Opinion of the European Economic and Social Committee on "EU-China Relations"
Date: 2003-07-16
Institutions: European Economic and Social Committee
Subjects: China, European Union, foreign policy, human rights, trading operation

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7.13.
The Committee would also point out that inconsist-
encies and contradictions between EU policies and those of
the Member States often occur. The EU must therefore act to
set equal framework criteria for all the Member States, in order
to make such policies more effective.

7.14.
The Committee is convinced that full implementation
of the participatory approach must necessarily take account of
the objective of equality between the sexes. It therefore stresses
the importance of boosting the role of women in cooperation
policies, affirming their rights within development processes.
It calls for dedicated gender equality initiatives to be launched,
for focused training to be available to women, and for pro-
active measures to be energetically implemented to ensure that

women’s interest groups are fully involved in development
policies.

7.15.
As suggested in earlier opinions, it would also be
helpful for the World Bank, the International Monetary Fund
and the International Labour Organization to join with the
other European institutions in helping to strengthen and
promote the social partners and civil society organisations in
the developing countries.

7.16.
Furthermore, the Committee regrets that only a very
small portion of the funds (some 20 %) are channelled directly
to NSAs in the developing countries, which clearly runs
counter to the recent participation-based approach which has
been chosen as the method for strengthening development
policies.

Brussels, 16 July 2003.

The President

of the Economic and Social Committee

Roger BRIESCH

Opinion of the European Economic and Social Committee on ‘EU-China Relations’

(2003/C 234/17)

On 17 January 2002, the Economic and Social Committee, acting under Rule 29(2) of its Rules of
Procedure, decided to draw up an opinion on ‘EU-China Relations’.

The Section for External Relations, which was responsible for preparing the Committee’s work on the
subject, adopted its opinion on 24 June 2003. The rapporteur was Mr Etty and the co-rapporteur
Mr Dimitriadis.

At its 401st Plenary Session of 16 and 17 July 2003 (meeting of 16 July) the European Economic and
Social Committee adopted the following opinion unanimously.

1.

Introduction

The transition process of the Chinese economy is one
1.1.
of the major events in today’s world. Its political, economic
and social impact will have far-reaching consequences for the
world at large. It is a double transition: from a command
economy into a market economy, and from an agrarian into
It embodies an enormous
an urban/industrialised society.
growth potential, but also frightening risks. The EU is right to
follow this process as closely as possible, not only because of

the impact it has — and will
increasingly have — on EU
interests, but also with a view to the chance it has to influence
it to both its own and China’s benefit. In cooperating with
China, however, it should never lose sight of the limitations of
its role of a partner in change.

1.2.
Placed against this background, the basic principles
underlying the EU strategy vis a vis China are sound and the
objectives of the strategy can be supported. At the same time,
it must be observed that, after almost two decades of EU-China

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cooperation and three Commission strategy papers,
is
difficult to judge what has resulted from the efforts made. The
1998 Commission reports were presented as a stocktaking
operation. They documented a large number of important
activities, but did not
try to draw a clear and concrete
balance of successes and failures. Neither do the most recent
documents.

it

1.3.
It is not clear whether policies of the Commission and
of the Member States have always been in harmony and
whether or not efforts are being made to coordinate them.
Perhaps it is too ambitious yet to aim for that. However, with
a view to the limited means of the EU on the one hand, and
the unique dimensions of China and the magnitude of the
problems it is facing on the other, it is desirable that this aspect
of the EU’s relations with China will be dealt with more
adequately in future Commission documents.

1.4.
The five main policy objectives of the EU strategy are
well chosen. For the European Economic and Social Committee
(EESC), as the voice of economic and social interest groups in
the EU, three out of the five are of particular importance, i.e.:

— supporting China’s transition to an open society, based

on the rule of law and respect for human rights;

— helping to integrate China into the world economy by
bringing it more fully into the world trading system and
by supporting the process of economic and social reform;
and

— increasing mutual understanding between the EU and

China.

In discussing these three objectives, the Committee will (as in
its 1997 opinion on EU-China relations) concentrate on issues
closest to its own interests, competence and experience and
try to avoid duplication of positions taken by the European
Commission, Council and Parliament.

