The 15th Annual Global Conference of the International Finance Forum (IFF) was held in Guangzhou from November 24th to 25th. The theme of this year's annual meeting is "New Globalization - The Road to the Future - A New Type of Economic Globalization for Common Development."
Keynote Speeches
At the 15th Annual Global Conference of the International Finance Forum (IFF), "IFF Leadership Dialogue (No. 10): Dialogue with the former Chairman of the European Commission, former Portuguese Prime Minister Barroso", IFF Co-Chair, former Chairman of the European Commission, Portugal Former Prime Minister Barroso gave a keynote speech. In his speech, he pointed out that China-EU relations are rich in economic and trade aspects and share the experience of European economic integration. He believes that integration has its own structure and the world does not have to adopt the same approach. However, the successful experience of European countries in removing obstacles, establishing a fair market environment for investment and promoting trade will certainly benefit future development.
Barroso believes that for the EU, China's growth is an opportunity for global growth and prosperity. He pointed out that both China and the EU should bear in mind the overall goal of strategic relations and strengthen cooperation; not only must consider the interests of their own citizens, but also the interests of the other people's nationals and the interests of the world - because the EU and China are not only an important component of the global population. Part of it is also an important part of the global economy. This will not only benefit the EU and other Chinese partners, but also the global economy, and enable everyone to achieve a higher degree of integration in order to achieve their goals.
I was foreign minister of Portugal when we had the crucial moment of negotiations with China concerning the end of Macao’s transition to China. I was foreign minister until 1995. That's when I became more involved in relations with China. Since the 1980s I have been visiting this country and I've seen the remarkable development and modernization of China. Afterwards as prime minister, but also as president of the European Commission during two terms, from 2004 to 2009 and from 2009 to 2014, I was very much involved in what we called the dialogue and cooperation between the European Union and the People’s Republic of China.
We have structured cooperation between the European Union and China. In fact, the relations between China and our European countries are, some of them very old. As the European Union, we have diplomatic relationship with China since 1975. Now those relations cover around sixty sectoral dialogues and in fact it was adopted during my time in the Commission in 2013, the so-called strategic agenda for cooperation.
This year in July marked the 20th European Union-China Summit. We witnessed the highest level of two sides to attend the summit. From the People’s Republic of China is the premier or Prime Minister; from the European Union is usually the president of the European Union Commission, and the president of European Council.
I was also involved in the talks not only with my colleagues such as prime minister of China, but also with former president Hu Jintao and President Xi, who paid the first ever official visit to the European Union institutions in Brussels as the president of People’s Republic of China. I remember very well that very important occasion.
So we have a structured system of corporation between the European Union and China, a dialogue that covers many areas and it's in fact a dialogue that both parties ever declared strategic. It means we are covering issues of the greatest importance with a strategic vision over a long period.
The economical relations are extremely important. In fact, the European Union is the first trading partner of China. Usually people don’t refer to that because in the international statistics, we put this by countries and so you have the United States, Japan, Germany, France, UK… But in fact the European Union, in terms of trade, is a block. It’s, as you know, the European Commission that negotiates on behalf of all the countries of the European Union, today 28 countries. So we are, the European Union, are the first trading partner of China, and China is the second partner of the European Union. The first partner is in the United States of America in trade terms.
The trading goods is more than 1.5 billion euros a day, so it will soon be not very far away from 2 billion dollars a day. So we tell you how important it is in terms of volume, and not only volume, also in terms of the scope - because it covers so many areas and some of these goods are in fact already part of integrated supply chains.
So it's not the old concept of trade. Unfortunately, some people in the world's still think in the old terms of trade that we have one country that produces one thing and sells to the other – it’s not like that today. Today what happens very often is that one country exports some components to the other country that in fact afterwards come back to that country or to other.
So they are integrated supply chains and the European Union and China are becoming increasingly integrated. In fact, the last figures I have here, they are official figures of the European Union, the European Union has exported to China last year 198 billion euros of goods, and has imported from China 375 billion euros of goods.
So there is a surplus on China’s side, but in services, not on goods, there is a small surplus of the European Union in 2016. These are the latest figures I have. The European Union has exported 38 billion euros in services and imported 30 billion euros in services from China.
As you see, this is a very important, substantive economic and trade relationship. Today the European Union is negotiating with China what we have decided to call a comprehensive agreement on investment. I was still president of the Commission when we discussed that matter and when we decided to launch in 2014.
The reality is that at that time, we were discussing with China a possibility of a free trade agreement. Some European countries were suggesting the possibility of an FTA , but the reality is that in the European Union, there was no consensus for the FTA. We thought because of the different structure of our economies, because of many other issues that will still not yet settle including the issue of the recognition of the so-called market economy status of China - that was one of the difficult issues that we had to discuss very often between the European Union and the Chinese leadership. We said that instead of going immediately for an FTA, a free trade agreement, we should work first for a comprehensive agreement on the investment, because this agreement shall create level playing field for business and new market opportunities for both sides.
The idea was also from a European side to help support the economic reform of China. China, as you know, now be commemorating 40 years of that, has already defined its policy of opening up and reforms and the European Union was very supportive of that idea. So we thought that having a comprehensive agreement on investment, we could create good conditions for possibly further opening on both sides, including with more market access and market liberalization that shall create level playing fields.
For instance, one issue that is as far as important from a European perspective is the access of foreign direct investment. Just to give an example of very concrete, my country Portugal. In Portugal, the most important electricity company is now controlled by a Chinese company; the most important network of electricity distribution, the grid is controlled by another Chinese company; the most important private bank is, in fact, controlled by a Chinese group; the most important insurance company is also controlled by a Chinese group; one of the most important private hospital is also owned by a Chinese group.
