China plans to develop further collaboration with Greece in infrastructure


Dr Jinmin Wang

Developments in China are currently on the agenda on Western media as far as its economy and foreign policy are concerned. In an exclusive interview with Assistant Professor at the School of Contemporary Chinese Studies of the University of Nottingham  Dr Jinmin Wang offers insights on the course of China’s economy, on Sino-European relations as well as on Chinese investments in Greece.

Why is China’s stock market in crisis? Is there a possibility for a way out ?

One of the main reasons of China’s stock market crisis is that the stock market in China is mainly dominated by individual investors rather than institutional investors. After individual investors in China are allowed to borrow money from the security brokers to make more investment in the stock market with the collateral of their assets, they are exposed to very high investment risks particularly when the stock market corrects or crashes. It also poses a great challenge for China Securities Regulatory Commission to regulate the stock market effectively. I feel confident that the Chinese government will be able to undertake deeper reform and effective regulation of China’s capital market to promote its orderly development in the long run.

What factors do you believe have been the most important to China’s successful economic growth?

I think that the market-oriented reform, international trade, inward foreign direct investment  are the most important factors that have contributed to  the rapid economic growth in China in the past three decades. The Third Plenum of the Chinese Communist Party’s 11th Central Committee in December 1978 marked the beginning of market-oriented reforms in China. The introduction of the household responsibility system initiated successful rural reform in China. Afterwards, the gradual privatization of State-owned enterprises (SOEs) led to the rapid development of private enterprises around China. International trade and inward foreign direct investment have integrated China with the rest of world. China developed the successful export-oriented economy over the past three decades. Inward foreign direct investment made it possible for Chinese enterprises to cooperate with and compete against the leading multinational companies around the world.

How do you assess the “New Normal” of China’s economy?

The “New Normal” of Chinese Economy means that China will shift from annual high economic growth to more sustainable medium-high economic growth with higher efficiency and lower costs in the following years. In the past three decades, the Chinese economy was overwhelmingly relied on export and investment. It was easily affected by the fluctuating foreign demand and investment. Under the new normal state, the  Chinese economy tends to be stimulated more by the domestic consumption. Chinese economy is facing some uncertainties and challenges, including the deeper financial reform, high local government debt and real estate bubbles in some regions. These risks, which are inter-related, could lead to a chain reaction affecting the stability of macroeconomic stability of China. Therefore, the Chinese government will attach more importance to the quality rather than quantity of GDP growth under the new normal state.  It aims to adopt an innovation-driven growth model to promote industrial upgrading and sustainable development of Chinese economy.

Is the European debt crisis facilitating China´s economic ambitions?

I think that European debt crisis poses both challenges and opportunities for the Chinese enterprises. For example, European debt crisis has negative impacts on the Chinese economy since European Union is the largest export destination of Chinese companies. As a result of the debt crisis, the demand for Chinese exports from the EU member states declined for some time. However, European debt crisis has also offered a good opportunity for some Chinese enterprises which would like to internationalise their business and make outward foreign direct investment in Europe. Since a lot of SMEs in Europe possess advanced technology and management practices, some of them have become the potential acquisition targets by the Chinese enterprises with the depreciation of Euro.

What did it mean for China – during the European debt crisis – that the price of the euro was continuously falling?

The depreciation of euro has negative impacts on China’s economy, exports and foreign exchange reserves.  Euro accounts for a high ratio in the foreign exchange reserves of China, so China suffers from a huge loss by holding euro currency or investing in euro-denominated securities and assets. However, some Chinese companies will choose to make outward foreign direct investment in Europe to acquire advanced technology and management practices with the depreciation of euro. More Chinese tourists will come to visit Europe and more Chinese students will come to study in Europe.

How do you see the evolution and the improvement of the Sino-Greek relations related to the Chinese investment in the port of Piraeus? Regarding China’s activities in the port of Piraeus, do you think that China will turn to Greece for closer collaboration?

I think that the Chinese investment in the port of Piraeus is a good example to indicate the potential closer economic cooperation between China and Greece in the long run. The Chinese government has been promoting the development of marine economy in the past decade. It encourages the Chinese state-owned shipping company such as Cosco to make outrward foreign direct investment to explore the international market and improve their international competitiveness. On the basis of successful transformation of the port of Piraeus, China plans to develop further collaboration with Greece in other infrastructure development such as the airport, rail, road when opportunities arise. Moreover, the Chinese government initiated ‘One belt, one road’ development strategy in 2013. Since Greece occupies the geographic position with strategic importance on the 21st Maritime Silk Road and the New Silk Road Economic Belt, it can be expected that Sino-Greek economic cooperation will be enhanced further.

Lida Metallinou