1.5.
In the six years which have passed since the Committee
produced its earlier opinion, major changes have occurred as
regards the major questions it discussed. No doubt, the most
important was China’s entry into the WTO in November
2001. Issues of particular interest for the Committee then as
well as today include:

— the implementation of China’s rights and obligations as a

member of the WTO;

— conditions for foreign investors in China;

— the development of a market economy in China;

— the implementation in law as well as in practice of human
rights, embodied in the UN Human Rights instruments
that China has ratified (and in particular the Covenant
on Economic, Social and Cultural rights) and in the
fundamental international labour conventions of the ILO;

— the establishment in China of a climate conducive to the

development and functioning of a genuine civil society;

— training and education; and

— the situation in Hong Kong and Macao since the ‘hand-

overs’ respectively in 1997 and 1999.

2. General remarks

In twenty-five years of transition from a command to
2.1.
a market economy China has realised impressive economic
progress while retaining a regime falling short on democratic
processes. The regime seems to be convinced that this process
can be continued without real changes in the realm of
governance and the rule of law, other than those immediately
linked to economic requirements.

Among the main accomplishments of this period are
2.2.
significant progress towards a market economy; high (often
double-digit) growth figures, and poverty reduction.

2.3.
On the negative side are corruption, violations of
human rights, poverty (despite the progress made), unemploy-
ment, the virtual absence of social security, increasing social
and regional inequalities and continued limitation of freedom
of expression and of information.

2.3.1.
A sad recent example of the lack of change in
political culture, compared to the transition in the economic
field, is the dramatic mishandling of the SARS (Severe Acute
Respiratory Syndrome) epidemic in China.

Although China has made impressive progress in
2.4.
transforming its economy during the reform era (begun in
1978), the important engines that have driven China’s growth
in the past are losing their dynamism today.

2.5.
The main reason is that China’s economy has become
badly fragmented and segmented, and this led to increasing
inefficiency and under-utilisation of resources. Trade and
investment liberalisation, although it will require difficult
adjustments by some segments of the economy, will stimulate
other segments and bring positive net benefits to the economy

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as a whole in the long-term. However, trade and investment
liberalisation alone are unlikely to solve the basic problems
now impeding China’s economic development.

— those in the official core of the economy (with all its
present difficulties) and those trying to survive in petty
and ‘informal’ economic activities.

China’s economy has reached a stage that calls for
2.6.
some important changes in the way economic reforms are
carried out. As the economy has become increasingly exposed
to market forces and the scope for self-contained development
of individual sectors has narrowed, economic problems have
become more and more interdependent. Conditions in particu-
lar segments of the economy, such as labour markets, industry,
the financial system, and regional development, now depend
more and more on developments in other areas of the
economy than on developments or policies within that specific
segment.

2.9.1.
From 1978 to 1998, the per capita income of rural
residents increased from 133,5 yuan (EUR 16,5) to 2 160 yuan
(EUR 268), an actual increase of 350 % after allowing for price
rises, with its yearly average growth rate exceeding 8 %. The
per capita income of urban residents increased for 343,3 yuan
(EUR 42,5) to 5 425 yuan (EUR 670,6), an actual increase of
200 % after allowing for price rises, with its yearly average
growth rate exceeding 6,2 % (1). For the country as a whole,
the World Bank reported GDP year-on-year growth rate of 8 %
for 2002 (2).

The rapid and continuing growth of China’s public
2.7.
debt in recent years has raised concern among economists,
investors and the general public over China’s economic
future. The pursuit of expansionary fiscal policy, the poor
performance of state enterprises, and the slow growth of local
government revenue will add to public debt.

Of great importance is China’s rural economy. In
2.7.1.
1980, agriculture employed virtually the entire rural workforce
and supplied nearly all of its income. However, rising pro-
ductivity within agriculture was accompanied by the large-
scale exit of workers from agriculture to industry. Today
agriculture employs about 50 % of the country’s workforce
and is characterised by relatively scarce land in relation to
labour and small-scale production using little mechanisation.

2.7.2.
Of particular concern is that farm incomes may
fall, exacerbating rural-urban and inter-provincial (especially
Western-Eastern) income inequality and possibly adding to
rural poverty. This trend has become apparent since 1998.

All of this, together with a population of 1,3 bn and a
2.8.
vast territory, has made China number one in the world in
terms of bad debts, unemployment, the number of workers
laid off, and probably also with respect
to income gap
problems.

This is reflected most fundamentally in the ‘three

2.9.
inequalities’ between:

— the rural and urban population;

rural

income

Nationwide,

2.9.2.
in 1999 averages
2 210 yuan (EUR 273), but it was 2 971 yuan (EUR 367,3) in
the east, 2 031 yuan (EUR 251) in the central region and only
1 448 yuan (EUR 179) in the western region. Whereas farmers
in the east saw a modest 4,3 % increase in income in 1999,
those in the central region received an increase of only 2,4 %,
while those in the West saw income rise by 2,7 %.