So we are extremely to open in economic field. Just to give an example, that electricity company is the most important utility in Portugal. The Portuguese government has opened a tender. There was a Chinese company; there was a Brazilian, and there was a German company, Germany from the European Union. Among three bidders, the Chinese offered the best price, and today that company is in fact led by a Chinese company as well.
Would it be possible if it was the opposite way? If it was the European company having the control of a Chinese company? Let’s be frank and open. It will not be possible. Today, still today, even if there are already some announcements about deepening open-up, the reality is that in China this is not yet possible, namely, in the financial sector. So that is a very important decisions that for authorities in China and the Chinese people to make - are you ready to accept that level playing field in terms of direct investment? I believe that will be a very important positive think, because they're to remove an important obstacle in terms of the trade between different countries. In fact, some of the arguments today, of those who are trying to create more tensions with trade with China, is the fact that China does not create the level playing field, beyond other reasons from industrial policy to intellectual property rights and others.
So my point is that we should, and I believe that by the way, it's in the interest of China to grant more direct access of investment. If we believe that our economies should be more integrated, that integration is not only through the traditional mechanisms of trade, and the instrument should not only be the tariffs or quotas but also about direct investment, and of course, full rule of law, so predictable rules that protect also the investors on both sides.
EU doesn’t have the potential to give lessons to others but can share our experience. From the point of view, let me tell you the European Union, as you know was created after the Second World War, as the European Community. The idea was a political one; the idea was to make war a moment of countries of Europe impossible or unthinkable, but the means and strategy was through economic integration - that was the basic European concept of integration. The founding fathers of the European Union, from France, Germany and seven other countries, after so many years of terrible war, we were at the 20th century, as you know two terrible wars, it was just now we commemorate the 100 years of the end of the First World War. After so many years of war - terrible wars between different countries - the founding fathers said “let’s put the economies integrated” so that we make war impossible or even unthinkable. The reality is that since then in the western part of Europe - the former enemy like France and Germany - there was never a war.
Today if you go to Europe, people would think it to be unthinkable to have a war between our countries that are now part of the European Union. Some of them are countries that are very old, they exist for many centuries, like my own country as independent sovereign countries, but they decided to create this mechanism of integration, not only with the common market, also abolishing all types of frictions in terms of trade between European countries. There are no quotas, no tariffs. So a small company from Portugal can sell to Germany without any kind of obstacle, the same on the other side, but also because of the customs union and also integrated supranational measures for the countries of Europe, including a single currency. We have 19 counties within the European Union that share the same currency – the euro. This is the most advanced case ever of integration in the regional terms.
There are other cases of integration like in Asia, the ASEAN, but the reality is that in terms of supranationalism, there was never a case of such a level of integration, commercial investment, monetary policy, society, including redistribution policies where there is a budget that allocates big part to the poorest regions.
So it's a different construct. I’m not suggesting that now all over the world we should have the same model, not at all. But what I’m telling you is that European countries have the experience of removing barriers and having a level playing field for common investment, and to facilitate trade. And I think it is important for the future.
Personally I believe that the European Union has shown its resilience. I was president of the European Commission during the financial crisis, so I became president in 2004. Back there we were 15 countries, and when I left in 2014 we were 28 countries - we almost doubled the membership of the European Union during those years. As you know, those countries that were a part before of the so called socialist block that were in fact end of the control of the Soviet Union. Three of them were in fact part of the Soviet Union, the three Baltic countries, Latvia, Lithuania, Estonia, but also other countries that were part of the so called Comecon or the Warsaw Pact, including Poland, Hungary, Czechoslovakia that afterwards separated into Czech Republic and Slovakia. And there are countries that were former Yugoslavia, like Slovenia, and Croatia. All those countries joined the European Union.
And today we are 28 countries. Unfortunately I say, unfortunately because I think it was a bad decision the United Kingdom will most likely leave the European Union in next year and so we are going to be 27, but there are other countries that want to join the European Union as well.
But my point is this one, to put thinking perspective in a strategic manner. Even during that crisis that was the most acute financial crisis we had since the beginning of the European integration in the 50s, it was possible for the European Union to go from 15 to 28 members and there were more mechanisms for integration. For instance, today we have not yet complete, but we have a banking union. It was the initiative of my Commission. We create a single supervisory mechanism for the banks and financial sector in Europe and the single resolution mechanism for banks it may fail; and this was created precisely as the response to the crisis. It is through that sometimes it takes the crises for the European Union to advancing its integration, because only under the pressure of the crisis are the national leaders ready to make some compromises and to advance with common mechanism of integration.
I remember being in the G20 also with the Chinese leadership with the president at that time, and American’s president was president Obama, but also with presidents of all the other countries of G20. Many of our partners were thinking that the euro could collapse, and even that Greece was conceived as unavoidable because Greece was in a very difficult situation that Greece was going to leave the euro. It was the famous Greecexit.
Nothing of that sort happened. On the contrary, we have shown creating new instruments, instruments that we had not before like European Stability Mechanism. It's a kind of European Monetary Fund that is still now developing and being reinforced. We created new instruments and reality towards what it was possible to keep Greece in the euro, and euro is today the second global currency. This is because I think we have shown the resilience of the Europe Union and of the euro.
During that time, China was supporting the European Union and euro when many players in the market were expressing deep mistrust in the euro, and selling the bonds. But China was supportive.
