Daniel Korski

The danger of unbalanced trade with China

The Chinese premier seems to like cars; the Chinese in general seem to like cars. China has bought MG in Britain and Volvo in Sweden, to which it has just added Saab.

If the Chinese can make European car companies viable, then what’s the problem? Theoretically nothing: trade will help the Chinese and Europeans alike. But, as Robert Peston made clear in his questioning of Wen Jiabao, trade remains unbalanced. For example, European companies are excluded from public procurement contracts in China. It is also worth noting that China’s purchase of Spanish and Greek bonds over the past year, coupled with their promise to buy from Hungary, have made it a bilateral lender of last resort for politicians in indebted countries. That has serious repercussions for Europe’s ability to present a united front to China on issues like trade tariffs, climate change and human rights.

Such imbalance has implications in a world without free markets, where issues such access are negotiated between states not companies. China may be a saviour now, but it may not always be, especially as its power increases. European must prepare for that and perhaps they should insist on trade reciprocity with China: something for something: rather than just ceding assets for a handful of Renminbi. This is not protectionism, but common sense. Today’s extensive package of deals amounting to £1.4bn need to be seen in this context.

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