2.9.3.
The east coast appears much better positioned to
capitalise the opportunities that WTO presents. The east
has advantages in human capital, management, information,
transportation and infrastructure that other areas cannot
match and therefore will capture the biggest share of new
foreign direct investment (FDI).

2.9.4.
The heavily industrialised north-east is likely to face
a formidable challenge in adjusting to WTO. Manufacturing
industries are not in China’s comparative advantage, and so
they will face continuing lay-offs.

2.10. WTO-membership will put the accomplishments of
transition to the test and threatens to aggravate the major
problems. On the other hand it opens new perspectives for
more openness, transparency, accountability and for good
governance. As regards the WTO’s economic requirements, a
great deal of preparatory work has been done by the Chinese
authorities and their trading partners, including the EU. One
can be assured that they will have their full attention in the
years to come. Not so much thought has been given to the
solution of the economic and social repercussions of WTO-
membership in China. For the time being, they seem to be
considered mainly with a view to the threat to stability they
might pose.

(1) The Information Office of the State Council, ‘Progress in China’s

Human Rights for 1998’, People’s Daily, April 14, 1999.
(2) http://lnweb18.worldbank.org/eap/eap.nsf/Attachments/

— the south-east and the remainder of the country;

updateapr03/$File/china.pdf

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2.11.
China’s WTO membership, making it part and parcel
of a rule-based world wide system, will at the same time be a
formidable impulse for the economic transition process and a
decisive step towards integration into the global economy. It
is an important milestone along the reform path China has
been following for more than twenty years, rather than a new
direction. The true significance of WTO is on the institutional
side — laws, legal practice, regulatory practices. There will be
an institutional convergence towards a market economy and
it will facilitate development of the private sector. The opening
to international markets promotes market discipline, access to
technology, and other qualities that have been important goals
of domestic economic reforms. In this respect, WTO entry is a
complementary aspect of the next phase of China’s reform.

2.11.1.
The policy changes still to be made to fulfil WTO
obligations will affect all areas of China’s economy. Numerous
commentators predict a dramatic effect on agriculture and
hence rural areas, because reforms in China over much of the
23 years largely ignored the country’s trade policies for farm
products. China was required by its trading partners to commit
to major changes in those farm trade policies by 2005 —
commitments that appear far greater, and faster, than other
developing countries committed to in the Uruguay Round
Agreement on agriculture.

2.12.
China’s WTO entry gives new impetus to EU-China
trade growth. The entry provides effective institutional and
legal guarantees for bilateral trade.

2.13. WTO rules stipulate that members should abide by
the principle of non-discrimination and most favoured nation
treatment which, in the case of EU-China trade, includes tariff
reduction, lifting import quota restrictions, and easing market
entry criteria.

China’s further opening to international markets
2.14.
(WTO membership) will
force substantial adjustments to
industry and a further increase in FDI. Although higher FDI
will create jobs, it will put competitive pressure on domestic
enterprises.

2.14.1.
Today about 10 % of China’s FDI inflows originate
in the EU. These investments are of particular importance for
China as European FDI is known to be much more capital
intensive and go along with the introduction of newer
technology than the bulk of China’s FDI inflows originating in
Asia. The development impulse associated with European FDI
is therefore deemed to be very considerable. Seen from the

perspective of the EU and its member states, however, China
is still of minor importance as a host country for European
FDI. On average less than 1 % of the EU Member States’ FDI
outflows are directed towards China.

2.15.
According to recent UNCTAD estimates, FDI inflows
to China may more than double to $100 billion per annum in
2006.

China’s WTO membership will push the country to
2.16.
open its markets further and to improve the investment
environment; it will provide foreign investors with the same
treatment as nationals.

2.17.
According to WTO rules, China is committed to
reducing tariffs on 150 varieties of industrial products from
the EU. It will open the farm produce market and allow the EU
to enter its tertiary sector.

2.18. Meanwhile, the EU will take measures to give China
better access to its market. The EU also partially lifted
restrictions on the entrance of China’s farming products.

2.18.1. With respect to the importance of food safety, it
should be recalled that the relevant international standards
have been set by the FAO/WHO Codex Alimentarius Com-
mission.