I had, at that time, very instinct dialogue with the Chinese leadership. And the reality is that China was supporting euro, because China understood once again strategically that the euro would most likely be there to remain, would remain an important currency, and that it makes sense that China tells the world the importance to have European Union.
Now, is everything perfect between China and the European Union? Were there no problems? Of course there were problems and many problems sometimes, including in terms of trade, but there was one of the concerns we had, I am not speaking from myself. Every time there was a problem, our decision was to treat that problem in a more or less discrete manner, trying to avoid contamination of that problem to other areas of conflict. I think it's very important.
I think it's very important that in the international life, we avoid over-dramatization that we avoid a kind of a communication that only creates more problems for the future, because countries, at the end, our states, it’s a little bit like persons – we have also our feelings, we have our frustrations and prides; we don't want to lose our pride. So I think it’s not good to ever put international policy based on the sentiments of arrogance. By the way, all forms of arrogance are a form of stupidity. Every time someone's arrogant, it shows stupidity. So we should avoid all forms of arrogance, but also to avoid all forms of resentment. And it happens sometimes that we have difficulties and yet we have disagreements, but our opinion is - let's try to avoid that issue to contaminate others; let’s continue to positive aspects of our relationship. That's why I’m basically very proud of the results achieved during those years.
Now, could we do more? Of course we could do more, but some of these areas require, from my point of view, further convergence of use, keeping in mind the strategic purpose of the relationship. The purpose of the strategic relationship is of course to have good relationship between China and the European Union.
In European Union, we understand, at least that has been the vision until now, the growth of China as an opportunity for global growth and prosperity.
We sincerely admire what has been achieved in this country to lift hundreds of millions of people out of poverty. And we have expressed that privately and publicly to the Chinese leadership. Let me tell me also that the Chinese leadership also told us several times. I remember many contacts I had, for instance, with premier Wen Jiabao. Recently I visited Beijing, and he invited me for a dinner. Now he is retired, but we spoke about that period and the Chinese leadership also expressed the great respect they have for the factors that the Europeans were able to make a true reconciliation among former enemies.
Let's be frank about that was what the Chinese leadership told me several times. In Asia today, it's not yet done. Some of them, major players in Asia, have not yet made a true reconciliation after the terrible conflicts of the past. In Europe, the most important, Germany, France, the United Kingdom, Italy… I think today we can say there is a sincere reconciliation. So this is important to understand the overall context, and this is going to be very important for the immediate future because it’s about the general economy.
I think the economy is being going well, as you know this year has been, until last year, the last year has been good. In the last year, in fact it has been exceptionally good, because you have a situation where all the main powers on all the main poles of the economy development have been growing. We have been seeing a spectacular growth in the United States. To a large extent, that growth is disturbed by some kind of tonic that was the tax reform made by the current administration, but the reality is that the United States is growing in a spectacular way, much more than Europe. But Europe was, there is no country recession in Europe and Europe is growing moderately. It is growing, which is not bad for a mature economy like European economies, and some of our countries are in fact growing above their potential.
China is remaining a driver of global growth, which a spectacular growth. Even if you think that growth continues to be important, but the pace of growth has been slowing down a bit. Japan has been growing as well. Most of the emerging economies have been growing.
Now there are some clouds and those clouds appeared recently. We see some clouds in the emerging economies. We believe that the United States will not be able to keep that level of growth, and that there is also possibility of some slow down in the growth of China. By the way, if the trade frictions continue, that will most likely happen. That's why I think China, in next year, will be a great test of resilience of the China economy, because China, we have the experts on China, I’m not going to replace what they will say, but let me share very open my opinion.
I think that China is always to have to solve that very important situation, how to continue to keep sustained growth, without creating further debt, because the level of debt in China, as you know, is also been growing probably more than what the leadership would like to see.
I think that China is always to have to solve that very important situation, how to continue to keep sustained growth, without creating further debt, because the level of debt in China, as you know, is also been growing probably more than what the leadership would like to see.
We in Europe and myself, my analysis on China is that the key for China to continue to achieve those important levels of growth lies in structural reforms. China’s structural growth prospects lies with its commitment to push the market-based reforms. It's China’s reform commitment that in fact drives its long term prosperity.
I understand that that is exactly what has been said by the president of China, by president Xi that to remain committed to the reforms because it is those reforms that you can create increase productivity and most likely, be able to compensate some of the negative news that will come if there is indeed a backlash in terms of trade or international investment. So we are going to see a very important, here next year, we are going to try to avoid what I believe it's going to be almost unavoidable. We are going to see more market volatility, more economical volatility next year.
That is one additional reason I think for the European Union and China to work together in the spirit of openness and frankness and friendship, keeping in mind the overall goals of our strategic relationship and working together, having in mind not only the interest of our citizens, either European citizens or the Chinese citizens, but also the interest of the world, because together the European Union and China represent a huge part not only of global population but also of the global economy.
It will be good for the global economy including, of course, other partners that the European Union and China continue to cooperate and achieve a higher degree of convergence around these objectives.
Comments and Opinion
Moderator: Thank you very much, Mr. Barroso. I also want to know some of our other guests' opinions and opinions on our topic. Let me introduce, first, our guest is Mr. Chen Wenhui, deputy chairman of the National Social Security Fund Council, Mr. Chen. The second is Mr. Zhu Xian, the deputy governor of the BRICS New Development Bank. We also have Mr. Liu Wei, the deputy general manager of China Investment Co., Ltd., Mr. Nie Qingping is the chairman of China Securities Finance Corporation, and Martha Wanderberg is the CEO of the former Pacific Pension Association. This is Mr. Hu Weixing. He is a professor of politics and public administration from the University of Hong Kong. I am very grateful to all of you for taking the time to participate in our discussion this afternoon.
