EU Statement at the 9th Trade Policy Review of the People's Republic of China, 17 July 2024

On behalf of the European Union, I would like to welcome the Delegation of China, led by Mr. Li Fei, Vice Minister of Commerce, and thank China, as well as the WTO Secretariat for their reports. My appreciation is extended to the Discussant, H. E. Mr Dandy Satria Iswara of Indonesia for his insightful introductory remarks.

I would like to recognize China's constructive role in this organization, including in the reform-related discussions on dispute settlement reform, its cooperation on the Multi-Party Interim Appeal Arrangement, and its active participation in Joint Statement Initiatives. I would like to especially thank my colleague, Ambassador Chenggang Li, for the very collaborative spirit in which our delegations in Geneva work together.

The European Union attaches great importance to its trade and investment relation with China.

As is evident from the Reports underpinning this Trade Policy Review, China's weight in the world economy has grown exponentially during the more than two decades of its WTO membership, providing an important impetus for global growth. Per capita GDP is already in excess of $13.000 and China is on the cusp of meeting the threshold of a high-income country according to the definitions of both the IMF and the World Bank, which is around $14.000.

In order to ensure that real developing countries benefit from the special and differential treatment provisions in the WTO, we therefore call on China to acknowledge the benefits of its WTO Membership by committing to refrain from claiming WTO developing country status in the future.

Over the last years, the EU has conveyed growing concerns regarding systemic imbalances that characterise the Chinese economy. We consistently encourage China to implement reforms to move from a production-driven economy to a consumption-driven economy and to evolve from a primary emphasis on manufacturing to a more balanced economy with a strong, open and diversified services sector. More effort is needed to rekindle this objective and to implement appropriate corrective policies.

China's domestic savings rate at 45% is unprecedentedly large for a country of its size and level of development, and this is having serious knock-on effects that are straining the trading system. Absent macroeconomic reforms, the pressure on WTO Members to have legitimate recourse to second-best instruments of trade defence will only increase.

Systemic imbalances are worsened by the negative impact resulting from China's distortive industrial policies and practices, in particular with regard to the widespread support for the manufacturing sector that tilts the global playing field, creating further overcapacity in China with negative externalities for a wide range of WTO members.

The European Union believes that in order for China to assume the responsibilities that come with its economic weight and play a corresponding role in the WTO, it is indispensable to examine and conduct its trade policy, as well as its domestic policies, in particular its industrial policy with a goal to minimise such negative spill-overs.

In this context, the EU also stresses the importance of a properly functioning bankruptcy and corporate governance framework that provides strong incentives for loss-making companies to eliminate losses or exit the market, reinforcing healthy competition.

Another area of concern is China's drive towards import substitution and self-sufficiency. While the EU welcomes the efforts by the Chinese authorities to attract Foreign Direct Investment, foreign-funded enterprises continue to face discrimination in the Chinese market, and it remains difficult for European businesses in China to compete due to a lack of level playing field.

Moreover, despite the Chinese government's stated ambition to pursue high-level opening of its market and build mutually beneficial trade partnerships, China still remains largely closed in many important sectors.

Many European companies feel that the business environment has become more politicised over the past years in China, coupled with concern that certain measures affecting trade and investment are taken to influence decision-making in other WTO Members, including in some EU member states.

Economic challenges increased, while regulatory obstacles remained largely unchanged, which has further negatively impacted the business outlook.

A complex and un-transparent legal framework on cybersecurity, combined with restrictive rules on the cross-border data flows subject to broadly applied security approvals, insufficient enforcement of intellectual property rights and requirements leading to technology transfer, as well as a broad concept of national security further deteriorate the already difficult business environment.

There is also increased concern over non-public guidelines encouraging Chinese entities to reduce or eliminate imported products or inputs, particularly in procurement procedures. The medical devices, software and semiconductors sectors are all impacted. Together with a regrettable lack of progress in China's accession to the Government Procurement Agreement, it seems like a step back from a more transparent and less discriminatory public procurement framework.

China in its Government report, as well as in high-level political statements claims to uphold its commitment to WTO rules and calls out on alleged protectionism by other WTO members. It must however accept its responsibility for the impact that it is having on the multilateral trading system and take corrective action to reduce and eliminate negative spill-overs from its policies on others.

Also, it has become increasingly clear that the existing global trade tensions cannot be sufficiently addressed by current WTO rules alone. This is why the EU has proposed a collective effort of deliberation on the modern challenges we face at the nexus of trade and industrial policy. China's constructive engagement in this discussion is indispensable as we continue our efforts to reform the WTO.

Increasing transparency is a primary objective of the Trade Policy Review Mechanism. It is troubling that important gaps in relation to information on China's industrial subsidies as well as domestic support in the agriculture sector remain. The EU encourages China to fulfil its notification and transparency obligations as soon as possible.

We encourage China to step up its efforts to further align its rules and policies to the letter and spirit of the WTO Agreement and - mindful of its individual responsibility as a global trading power - to reduce the negative impact of its policies on other WTO Members.

The EU wishes the Delegation of China a successful 9^th Trade Policy Review.

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