An early, crucial

issue affecting the relations
2.18.2.
between the EU and China, shortly after China’s entry into the
WTO, was that the EU placed bans on certain animal products
originating from China. All imports for human or animal
consumption from China have been suspended since the
end of January 2002, because they were found to contain
unacceptable levels of chloramphenicol. China has protested
strongly over the moves taken by the Netherlands to destroy
containers of Chinese animal products stored in Rotterdam
and reacted against the EU imposing bans on certain products
imported from China. During Commissioner Lamy’s recent
visit to Beijing, the Chinese decided to lift progressively the
embargo on Dutch products and are to send a technical
mission to Europe, which has so far been delayed because of
the SARS epidemic.

2.18.3.
ucts have already significantly decreased.

Finally, anti-dumping cases against Chinese prod-

2.19.
China’s obligations to implement its WTO commit-
ments (reduction of tariffs, abolition of administrative and
approval procedures for the imports of goods, liberalisation of
a broad range of financial and professional services and of its
investment regime) have received wide publicity and have been
hailed by the Commission as an important negotiation success.
There has been less discussion on EU commitments (e.g.
phasing out of China specific qualitative restrictions with
respect to textiles and clothing).

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2.20.
In addition to China’s WTO membership, the launch
of the euro is another driving force for the growth of EU-
China trade. The good performance of the euro so far has put
the US dollar under pressure and has eased China’s dependence
on the US dollar in foreign trade settlements. Now that the
euro has integrated the European currency system, the risks in
China’s EU-related transactions,
incurred from changes in
the foreign exchange rate of different European countries’
currencies, will be reduced.

The integration of the European currency system
2.21.
enables Chinese exporters to orient their business to one
integrated euro zone, instead of several individual countries,
thereby saving transaction costs.

The Committee remains convinced that there is a
2.22.
link between stability and respect for international
direct
It welcomes China’s ratification of the
norms in China.
International Covenant on Economic, Social and Cultural
Rights (although it regrets that the Chinese Government has
made a reservation on its Article 8(1)(a) which protects trade
union rights).

2.23.
There has been progress in the development of civil
society in China. Nevertheless, the Government needs to lift
many unnecessary restrictions in order to bring Chinese civil
society on a par with the international community.

3.2.
The Committee welcomes the WTO related co-oper-
ation projects of the EU with China, as well as the monitoring
its WTO
of China’s progress in the implementation of
obligations.

The Committee was struck, during its visit to China in
3.3.
July 2002, by the confidence of its Chinese counterparts as
regards their country’s ability to conform to the WTO
rules before 2005. They stressed their long and thorough
preparation and the training given to relevant officials at
national, regional and local level. Nevertheless, the Committee
notes that well-informed observers have stressed that the main
obstacles in China will be found at the regional and local level
and that the Ministry of Commerce, which is responsible for
enforcement of WTO rules in China, is not in a position to
command other ministries or provincial authorities. The EESC
has therefore pleaded for a specialised mechanism for WTO
enforcement in China.

3.4.
Corruption is one of the most acute problems in
China’s economic development. A recent estimate of the
outflow of embezzled funds by Government and state-owned
enterprise-officials amounts to USD 48 billion in 2001. That
is a slightly higher figure than the total amount of foreign
direct investment in China recorded in the same year. Organ-
ised crime and triad involvement in large scale corruption of
senior Government officials has been acknowledged to be
serious.

Experiences in Hong Kong and Macao with ‘one
2.24.
country, two systems’ have not been fully satisfactory so far.
Certain developments in the sphere of democracy and respect
for human rights give rise to concern.

3.4.1.
Some of the serious problems in China’s banking
and accounting system are intimately connected with this
phenomenon.

2.25.
The Committee thinks that it has a special contri-
bution to make in the development of EU-China relations and
it has found an interested counterpart in the China Economic
and Social Council. It has stressed the important contribution
to economic and social development which free, independent
and representative interest groups of employers, workers,
farmers, etc. can make in China and will continue to do so.

3.4.2. Malpractices, corruption and abuse of power are
among the main popular grievances against the Government.
An important remedy against these major shortcomings of
governance would be effective check and balance and watch-
dog mechanisms which would help to make enterprise owners,
managers, and officials accountable. Organised civil society, as
a major contributor to democracy, has to play a prominent
role in such mechanisms. Freedom of information and a free
press are of great importance in this context.