I think I will ask a question first. I would like to ask you some basic opinions. For example, it takes 3 to 5 minutes to briefly introduce some of your ideas. I would like to ask Mr. Chen Wenhui first. Can you tell us about China's current economic development and China's economic outlook? What are your general views?
Chen Wenhui: Thanks to the moderator. I'd like to say that Mr. Barroso made a very good keynote speech just now. I want to take this opportunity to ask Mr. Barroso two questions. As Mr. Barroso said just now, China has goond relations with the EU and countries in Europe. I just visited Mr. Barroso’s motherland, Portugal, in July this year. I think it is a very open country. The people of Portugal are very friendly. Many Chinese institutions have bought companies in Portugal, including the power, banking and insurance companies as just mentioned. At that time, I was still working at the China Banking Regulatory Commission. Some of the acquisitions that I did not know were already completed, so I think that the China-EU cooperation is very good.
The two questions I want to raise, the first one is about Brexit, which poses a big impact on the EU. Merkel’s time as a prime minister in Germany is long, but there may be some changes in the near future. We know that countries like German and France play a very dominant role in the entire EU, including Merkel. I personally admire her contribution in this regard. I would like to know your opinions of the movements of the EU in the context of Brexit. The second question is about the relationship between the EU and the member states. I think it is still quite complex. When I wae engaged in financial regulation, I often feel that some things may have to be discussed with the EU; and some things have to be discussed with member states. I think that if the EU integrates more closely in this respect, it may be also enhance the relationship between China and the EU in the future. I would like to ask Mr. Barroso about the future of the EU. What's your take? Thank you.
Barroso: Thank you Mr. Chen, I care about my country so much. Thank you very much. We are very open. I think the Brexit is a good thing. It is a good thing for the EU. Of course, we have to look at it. The British made their own choices, and we respect their choices. Britain is the most important member of the European Union before, and it is also a big country and one of the UN members. It also has its military power, including nuclear weapons. It is one of the most used languages in the world, so its influence on the world, its impact on the economy, investment, diplomacy and finance between the EU and beyond the EU is enormous. The capital market is also a very important part of the EU. Sometimes, from a certain point of view, I also miss the time when the EU had Britain, but now the country is leaving. We don't know what will happen in the future. I don't even know what will happen tomorrow.There will be a meeting tomorrow in Brussels on November 25th. We will sit down and talk to the UK with 28 member states. We will sign an agreement related to Brexit when we talk, because the EU decided to let it go. But we also made some predictions. I told a year ago what was the difficulty of a true Brexit. It is easy for our 27 member states and the European Union to sign this agreement, but it is not easy for the UK itself to reach an agreement. Because you can't even agree on a consensus in their own, for example, the current negotiations themselves are very separate, and the government is a separate state. Then some people even resigned, because they themselves do not support the government's practices. In fact, they emphasize democracy in the UK, and their own Congress is still very strong.
At the parliament level, we must first reach an agreement with our EU-27 member countries. First, we must reach the approval of the British Parliament. However, it has not approved it, and we don’t know whether they will approve it or not. There are a lot of uncertainties related to Brexit. Based on my own experience, the EU and the UK might sign a certain agreement. Both sides, the United Kingdom or the European Union, now both sides understand that we are in need of each other. I have said it many times before that there is no country in the EU that is so important like the United Kingdom. But for the United Kingdom, no international relationship will be one like it with the EU. We can make some arrangements. Economically speaking, in terms of security, research and other areas, we can sign the agreement separately, and the UK and the EU can still be as close as possible just like the previous close relationship. Like some countries, they are not members of the European Union, but they have a close relationship with the EU, such as Switzerland. We have three partners in trade, the first is the United States, and the second is China. Switzerland is the EU's third largest trading partner, so it is important to us, even more important than Russia. These partners are very important. Of course, to answer your question, I don't know exactly what the future relationship between the EU and the UK will look like.
At the parliament level, we must first reach an agreement with our EU-27 member countries. First, we must reach the approval of the British Parliament. However, it has not approved it, and we don’t know whether they will approve it or not. There are a lot of uncertainties related to Brexit. Based on my own experience, the EU and the UK might sign a certain agreement. Both sides, the United Kingdom or the European Union, now both sides understand that we are in need of each other. I have said it many times before that there is no country in the EU that is so important like the United Kingdom. But for the United Kingdom, no international relationship will be one like it with the EU. We can make some arrangements. Economically speaking, in terms of security, research and other areas, we can sign the agreement separately, and the UK and the EU can still be as close as possible just like the previous close relationship. Like some countries, they are not members of the European Union, but they have a close relationship with the EU, such as Switzerland. We have three partners in trade, the first is the United States, and the second is China. Switzerland is the EU's third largest trading partner, so it is important to us, even more important than Russia. These partners are very important. Of course, to answer your question, I don't know exactly what the future relationship between the EU and the UK will look like.
Germany is very strong, and it has a willingness to work with the EU. There is another problem. This problem is even a bit complicated. That is, the relationship between the EU and its member states is very complicated. Because there are so many member states, and our culture is different. We have more than 20 official official languages in the EU. We need translations between different languages. We have a centralized authority, but not like that in the Soviet Union - they had a central center so that they could concentrate this power. Every country in the EU has its own freedom. What have we done? We decided to integrate some aspects first. For example, we will integrate the trade first. This is what the EU is doing now. The competition policy is also completely integrated, which is also decided by the European Commission. It is true that each country has its own capabilities, such as education, health insurance, health, etc. All countries have formulated their own policies. We have also discovered that it is actually very difficult in the EU.
