that here in
China is well known. Indeed, the variation of languages and traditions
among Chinese regions could be even greater than between the countries
of the European Union. For example, the difference between Mandarin
and Cantonese is greater than that between Spanish and Italian.

As major global actors, the EU and China recognise common aspirations
for social justice and economic development. We also face similar
challenges – both domestic and global. For example, our concerns over
an ageing population will be familiar to you here in China. Likewise,
an issue such as climate change is a matter for policy makers the
world over.
Today I want to focus on the challenges that we have in common and the
actions we are taking to deal with them.

China is enjoying spectacular economic growth, expanding at around 9%
for the last two decades. It is the fastest economic transformation
the world has ever seen. Such figures make it easy to forget that in
many respects China is a country in transition. This is a process that
Europe, especially the new eastern European members of our Union, has
recently experienced. Europe is also going through a period of change.
Since the EU's foundation 50 years ago, we have advanced to a high
level of integration. The best example is surely the creation of the
euro. Our European single currency is a truly impressive achievement
of economic integration. In less than a decade the euro has brought
macro-economic stability, created very favourable financing conditions
and emerged as a strong international currency on a par with the
dollar.

Let me start by discussing a problem we share in common. Population
ageing is a concern shared by policy makers in both China and the EU
and so there is a great deal of scope to exchange ideas and solutions.

In Europe, the over 65 population is predicted to increase by 77% by
2050. Of course, the increase in life expectancy which lies behind
this trend is very welcome. But there is no question that problems
will result from a smaller number of workers having to support a much
larger proportion of retirees. Projections indicate that, if no
actions are taken, our current potential growth rate could be cut by
half and that public spending on pensions, healthcare and long term
care will increase by 4% of GDP.

Likewise, China will experience very rapid ageing. The number of
Chinese aged 65 and above is expected to raise three fold between 2000
and 2050, bringing your old age population to 332 million. Providing
for this growing section of society will be a major undertaking for
China just as it is for Europe.

In Europe we have developed a three pillar strategy to cope with the
impact of ageing:

First, we are reforming our health and pension systems so that they
can be financially viable in the long term and provide adequate care
for future generations. Many EU countries have already made
significant changes to their pension systems and have raised the age
of retirement.

Secondly, we have to raise employment and productivity levels if we
want to meet the challenge of a shrinking workforce. Getting more
women and older people into work is key while greater investment for
innovation and R&D is essential to increase productivity and
competitiveness.

Last, public finances must be in good shape before the impact of
ageing takes hold. In Europe economies with high debt levels and
budgetary deficit have to reduce them fast.  Budgetary consolidation
in the medium term will make it easier to meet the public finance
sustainability.

In this respect, we are making progress in Europe, largely thanks to a
rules based framework put in place to support fiscal discipline.
However more progress is needed before we can declare our public
finances to be on a sound footing.
Ageing will hit our countries in different ways, both in terms of
timing and the nature of the economic impact. However, there is no
denying that the importance of sound budgetary policies and reforms
are universally valuable for coping with this challenge.

I am aware that China has to address the ageing issue from a rather
different perspective. Where Europe needs to make the current,
relatively generous, social security systems sustainable in the long
term, China's challenge is to build a universal, social safety net
that is generous enough to avoid excessive precautionary savings and
that will resist the shock of a rapid ageing of the population.

China will find the solution which suits her best. But when put on a
sustainable basis, universal pension schemes have proven equitable,
non-discriminatory, and cost-effective.

And, Chinese authorities may gain useful insights by looking at how EU
social security systems are structured as they move to create a
sustainable and possibly universal system of social protection.
Regional disparities in growth and income

I want to turn now to a second domestic challenge that we share –
managing regional disparities in growth and income. Since the latest
accession of 12 Eastern European countries to the EU, the economic and
social divergences within the EU have increased.

Indeed, I understand that the difference in income between Shanghai
and a province such as Gansu are even greater than between Europe's
richest areas, such as Paris and London, and the poorest in the new
Member States of Bulgaria and Romania.

Thus we both share a desire for a rapid catching up of our poorest
areas– for China, across your 31 provinces, and for the EU, throughout
our 27 Member States.

In Europe we place a premium on economic and social convergence. It is
essential for our Single Market and our Single currency to function
properly, and absolutely necessary for spreading opportunities and
alleviating poverty.
Our EU regional policy is a valuable instrument here and we have been
evolving its use in recent years to make it more effective. Our
conclusions resemble those of the Chinese 11th Five Year Plan - that
regional policy can trigger regional growth through investments that
target innovation, competitiveness and R&D as well as physical
infrastructure.

Indeed, we estimate that regional policy investments in Europe between
2007 and 2013 could create up to 2.5 million new jobs and raise GDP by
10 to 16%.
The amount of transfers to catching up regions of the Union is well
below the level of transfers that you find in most federal states.
Still, in many cases they have been very effective at accelerating the
development of some regions or countries like Ireland and Spain.