3. Specific Remarks

In the discussion about China’s WTO-membership and
3.1.
its further integration into the global economy, the main
accent is put on bringing its economic and financial regulations
and performance in line with the WTO. Important as that is,
the Committee thinks that these efforts should be combined
with respect for other relevant international standards regard-
ing product safety, sustainable development, and fundamental
labour rights.

Taking a look at China’s industry, the biggest prob-
3.4.3.
lem impairing industry performance is the widespread inef-
ficiency in enterprise operations. Added to this the inadequate
technology and the limited capacity to innovate are particular
weaknesses of much of Chinese industry.

3.4.4.
Some key obstacles to the improvement of industry
interference in
continued government
performance are
enterprise management, poor financial discipline, the restric-
tion of exit and other modalities for re-deploying resources.

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3.4.5.
Technology standards for a large portion of domestic
firms are far below international standards. Moreover, tech-
nology transfer by foreign enterprises to Chinese firms seems
to have been limited in both amount and scope.

In the mid-term the Chinese financial sector will have
3.4.6.
to catch up with international best practices as the availability
of state-of-the-art financial intermediation will be the key for
successful WTO membership and long term growth because:

— the enterprise sector’s international competitiveness relies

on the availability of modern financial services;

— attracting capital from the world capital market — at
reasonable costs — relies on modern financial
insti-
tutions;

— in a market economy macro-economic stability is based

on sound financial markets.

These necessities will speed up the modernisation of
3.4.7.
China’s financial system and by doing so create the precon-
ditions for full convertibility.

3.5.
Although the fight against poverty has been a priority
for the Chinese Government for several years now, the figures
remain alarming. The World Bank estimates that, despite the
improvements which have been achieved, 130 million people
live below the poverty line. Mass dismissals in state-
still
owned enterprises without social safety nets continue in the
industrialised areas of the country and grave problems in rural
China will keep the issue high on the agenda. In the short and
medium term, the consequences of China’s WTO membership
will probably only aggravate an already very difficult situation.

In order to employ the workers coming from agri-
3.7.
culture,
local governments were encouraged to foster the
growth of rural-non agriculture enterprises (REs), also known
as TVEs. REs are small- and medium-sized enterprises in rural
areas that specialise in labour-intensive products, and along
with foreign funded enterprises produce most of China’s
exports.

3.8.
REs have been the main vehicle for absorbing workers
from agriculture and an important engine of China’s growth,
as it has been for other rapidly developing countries in the
past. Today REs are suffering from financial problems and
operating inefficiencies nearly as severe as those afflicting the
State Owned Enterprises (SOE) sector.

3.9.
Quite rightly, the Commission identifies the establish-
ment of a social safety net as a crucial task for the Chinese
Government. The majority of the population is currently not
covered by social security regulations. Many who used to be
covered as workers in state-owned enterprises have found that
their money has disappeared in the course of ‘restructuring’.
One crucial problem in the maintenance or establishment of
social security provisions is the absence of sound monitoring
mechanisms. This has resulted in malpractices and misappro-
priation of funds; frequently one of the major causes for recent
social unrest. Social security is typically an area where the
absence of genuine, independent organisations representing
the interests of workers and employers is being felt.

3.5.1. What must be highlighted in this context is the
feminisation of poverty. Large scale migration of (male) surplus
labour from the countryside leaves women to take up the bulk
of farming on the countryside. They largely live on the verge
of poverty. Women farmers are often deprived of the right to
In recent years, many employers in
own their farmland.
industry as well as in the civil service stipulate that only male
applicants will be considered for its vacancies.

3.10.
Growing social dissatisfaction and unrest represents
a real threat to stability. It is widespread in the cities and
perhaps even more in the countryside. Causes in addition to
those already mentioned are growing income disparities and
massive ecological damage. There has been a sharp increase of
protest actions in terms of numbers, scale and militancy, both
in urban and in rural areas. In most cases they have been dealt
with by police repression. There appears to be an urgent need
for reconciliation machinery.

Unemployment in China today is probably closer to
3.6.
15-20 % of the national workforce of 730 million than the
official 4 %. Nearly half of the 100 million strong workforce
in the state-owned sector has been made redundant in the last
few years and the end is not yet in sight. In the short and
medium term, China’s entry in the WTO will bring to bear
negative influences and perhaps even pose an immediate threat
to the livelihood of its agricultural workforce of 400 million
(among whom there are already some 150 million surplus
workers). A large number of them, possibly about 100 million
people, are presently looking for work outside their area of
origin.