Consensus is difficult to achieve, it is a very complex issue. The EU is not an international organization like the United Nations, because we have supranational power, and the EU law is completely effective in every member state. When I was the president of the European Council, I would not receive instructions from any country, like my own country, Italy, France, Germany, I would not be instructed by any of them. It is an independent institution, but at the same time we also have member states - our member states are the owners of the EU and they created the EU. Therefore, the EU is not a traditional international organization, but we are not a country. For example, we are not a European federal state. I have a story. I used to see President Obama. He asked me why you don't do such a project like the US. That is, to make them integrated and centralized. I said that because we are not the European Union - we have to gradually achieve these goals based on consensus. Therefore, we must remember this point. We are not a traditional international organization, and not independent countries like the United States, China, Russia, and India. We are such a subject. Our foundation is to share sovereignty in certain areas, not in all areas. I think it is very complicated, but in the end it is effective.
Moderator: Thank you very much. I hope he answered Mr. Chen's question. I am going to invite Mr. Zhu to share your views, thank you.
Zhu Xian: Thank you very much today for hearing Mr. Barroso talk about the EU, including the cooperation with China. I think there are two things I want to discuss with Mr. Barroso. The first is about the EU itself, as he said, who has slowly evolved from the beginning after World War II, to 27 member states now, if excluded the UK. This process also reflects the importance of reaching a consensus to cooperate. At the same time, he mentioned another point, that is, this process is a gradual process.
I want to ask two questions. The first question, this year is 40 years of China's reform and opening up. The cooperation between the EU and China is an important aspect. But China's process of reform and opening up is also a gradual process. Just now Mr. Barroso mentioned that he hopes during the reform process, China will continue to be market-oriented in the future. That is to say, from the perspective of the EU's own history, China's reform and opening up is indeed a gradual process. So you can't be too hasty.
Second, in the process of absorbing the new member states of the European Union, some new members came from Eastern and Central Europe. They used to implement the centrally planned economy in the past, which is similar to what China implemented 40 years ago. I would like to ask Mr. Barroso, in the process of their negotiation into the European Union, in the middle of their economic transformation process, what kind of expectations and requirements the EU has given them, so that they can become EU-approved for entering a European market as a market economy country. Thank you.
Barroso: Thank you very much Mr. Zhu. I understand your opinion. You talked about this policy. China's reform and opening up is gradual. I fully understand this. We also respect this very much. I personally believe that step by step is better than a subversive change. I believe in reform, but I don't believe in revolution. When I was young, I believed in the revolution, but I now believe in reform more. But we must remember where our direction is. Our strategic direction must be clear. Later, when you talk about the conditions, what is the condition for the EU to absorb new members?
There are three conditions, that is, the Copenhagen condition, because it was adopted at the Copenhagen Summit. When a country joins the EU, first of all, it has to be a democratic country. It must have the rule of law, respect for human rights, and have judicial independence, equality between men and women, respect for ethnic minorities, etc., this is a series of conditions. I think they are defining whether you are a democratic country, so this is a political condition. My country, Portugal, became a democracy one after 74 years. We used to be a member of the European Free Trade Area, but we were not an EU country 74 years ago, because the EU only absorbed democracies.
The second point is that you need to have a competitive market economy. It must have the ability to become a fair market economy. Third, you have to accept all EU laws and our institutional rules. You must adopt them and implement them through your administration or through your justice. So basically speaking, this is the three conditions.
First, political, second, economic, third, rule of law.
All of these countries have promised to implement these reforms. In the end, they are considered ready to join the EU. Of course, their level of development is different. You all know that their GDP is also different. Countries in the EU like Luxembourg are relatively wealthy, but Bulgaria and Romania are relatively poor, but in fact their conditions are the same. I want to reiterate that we are not a country, we are different countries, and our conditions are different. But these countries ultimately have to meet these same conditions. Of course, there is now such a debate in Europe, that is, some people are worried that the rule of law in some countries may not be perfect. We are discussing such issues now, and I hope that through this discussion and consensus realization, these concerns will be resolved.
Moderator: Thank you very much Mr. Barroso. Next, Mr. Liu, I want to ask you, from the perspective of China's largest national sovereign fund, what do you think about this problem?
Liu Jun: Thank you. As China's sovereign wealth fund and one of the world's largest sovereign wealth funds, our problem now is that we now need to find opportunities for us to invest in the world, especially in Europe, because of the globalization of this activity. Of course, we now have some challenges in terms of policy and sensitivity. But as a financial investor, as a strategic investor, we do have a lot of investment in continental Europe, as well as in the UK. So far our financial results have been good. We are now promoting cooperation between bilateral and multilateral and local partners to invest in the future, not just in the government. We also want to discuss with local partners, such as investment banks, etc. to see where we have better opportunities, a better future, better investment opportunities, so that one of our methods will be at CIC as a basic method.We want a good ecosystem for all our partners, not just for our own financial interests.
Moderator: Thank you. I would also like to ask, have you noticed, that is, when you were looking for this opportunity with some partners in Europe, did you find that this ecological environment has changed?
