Trading places

Updated: 2012-09-21 13:31

By Cecily Liu (China Daily)

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 Trading places

David Brewer, chairman of the European Union-China Business Association, has visited China 127 times since 1981 and witnessed the fast development of trade and economic relations between China and Europe. Provided to China Daily

Chairman of European business association says the greater use of the chinese currency in London will benefit Europe as a whole

When Sir David Brewer, chairman of the European Union-China Business Association, next boards a flight to China, it will be his 128th visit to the Middle Kingdom.

From his first trip in 1981 as a young insurance broker to his frequent stops in the Far East today overseeing business delegations, Brewer has seen China change dramatically over the past three decades.

"When I first went, I remember everybody wearing Mao suits. One girl in Shanghai had a nice pink cardigan over her Mao suit and that was one piece of color I saw. But now of course Chinese people are very fashionable," the 72-year-old says.

One of the country's most dramatic changes is its level of trade with Europe. In the early 1980s, there was little in the way of trade or investment exchanges with Europe.

Today, China is a major market for European businesses and the EU's second-largest export market after the United States.

According to statistics from the European Commission, EU exported 136.2 billion euros ($179 billion) in goods to China last year. China exported 292.5 billion euros in goods to the EU in 2011, making China the EU's biggest source of imports.

"The EU-China trade and investment relationship is largely very healthy," Brewer says.

But he admits that trade tensions do exist between the two partners.

One recent example is the EU's announcement this month that it would launch a 15-month investigation into imports of solar panels and components from China. Provisional anti-dumping duties could be imposed within nine months.

The investigation came after a complaint by a group of European solar companies in July led by Germany's SolarWorld AG.

The company also filed anti-dumping and anti-subsidy cases involving China's solar panel exports to the US in 2011.

Taking a tough line with China over trade disputes is EU Trade Commissioner Karel De Gucht, but German Chancellor Angela Merkel suggested on a recent visit to China that China and the EU should solve disputes through discussions.

"I think Merkel was right in taking a reasonable attitude, not just a German point of view, and not just a Chinese point of view," Brewer says.

Another recent high profile dispute centers on the refusal by Chinese airlines to pay for its carbon emissions when flying in the EU. The refusal is supported by the Civil Aviation Administration of China.

Under EU laws that came into effect earlier this year, all airlines using EU airports are required to buy permits under the EU's Emissions Trading Scheme.

But many international airlines, including Chinese ones, argue that the Kyoto Protocol made a distinction between the level of efforts that developed and developing nations must enact to ward off climate change.

These "differentiated responsibilities", the airlines argue, are not accounted for in the trading scheme.

Brewer says he supports the Chinese airlines' opposition to the scheme in its current form.

"I think every airline is reasonable to challenge it," he says.

"China is not alone in disagreeing. A large number of international airlines are saying the (trading scheme) is totally unreasonable. If they only charge for the amount of emissions over Europe, then it's more reasonable, but they are doing it for the whole journey," he says.

Despite the trade disputes, Brewer says many European and Chinese companies he speaks to on a day-to-day basis are very satisfied with their international trade operations.

He adds that China has greatly helped the European economy by investing in Europe in both mergers and acquisitions and with greenfield projects in which Chinese businesses open their operations in a European country.

"When Chinese companies open subsidiaries in Europe, they create jobs and stimulate the economy. When they acquire a struggling European business, they often save jobs," he says.

According to a recent report by consultancy Rhodium Group LLC, China's annual investment in Europe tripled from 2006 to 2009 and tripled again to $10 billion (7.6 billion euros) in 2011.

The number of deals with a value of more than $1 million doubled from less than 50 in 2010 to almost 100 in 2011.

Rhodium also forecast that Europe will see $250 billion to $500 billion in new Chinese investment by 2020.

An increasing number of Chinese companies that export to or invest in Europe has created a demand for financial services, prompting Chinese banks as well as law and consultancy firms to follow in their footsteps.

The expansion of Chinese banks in London, Europe's financial center, has also helped to facilitate an increasing flow of renminbi through the city. This has given London a slight edge over Singapore and New York City in the race to become the next offshore renminbi hub.

Currently, renminbi is freely convertible only in the Chinese mainland and Hong Kong. If London can become the next offshore renminbi hub, its financial community can benefit by investing in the appreciating renminbi and China's growth.

Brewer says that a greater use of renminbi in London will also benefit Europe as a whole.

"London is the window of Europe for international trade and finance. We are happy to run it as an open center for Europe and European trade," he says. "From talking to European businesses that trade with China, I can see that they are already making the best of the opportunity to trade in renminbi."

A Barclays report last year said that paying Chinese retailers in renminbi could potentially increase profit margins by 7 percent.

The wider reach of China's currency is one indication of China's growing global influence and Brewer is keenly aware of how China made this journey over the past three decades.

Brewer went to China in 1981 to set up a representative office for the Sedgwick Group, a British insurance broker that he worked for at the time.

Back then, Brewer would cycle with a colleague in Beijing, taking shortcuts away from the main roads. But today's China is filled with cars. The few high-rise buildings that he once biked past have been overshadowed after the boom of skyscrapers across most major Chinese cities.

And he would have lost count of the number of visits he made to China had it not been for the pestering from his public relations colleagues when he became Lord Mayor of London in 2005. He was tasked to run the local authority in charge of London's square mile business district.

During his one year in office, Brewer visited China twice, despite the fact that his predecessors only visited China about once every three years.

"I did say to the City afterward that every Lord Mayor must go to China once a year. China has so many cities, and so many opportunities," he says.

(China Daily 09/20/2012 page19)