3.11.
Against this background it is of great concern that
basic trade union rights (freedom of association, right to
bargain collectively) continue to be violated. The 2001 amend-
ment of the trade union law fails to satisfy ILO Convention 87
and 98 as well as the International Covenant on Economic,
Social and Cultural Rights. The monopoly position of the All
China Federation of Trade Unions is not only reconfirmed, but
also its function as an instrument of the Communist Party is
underlined.

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3.11.1.
The Government should seek reconciliation with
the tens of thousands of protesting workers through tripartite
consultation instead of repression or (in incidental cases)
buying them off. Organisers of autonomous unions or non-
violent workers’ actions should not be victimised. Arbitrary
detention of labour organisers should stop in respect of ILO
Convention 87 and 98 (which China, as a member of the ILO,
is expected to respect and implement even if it has not yet
ratified them) and the recommendations made by the ILO
Governing Body Committee on Freedom of Association in
recent complaint cases should be followed up.

governmental interference are not much in evidence.
They are still at an early stage development and they are
still struggling to define their structures and functions.

— In line with the above features, many of China’s NGOs
are not firmly institutionalised. Although the Ministry of
Civil Affairs revised and promulgated the new manage-
ment regulations for civil organisations in 1998, the
institutionalisation process has only just begun and is
ongoing. Many restrictions to their functioning, including
political censorship still remain.

China’s economic and political restructuring initiated
3.12.
since 1978 creates the basic political, economic and legal
environment for the rise of civil society. At the same time, the
emergence of civil society will in due course exert a great
influence on social policy and economic activities, change
governance to a large extent and effectively promote good
governance.

3.13.
In decentralisation, the Government and the Party
have widened the scope for certain non-governmental organis-
ations (NGOs) to perform previously state-run, or newly-
established, functions of service provision (as in the field of
healthcare) and resource mobilisation. However, NGOs should
also be allowed to assume other essential functions in advo-
cacy, monitoring of public policies, community organisation,
and interest representation. In order to reconcile rising social
and economic tensions, a process of civil dialogue and
consultation needs to be built urgently. Interest representation
can only be meaningfully materialised on the basis of freedom
of association, and NGOs can play a crucial role in that
process. The Committee was impressed by the frankness of
several NGOs, who assumed a proactive stance in the face of
Government-led quasi NGOs during discussions held during
the EESC’s visit in July 2002.

There are obvious differences between China’s NGOs
3.14.
and those in the EU. In comparison with those in EU, China’s
NGOs have the following special features:

— China’s civil society is, generally speaking, under tight
government control and has an obvious official-civil
duality. It is a distinctive feature of China’s civil society
that the government directs important key organisations.

3.15.
independent NGOs.

Nevertheless,

there is a growing body of more

3.16.
The development of NGOs in China today is rather
uneven. There are great differences in social, political and
economic influence and status between different civil organis-
ations, often depending on the degree of government support
and control.

The EESC stresses that the serious difficulties facing
3.17.
foreign NGOs wanting to establish operations in China remain
virtually unchanged.

3.18. More in-depth discussion between the EU and China
on the important role of NGOs in the transition process may
contribute to widening the space of operation on independent
NGOs. This may also create better conditions for the develop-
ment of free and independent workers’ and employers’ organis-
ations.

3.19.
The European Commission’s China development
cooperation programmes target several of the most pressing
problems China is currently facing. They include encourage-
ment and assistance to ratify major international conventions.
What is, as yet, not addressed in an articulate way in its
discussions with the Chinese authorities is the nature and the
prospects of the key issue of social instability. The Commission
cooperates to a great extent with quasi-governmental bodies
instead of the growing community of independent NGOs in
China. Recently, it has started on a modest basis to work with
these independent NGOs.

— China’s NGOs came into being during the transition
period. Typical features such as autonomy, voluntary
action, close contacts with the population, absence of

3.20.
Hong Kong was identified by the Committee in its
1997 Opinion as an area of special interest, in particular with
respect to developments pertaining to fundamental rights to
organise and to bargain collectively after the ‘hand-over’ in
July 1997.

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3.20.1.
Now, five years later, the Committee thinks that the
Hong Kong Government is not demonstrating convincingly its
to uphold internationally recognised human
commitment
rights standards as well as the integrity of its rule of law.
Certain political and civil rights, and also economic and social
rights, which were already limited in the pre-1997 period, are
clearly under pressure (freedom of assembly,
freedom of
expression, freedom of the press, basic trade union rights). A
recent cause for special concern are the recent Government
proposals to implement Article 23 of the Basic Law, dealing
inter alia with sedition and subversion.