Liu Jun: Compared with the United States, the changes in Europe are actually controllable. Because the voice of the US Foreign Investment Management Committee is getting higher, of course, in the context of the current trade tension between China and the United States. Now there are some policy obstacles in Europe, especially about direct investment, because some governments are worried about the security of the country. But the problem is that as an investor, we are sovereign wealth funds, we are not such investors. We are not targeting sensitive departments. For example, the national defense. On the other hand, we can cooperate with local companies, and all the main players in the market. In other words, we can use this method to reduce sensitivity to a relatively low level politically. We want to find financial returns, and our goals are very clear, we have to deliver our goals very clearly and achieve it.
Moderator: Thank you. Mr. Nie, can you share your opinion with us and if you have any questions, you can ask for it.
Nie Qingping: Mr. Barroso just talked about China and the EU, as well as the development of the EU, and the market economy. I will not mention other issues for the time being. I think there are two reasons for the international economic situation and possible impact. The main factors may affect next year or longer.
The first factor may be the trade friction between China and the United States. The trade between China and the United States is mutually beneficial and win-win. But the United States has provoked this trade war, and most media now seem to have discussed more about the impact on China, but few on the United States. So I want to talk about it in this regard.
First, I think that the trade war is actually very harmful to the United States. For 40 years since the reform and opening up, the United States has actually taken up a lot of benefits in China-US trade, not a loss. As mentioned earlier, a study conducted in American trade shows that 70% of GDP growth in the United States comes from consumption. And perhaps 70% of this consumption is from Chinese goods. If you go to Washington, you can see that most people in Washington Square usually have 3 to 4 Chinese in 10. 70% of the goods are made in China. China makes great contribution to this consumption. In the past 40 years, the United States has used the international division of labor and utilized the Chinese labor force. China’s labor force is relatively cheap. The hourly wage in the United States is 28 dollars, while may be less than 10 dollars in China. This is an important factor. So it is not the United States that suffers, but China suffers. In the past 40 years, the United States did not feel the threat, didn’t talk about China’s unfairness. Then suddenly it said this is wrong. In the United States, if the Chinese goods increase the tariff by 25%, it would equal to the US product price increase of 25%, which will cause inflation in the United States, and at the same time it will be a big blow to the consumption. Statistics show that 80% of Apple's mobile phone assembly is completed in China, and 20% of the global sales of Apple's mobile phones are done in China. That is to say, one-fifth of the US mobile phones are sold to overseas markets, their Chinese investors. Sales of Ford, Chrysler, and GM in China accounted for 33% of global sales. Including trade in services, so the United States has gained enormous benefits from China. When it comes to this issue, actually the United States is taking advantage of the trade. If we are studying the international economy, we can only think that the long-term logic of the Western countries, such as the United States, to treat developing countries is to restrict and prevent China’s economic growth. This can be seen through two ways. If you are a trade-dependent economy, trade wars slow down your GDP growth, and bring a substantial financial crisis. Second, if your GDP slows down, if there is a structural bubble and asset bubble in your system, or if there is excess production capacity, it will also bring about a financial crisis.
So I once summed it up as the financial crisis trap of developing countries. Western countries are also familiar this issue. You can see this shadow from the Latin American financial crisis and the Mexican tequila crisis. If China-US trade disputes continue, it is not beneficial to the United States and the global economy. Our relation with the US is essentially a mutually beneficial and win-win relationship. I feel that the United States should be worried about the bigger impact on the global economy. We hope that we can sit down and talk about it between China and the United States. This is the first factor that has affected the global economy.
Second, the factors affecting the global economy next year are very important to the United States. The United States has not resolved it. If you go to see it now, Americans say that Chinese people should not invest in the US. You should go to see the three major indices of the United States. Nasdaq is already 48 times PE, the US has a price-to-earnings ratio of 24 times, and the market value of the US stock market has increased by 50%. That is the top ten companies, Apple, Adidas, etc., their market value has risen by 1 trillion dollars, so its bubble has not been resolved. In 2008, the United States adopted a zero-price policy. More than 8,000 gold and 100 billion dollars were prepared as currency in currency circulation, but how much has it increased since 2008? An increase of 3.5 trillion acquisitions of toxic assets of US commercial banks. This is the result of quantitative easing in the United States. If we Chinese, "the tiger in the cage", if this tiger is released, it will have a great impact on the global capital market. This may also be an important factor affecting the international capital market or the international economy next year. It is clear that the flow of international capital, especially its harm to the world, is extremely large. According to the statistics made by the Development Bank in 1997, the reason why Asia developed into the Asian financial crisis of 1997, suddenly changed from four little dragons to the four defeated small dragons, one of the fundamental reasons is the impact of international financing. A total of less than 300 billion US dollars of international capital financing in and out of Southeast Asian countries, so that its capital market, asset bubbles are in sharp decline in real estate. If we want to prevent systemic financial risks from the perspective of the global economic development, I think these two factors are very important factors.
Therefore, I think that the world must be mutually beneficial and win-win, and we must have an inclusive attitude to look at the relationship of the international economy. If you are not following this idea, then the international economy will not better off in the end. China is still a developing country with a population of 1.3 billion. and is striving to get rid of poverty. Therefore, we feel that it is necessary to integrate democracy, human rights and other aspects to the cooperation and integration of the international economy. This is my opinion on the macro economy, thank you all!
Moderator: Thank you very much. There are some interesting points. One of the most important points is the flow of capital. Because capital flows are not controlled, it will bring a lot of problems and troubles, which will further lead to the next round of global financial crisis. In fact, the trade war between the United States and China, it is very harmful to both sides.
