The smooth development of China-EU relations is in the common interests of China and the European Union in the long run.

China and the EU work well with each other, especially in business and trade, even though they don't share the same political system, development stage or cultural background. On the global stage, China and the EU pursue a policy of multilateralism and support the diversity of world cultures.

Following the 13th China-EU summit in October 2010, China and the EU issued a joint communique, expressing their commitment to opening a new phase in their relations and building on past achievements.

To further improve China-EU relations, China and the EU should focus on the following aspects of their relationship:

First, China and EU should think about how to improve mutual understanding. Mutual understanding is of crucial importance in international exchanges. Only then can both sides treat each other equally, broaden the common ground between them, and support each other on issues of great concern on the basis of the Five Principles of Peaceful Coexistence (mutual respect for territorial integrity and sovereignty, mutual nonaggression, noninterference in each other's internal affairs, equality and mutual benefit, and peaceful coexistence).

The lack of mutual understanding is not only an obstacle to the development of China-EU relations but also the root of some inveterate problems in bilateral relations. Thus China and the EU should adopt effective measures to deepen mutual understanding in order to improve bilateral relations.

Intense high level exchanges are the best way to enhance mutual understanding. China and the EU should also adopt other measures, including strengthening academic exchanges between China and the EU. Frequent academic exchanges offer policymakers the twin benefits of more accurate information and wise advice.

Second, the media in both China and the EU should learn from each other and communicate from time to time. Objective reports will provide the public and policymakers with accurate information to further understanding and strengthen ties.

Due to their different political system, cultural backgrounds and economic development levels, China and the EU still have differences over democracy and human rights, and regrettably, these pose an obstacle to progressing China-EU relations. While China needs to exert more efforts in these areas, the EU should first respect China's sovereignty, fully consider China's domestic conditions and eliminate prejudice against the country.

Third, China and the EU should try to reduce trade conflicts. Cheap labor is China's comparative advantage, so labor-intensive products were China's best option for growth during the reform and opening-up. However, faced with the growing imports of Chinese products, the EU has resorted to anti-dumping measures from time to time and while these anti-dumping measures have targeted a limited proportion of Chinese exports to the EU, data from the World Trade Organization shows that the EU has introduced the highest number of anti-dumping measures against China.

China should make efforts to improve its export trade structure, giving others no cause for blame, and the EU should adhere to WTO rules, enlarge exports of high-tech products to China, and oppose trade protectionism.

The EU has to recognize China's current investment environment. In recent years the EU has voiced criticism about China's investment environment. The European Union Chamber of Commerce in China alleges that China is still one of the markets with the strictest controls and that EU enterprises face a lot of obstruction. It says greater access and a more equitable environment would not only help China attract more European investment, it would also help establish a more balanced pattern of development.

Such judgments are one-sided. Every country has a changing economic development path and market environment. China is no exception. During the first period of opening-up, because of the imperfect market economy system, it was very difficult for foreign-funded enterprises to invest in China due to additional costs; therefore China gave foreign investors "preferential treatment" in the form of lower taxes.

After 30 years of reform and opening-up, the development of China's economy has entered a new stage: Its market economy has matured, and the costs that overseas enterprises face have been reduced significantly. Meanwhile competition between overseas enterprises in the Chinese market has become fiercer.

Thus there is no doubt that the preferential treatment should be gradually stopped. EU enterprises should stop complaining about Chinese policies, put aside their prejudices against the Chinese business environment and reset their business models.

The fourth point is that the EU should take an objective view of intellectual property rights (IPR) protection. The EU often complains that China pays no attention to the protection of IPR. It is true that as a developing country China faces many challenges in strengthening IPR protection, but the EU should know that China puts great emphasis on IPR protection and has taken many measures to strengthen it. On Oct 19, Premier Wen Jiabao announced at a State Council meeting that China would start taking special action against IPR violations and the fabrication of counterfeit goods with a view to clean up the market environment, awaking the conscience of the enterprises and creating a good social environment of conscious opposition to counterfeit goods and protection for IPR.

During the EU Trade Days (July 22-23) held in the EU Pavilion at the Shanghai Expo, participants had the chance to sample EU products with Protected Geographical Indication status, including wine, ham, and cheeses from France, Italy, Spain and other European countries. Such events will increase the awareness of European products in China and enhance the IPR consciousness of Chinese consumers. The Chinese government should host such events in Europe.

Last, the rapid growth of China has had a huge impact on the international structure. The EU should be aware that China cannot develop without the rest of the world and vice versa. As a responsible country, China has always been an active power in maintaining world peace and promoting global prosperity. China will unswervingly follow the course of peaceful development, uphold the open strategy features of mutual benefit and win-and-win, and strive to build a harmonious world of sustainable peace and common prosperity. The EU should treat China's rise as a precious opportunity for development, not as a threat.

China's rapid development also provides opportunities for cooperation in many fields. On issues such as climate change and anti-terrorism, China and the EU can work out solutions through communication and negotiation. Besides, more cooperation can be carried out in the fields of energy conservation, energy efficiency, and low-carbon development.

If these issues can be addressed and the EU can withstand pressure from the United States, the prospects for China-EU relations will be positive. Bilateral trade volume has increased 176 times in 35 years. The EU has been China's largest trade partner for six consecutive years and China has become the second largest trade partner of the EU. The EU is now China's largest origin of technology and the fourth largest for investment. Culturally, exchanges between China and EU have become more and more frequent. Both sides have established a solid foundation for further cooperation in many fields. Now the two parties have become an indispensable partner of the other, and the bilateral relationship will attain a more rapid development if they can treat those problems seriously.

The author is deputy director of the Institute of European Studies of the Chinese Academy of Social Sciences.