3.20.2.
An asset for Hong Kong is its active organised civil
society. It plays an indispensable role in defending human
rights. It is also an important source of inspiration and support
for the emerging civil society in mainland China.

3.20.3.
Subsidiaries of Hong Kong (as well as Taiwanese
and Korean) companies and their subcontractors are among
the foreign investors with the worst reputation in labour
relations in mainland China. Local trade unions and NGOs
have been campaigning to improve the situation. Government
and the business community should lend an ear to these
campaigns.

3.20.4.
For many decades, gaming-led tourism has been
the main economic pillar of Macao, which was handed over in
1999. The Macao Government has defined the future direction
of the Special Administrative Region’s economic development
in the next decade as follows: gaming-led tourism will function
as the main driving force and the service industry will act as
the main stay for the co-ordinated development of other
sectors. The aim is to establish Macao as an international
centre for gaming-led tourism and as a hub for international
conferences and exhibitions. Various sectors and industries in
Macao stand to benefit from this strategy, as well as the
expected strong development of tourism worldwide. There are
concerns about the over-reliance of the economy on very few
sectors. Efforts to reduce this over-reliance and to diversify
should be supported.

relations,

Industrial

3.20.5.
tripartite consultation and
socio-economic interest representation in Macao are clearly
below the modest Hong Kong standards. The same is true for
its civil society. For the time being, the climate does not appear
to be conducive to significant improvements.

4. Conclusions and recommendations

4.1.
One major question has hardly been raised in the EU-
China dialogue so far: whether a successful transition to a
market economy can be made without sweeping political
reform. However, the key issue (for both China and its partners
in trade and investment) of stability appears to be intimately
linked with the tension between the two. This question
therefore requires special attention in future EU-China con-
tacts,
including those between the EESC and the China
Economic and Social Council (CESC).

4.1.1.
issue for
The Committee believes that the crucial
China to succeed is development in terms of further political
pluralism, rule of law and privatisation. This might put an end
to the quasi omnipresence of the state in the economy and
bring its role closer to the role played by the state in a social
market economy.

4.2. Monitoring of implementation of the enforcement of
WTO rules in China will not be an easy task, in particular not
at the levels where the main problems may arise: the regional
and the local. Hence, the Committee strongly supports the
continuation of EU support for the efforts made by China to
train legislators and members of the judiciary involved in
China’s implementation of the WTO rules at the various
relevant levels. The Commission might suggest to the Chinese
authorities the establishment of a public watchdog.

4.2.1.
The Committee recommends that the Commission
should cooperate closely with the EU Chamber of Commerce
in China, which is in a position to give it first-hand accounts
of enforcement of WTO rules by drawing on the experience of
its 200 members.

4.2.2.
The Committee will contact the European side of the
EU-China Business Dialogue to draw their attention also to
this problem and to suggest they include this matter on the
agenda of their meetings with their Chinese counterparts.

3.21.
During its July visit, the European Economic and
Social Committee and the China Economic and Social Council
decided to engage in consultation, dialogue and research on
economic and social issues of common interest as well as on
issues related to human rights and the rule of law, so as to
promote economic development and social progress.

4.3.
To tackle the negative aspects of transition — and the
probable aggravation of some of them as a consequence of
China’s WTO membership — the real and full involvement of
organised civil society seems highly desirable. The European
Commission is aware of the crucial role NGOs can play.
Unfortunately, they have so far paid little attention to the role
of free and independent economic and social interest groups.

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4.4.
In light of the increasingly vital role of NGOs in
furthering China’s development and fostering international
cooperation the EESC proposes that, in close cooperation with
the CESC, work should be undertaken on the following issues:

— the improvement of transparency and clarity in regu-
lations by clearly defining the registration procedures
and requirements for foreign NGOs and specifying the
ministries responsible for their governance and sponsor-
ship;

— the elimination of ambiguities in current regulations
regarding how NGOs attain independent legal status, hire
employees, and gain access to foreign currency.

China, as a prominent member of the International
4.5.
Labour Organisation, should ratify all eight
fundamental
human rights Conventions of the ILO and implement them in
law and practice. As an ILO Member State China is already
expected to meet the requirements of Conventions 87 and 98
on the basic workers’ and employers’ rights, irrespective of
ratification. China should also withdraw its reservation on
Article 8(1)(a) of the International Covenant on Economic
Social and Cultural Rights.