I want to ask if Mr. Barroso should respond first. I would like to add to the extent that the deterioration of this trade relationship between the United States and China will affect the relationship between the EU and China. Especially the European Union also expressed some similar concerns in this regard, such as infringement of intellectual property rights, as well as WTO appeals. In fact, there are actually some concerns that are quite consistent. There are some disputes between the EU and China. How much do you think this kind of trade war between the United States and China will affect the relationship between China and the EU?
Barroso: In Europe, I want to reiterate that I am not representing the EU. I am speaking in my personal ideas, because I am not among them now. I just tell everyone what I think is what it is, and some of the views of the EU. It is true that the EU and the United States share some common concerns. However, the EU does not agree with the United States to do so. We will not do this. This is the conclusion, I will say first. In fact, the new government has changed some of its positions. Like when I talked to President Obama about the TPP at that time, it was another situation. Now that the new government is different after Trump took office, they simply canceled the TPP, the Trans-Pacific Economic Partnership. From my point of view, in fact, this is not to say that it is so good for the United States, so I feel a bit strange - you are the President of the United States, and then you are still against the TPP, which is very obvious, from my point of view, this TPP was originally beneficial to the United States. Now the US government, they said that they have changed it. Now Canada and Mexico are neighbors, and they have reached a new kind of agreement. This is a bit different, and sometimes it is puzzling. Now the United States wants to impose tariffs not only for China, but also for Canada, Europe, and for aluminum and steel. And his reason is that it threatens his country’s security. This is puzzling because most of the EU member states are members of the North Atlantic and industrial organizations. They actually support the United States in terms of national security. We ourselves have set some provisions on some trades between the Allies and our partners, just to ensure our security. Now that the US government has said this, then I think that these things that they may be concerned about are currently expressed by the United States to the government. In fact, it is not just the government’s own concerns, but there may be others. I think so many Chinese friends today may also have their own understanding.
Then the United States is really concerned about the relationship between China and the EU, the relationship between the United States and China - this is a deeper concern for them. In fact, you just talked about globalization. We also mentioned some of the positions of the United States, which is a very unique position. Globalization was created by Americans in the past. This is reality. The world we live in is largely built up after World War II under the leadership of the United States. Of course, the EU is helpful. There is also the World Bank, whose headquarters are in the United States, in Washington, New York, not in Africa. Because it was the leader and it has created the Bretton Woods, and other countries created the United Nations. After World War II, Europe was a mess and ruins at that time. At that time, it was a very wise decision for Europe at that time. There was no industry, no profit, so the United States developed a Marshall Plan to help the European economy regain its footing. But the reality is that it was particularly good for the EU at that time and very good for the United States. This is a very strategic vision.
Then, after the Second World War, the United States led the world to establish the present world and lead the current situation. Many of us in the world speak English, which is also an expression of the influence of the United States. You look at Hollywood to Wall Street. The world we live in today is largely a product of the United States, or at least a product of American leadership, their entrepreneurial spirit, and they are leading this way. So now, from Facebook to Amazon to Microsoft, these big companies are all American companies. This is really amazing. The United States is arguing over these issues. Some Americans, I think, can be said to be the most populist. If you go to the EU, this may be the case. Americans, I will say, some Americans may be more willing to do globalization than any other place in the world, and they are more willing to exchange. But there are other people in the United States, of course, also in Europe, support populism. Some people are not happy about globalization in the United States, so they voted for the president of the United States. Not everyone thinks they will benefit from globalization. In the United States, I am not an American, but I have lived there. The United States is a great democracy, but it is very complicated. I think we should not simplify the analysis of the United States. The EU is complicated. The United States is complicated, maybe China is also very complicated. So the current situation is more interesting. On the one hand, we have a wave against globalization. The rise of China is very impressive. China, of course, we honestly say that China may be one of the biggest winners of globalization.
If we look at the distribution of the global market, China may be the ultimate winner after 40 years. The share of the US market has been declining, and so is the EU, which may not be as serious as the United States. Germany is actually a winner of globalization. But there are other countries. They may be losing their market share. This explains why there are so many different emotions about globalization, including in Europe. Some of us strongly support globalization to be more open, but there are also some forces of resistance. We must manage such situations. When I was in office, I was very open. I said very frankly to the Chinese leaders that sooner or later, China's trade surplus will lead to some problems. You should pull your domestic demand. Now that you are doing it, you should continue to do so. This is correct. We can't have such a model, whether it is in Europe, Asia, or North America. We cannot have a model of trade-based surplus based only on transition. It is unsustainable. We must have internal consumption to drive our development. This is sustainable. But you have to find a balance, which is also very difficult, so our current situation is that we have the power to support and oppose globalization, what will happen in the future? We don't know, the future depends on our wisdom and our leaders. we have the right conditions.
I think this is also a view of the EU, that is, we want to open the market. We do not believe that the rise of China is a threat. We believe that the rise of China will not only benefit China, but also the world. This is why we have been cooperating with China, but we also express some of our concerns. I have done this before when I was in office, some concerns about this intellectual property, industrial policy, and that China does not allow foreigners to carry out such investments in China that we allow China to invest in our countries. That is to say, there is no such reciprocal investment policy. We don't think that the way to respond to this situation is trade barriers. I also agree with the speaker just now that the situation will get worse if both of us continue to do so. At the same time, I also believe that we must be very honest, we must be very candid to express some of our concerns to avoid a boycott of globalization. If you don't control it, the situation will be very bad, whether it is economic or political, and we may have a very big loss. We are definitely not willing to see such a situation. We want to solve problems constructively,and have more open trade and investment as much as possible. We want to do such activities on an equal footing.