I will now devote the rest of my comments to global challenges.
Together the EU and China represent almost one third of the world's
population, and as major international players, we have a
responsibility to establish a peaceful, secure and stable world,
certainly not a job that one nation acting alone could ever hope to
achieve. The task of managing global challenges can therefore spur
closer partnership and stronger ties of cooperation between the EU and
China.

Energy and climate change is a case in point. Climate change threatens
economic activity and people's quality of life the world over. China,
like the EU, is a net energy importer and its energy needs continue to
grow in line with its economic expansion. As a world power that is set
to become the earth's largest emitter of carbon dioxide by 2030, China
has a large stake in addressing climate change.
The EU too bears an enormous responsibility for this issue. This is
why we have adopted a raft of measures to foster energy efficiency and
combat climate change. EU leaders have agreed to enhance the
functioning of electricity and gas markets in the Union; to improve
energy efficiency by 20%; to increase the use of renewable energies by
20%; and to reduce greenhouse gas emissions by 20%. We aim to achieve
these targets by the year 2020.

We are convinced that economic instruments are vital to achieve our
environmental and energy objectives in an efficient and sustainable
manner. In fact, the European Union has a good track record of using
market based and fiscal instruments to achieve environmental and
energy objectives.
The European emission trading scheme, for example, is the largest
multi-country, multi-sector, greenhouse gas emission trading scheme in
the world. We are currently working on the extension of this scheme to
other sectors like aviation, with a view to cover an even greater
proportion of CO2 emissions.

Instruments such as these have proven their effectiveness in Europe
and could be effective in other regions of the world. Given the
urgency and scale of the challenges we face, we cannot act alone. This
is why the cooperation established between the EU and China on this
issue is so important.

The Chinese leadership's commitment to increase energy efficiency by
20% in the current five year plan is highly commendable. I know that
the Chinese government is concerned about the impact of double digit
growth rates on the environment and so I am optimistic that a
post-Kyoto solution can be found that will balance China's economic
development with its global responsibilities.

The same spirit of responsibility and partnership should guide our
approach to the world economy. As China and the EU are key actors in
the international economic system, so global growth and stability is a
shared concern. And so long as current account imbalances pose a risk
to the global economy, they represent a common challenge.

Although the EU's current account situation is close to balance, we
are fully aware that, along with China and the rest of the world, our
economies would be damaged by a disorderly unwinding of global
imbalances. With this in mind, we have made considerable progress to
liberalise product and labour markets and to raise employment. A
package of reforms in financial services has accelerated the
integration of European financial markets, making them more liquid and
internationally competitive. In this way, we are working hard to meet
the commitments we have taken with our partners, China included, to
reduce global imbalances.

China's booming current account surplus is, together with the large US
current account deficit and the surplus from oil producing countries,
the biggest source of global imbalances. Therefore, China's
contribution to solve this problem will be crucial.

China's economic expansion is currently too dependent on growing
investment and raising trade surpluses. Household consumption is now
below 40% of GDP, one of the lowest rates in the world.

With a shift to a more consumption-driven growth, households could
enjoy higher levels of income and welfare, investment expenditures
could become more efficient, the financial system could continue its
modernization and reform efforts, and the current account deficit
could be reduced decisively.

Increased provision of health care and education, unemployment
compensation, and the expansion of the pension system could all
contribute to reduce the risk perception of Chinese households and
provide incentives to spend more. Further reform in the financial
sector, higher interest rates, as well as an improvement of
productivity and quality of investment are also needed.

In addition, a more flexible exchange rate policy would allow the
central bank to raise interest rates and curb investment – in the long
run this would help China to rely less on exports and more on
consumption and investment geared towards the domestic market.

I know that none of this comes as news to China. Authorities here have
already taken measures to strengthen social safety nets and the
education system, in particular in the rural areas, and the Chinese
government has pledged to reduce the current account surplus by
boosting domestic demand, reforming its financial system and gradually
changing its exchange rate regime.

Nevertheless, progress until now has been rather slow. The trade
surplus continues to rise strongly. A more vigorous approach to reform
is needed to prevent the current account surplus from expanding
further and to reduce the risks to the global economy. A concerted
effort to tackle imbalances would also send a clear message to the
protectionist forces that appear to be on the rise in various parts of
the world.  We must work together in this respect. A well functioning
global economy is not a zero sum game, but a win-win situation for
China, Europe and the wider world.

As EU-China relations move forward, we have much to gain from sharing
our knowledge and experience.  I believe we can draw valuable lessons
from each other's approach to tackling common challenges.

But our mutual interests do not stop there. The EU and China are both
dependent upon a stable and growing global economy. We both share a
fragile planet that needs protection. These are just two issues that
extend beyond national borders and which require a multilateral
response, I have not even mentioned migration, terrorism, organised
crime or the subject of African development today. As key global
actors, we have a responsibility to lead by example. This shared duty
serves as the basis for an effective strategic partnership between our
regions and an incentive for concerted action.

Last update : Friday, 21 September 2007

Keywords : Dalian, Summer Davos, Clay Chandler, Joaquín Almunia, European Commissioner for Economic and Monetary Affairs, European Union, EU

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