4.6.
In its human rights dialogue with China, the European
Commission should pay even more attention to China’s
persistent violation of the right to organise and the right to
bargain collectively, systematically address the fate of detained
and imprisoned labour activists and stress the importance of
full involvement of free, independent and democratic econ-
omic and social interest groups in the transition to a market
economy, of NGOs and of freedom of information and a free
press.

4.7.
The EU should support and enhance dialogue between
organised civil society, economic and social interest groups in
China and the EU on issues such as social justice (poverty
reduction, gender, greater participation, environmental protec-
tion, etc.). This should include dialogue on issues as human
rights, good governance and minorities’ policies.

4.7.1.
The Olympic Games to be held in Beijing in 2008,
as well as the EXPO 2010 to be held in Sanghai could prove a
major opportunity for the deepening cooperation in all fields
if China puts an end to human rights violations and makes
substantial progress in the democratisation of the political
system.

4.8.
The development of political and civil rights, as well as
of economic, social and cultural rights under the conditions of
in Hong Kong and Macao will
‘one country, two systems’
be closely followed by the European Economic and Social
Committee.

4.8.1.
The European Commission might wish to draw
the attention of the Hong Kong authorities and business
community to the possibility of using the OECD Guidelines
for Multinational Enterprises as a reference point for the
activities of Hong Kong based companies and their subcontrac-
tors in mainland China. The Commission should, in close
cooperation with its EU member states, encourage enterprises
based in the EU with significant investment in and trade links
with China to respect the OECD guidelines and to encourage
their Chinese business partners to do the same.
In this
connection,
it should pay special attention to living and
working conditions in Export Processing Zones (EPZ) in China.

4.9.
The EESC delegation to Hong Kong and Macao con-
cluded that relations between the EU and Hong Kong and
between the EU and Macao have continued to be excellent
since the hand-over, but it is perhaps now time to place
the relationship between the EU and both the two Special
Administrative Region (SARs) in a more systematic framework.
In this framework, special attention should be paid to the
diversification of Macao’s economic development and to the
development of democracy and civil rights as well as basic
economic, social and cultural rights there, both in law and in
practice.

4.10. With respect to development cooperation, the EESC
believes that there should be a number of actions regarding:

1)

2)

3)

improvement of the living conditions and social justice,
life;
maintaining/restoration of
examples for that are: poverty reduction, improvement
of environment and food security, empowerment of
women;

the natural basis of

employment and social security issues:
for instance
establishing/improving social security systems in urban
and rural areas, promoting self-employment in the small
scale sector; restructuring of the rural financial system
(credit co-operatives, particularly for
self-employed
people and for women);

support for business training, in particular with regard to
the small- and medium-sized sector, as well as for the
establishment of independent business associations in
this sector.

4.11.
The EESC agrees that the EU should further encourage
the transfer of know-how, technology or policy experiences
through joint ventures and other forms of partnership either
between companies, municipalities/regions or public bodies.
Such contracts, strengthen the links between EU and China,
and could also give additional impetus to the reform process.
The success of Asia Invest and ‘Local Authorities’ programmes
in China show real potential
in this sector, focusing in
particular on SMEs links.

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The Committee believes that in order to take full
4.11.1.
liberalisation, China’s
advantage of
trade and investment
firms,
economy should require extensive restructuring of
improvement
in their governance and management, and
reallocation of resources. Particular attention should be given
to SMEs (producing labour-intensive products) who will need
to integrate into international production chains if they are to
be successful in world markets.

The European Commission China programmes
4.12.
should more prominently reflect the importance it places
on governance, civil society, human rights, and sustainable
development. Regular and systematic reviews will help to
improve the relevance and effectiveness of EU programmes
along these guiding principles.

Brussels, 16 July 2003.

4.12.1.
and strategy in all poverty reduction programmes in China.

There is a need to have a women-specific agenda

The EESC and the China Economic and Social Council
4.13.
have decided to engage in consultation, dialogue and research
on economic and social issues of common interest as well as
on issues related to human rights and the rule of law. They
intend to do this on a regular and institutionalised basis. These
contacts should also be used to address relevant issues coming
up in Hong Kong and Macao.

4.14.
Future visits of the Economic and Social Committee
in China should not only be used to strengthen contacts with
the China Economic and Social Council, but also to renew and
to widen contacts with the NGO community in China, (and in
particular with the free and independent among them) working
in areas such as healthcare and environmental protection,
along the same lines as during the visit of July 2002.

The President

of the European Economic and Social Committee

Roger BRIESCH