Finally, we just said that you are also right, that there is still room for improvement of of China’s continued development in per capita GDP, and it is necessary to catch up with other countries. But for China, as the most populous country in the world, your economy is also very large. Therefore, it cannot be continued as a developing country as before. Even if you are traditionally a very modest nation, you are now one of the most important countries in the world with one of the two largest economies in the world. So you can't expect others to treat you as a developing country. It is true that many of your places still need to continue to develop, and we are also in an unbalanced development within you. Moreover, Chinese leaders always tell us that they are also very open and candid to talk about these issues with us, but at the same time China is a very important country because of its large size. So many countries, including Europe, want China to commit to an equal situation, that is, we have to be reciprocal when dealing with us. We also hope to improve our international relations. Thank you very much.
Moderator: Thank you very much, very interesting. Marsha Vanderberg, Mr. Barroso just said that he does not represent the entire EU, but I don't know if you will represent the United States? I let you decide for yourself.
Marsha Vanderberg: Thanks to the moderator, thank you Mr. Barroso. You are really contributing to this United States, that is, World War II, and the contribution of the United States to the present, you are a good spokesperson. I think the United States should make you an honorary citizen of ours. Former US Treasury Secretary Paulson, who said in Singapore that there is an economic aspect that has been opened between China and the United States. He raised a question. I want to talk about the WTO issue. When it comes to saying that we need more and new ideas, we still need infrastructure or architecture, we need it to be multilateral, and the WTO is definitely such an institution. It is also very clear that the WTO will be out of date, behind the times. In particular, we are now looking at the background of the close relationship between the economy, and there is a very high degree of economic dependence between the entire region and the country. Therefore, the times have changed.
Our current US government has also changed. If I can say this, our American president has a bad temper and he is more stubborn. He said that if those people do not reform, we will withdraw. Therefore, to a certain extent, he regards the role of the United States as a hostage. After China's accession to the WTO, China's economic volume has been greatly improved, compared with the original, and the GDP has been turned over several times. Therefore, with the development of China, there should be corresponding responsibilities as a member of the WTO. All the questions are whether Europe and China can come together to become the driving force for the internal discussions of the G20, that is, to achieve WTO reform. And is the G20 a suitable platform to let the two regions of China and Europe promote the reform of the WTO and let the WTO adapt more to our day? And at the same time, we can start to solve the questions that Paulson mentioned. Thank you.
Barroso: Very interesting question, thank you for your comments. We must be very honest and we should talk about this issue very deeply. The issue of multilateralism did not begin with Trump. Do you remember the failure of the Doha Development Round? That was the Obama era. I was still on the committee. I remember that we Europeans were very eager to solve problems. We have been working hard in Geneva. China actually wants a global agreement. India does not support it. Then the United States is not very clear about his attitude. This is already the case in the Obama era. Of course, Trump leads a relatively disturbing trend in trade and politically. This is also true within the United States. I want to talk objectively, that is, we must realize that this is not the creation of the US government. The problem already existed before Trump came to power. He just made the global trade agreement more difficult. After Uruguay’s failure in the Doha Round, we are facing more global trade problems. Now we are facing a crisis in the WTO, then why does this crisis occur? That is, the United States decided not to carry out globalization, and it wants to conduct some bilateral actions. From a technical point of view, I can understand, for example, a large economy negotiates with a small economy. For example, when Canada and Mexico negotiate, it is best to have a bilateral agreement before global negotiations.
I think this is short-sighted, because in the long run, if all of us have a common stable framework, all of us will benefit because it can increase everyone’s confidence, especially for private sector investors. If we have very clear rules, some institutional infrastructure in terms of mechanisms. In this way we can work together to promote globalization. The WTO is like this. But now we find that the US government has clearly indicated that it is not willing to go in that direction. This is the reality we are facing. Then we have a terminal conflict resolution mechanism at the WTO. We have an appeal court with 5 judges, one of whom has already retired, but if the United States does not continue to participate in the WTO, we may soon smash the WTO, which is no benefit to global stability. To answer your question, I think we should work hard, whether it is Europe, China, or other countries. Brazil has always been very active to participate in the WTO. India is a big country, but unfortunately India is not always at the forefront of open trade. We need all the countries to get involved, and of course the United States. We should work together to try to make the WTO recover and make it a system that adapts to the wave of globalization. Unfortunately I didn't see it. At least until today, I have not seen this political will. I also said in a previous session that we should hope that the best things happen, but we must also prepare for the worst. As I said just now, various kinds of separations may be revived economically.
So there are some aspects that are more sensitive, not just economically, but also sensitive to security. I feel that each of us must have good intentions and good political will. This is the responsibility of each of us.We should not care too much about the small gains and losses. We must pay more attention to building a global balance. There should be an order, so that these more complicated problems can be gradually solved. This requires us to have a good order for the world and the economy, so everyone can follow them together.
Moderator: Agree. Thanks also to Mr. Hu for being so patient, so we are going to listen to your opinions, or do you have any questions to ask Mr. Barroso?
Hu Weixing: Thank you. I want to ask the last question. I have been inspired by Mr. Barroso’s speech. I am from Hong Kong, so I would like to propose a question from another perspective. How relevant is the EU experience to us? Considering that China is going to establish the Guangdong-Hong Kong-Macao Greater Bay Area, what is the significance of the EU's experience for us? You just said that China is quite complicated. It is true since we have two special zones - Hong Kong and Macao. These two special zones are all in the Greater Pearl River Delta region. Two or three years ago, when China was just beginning to call a development project in the Pan-Pearl River Delta, the project has gradually evolve