Let's discuss the China-Europe economic and trade relations from the perspective of "security and development." Currently, the European Union is preparing to impose high tariffs on our electric vehicles, and we are expected to adopt some reciprocal measures. Previously, the EU sanctioned some of our companies, alleging that these companies were suspected of providing raw materials for weapons and equipment to Russia.

Firstly, we should recognize that in the past decade, the world has undergone earth-shaking changes. In the words of leaders, there has been a "once-in-a-century change" globally. In such a globally transformative environment, analyzing economic issues by simply looking for patterns in data alone has become inadequate, as it fails to explain the causes and consequences. It is necessary to consider political factors and geopolitical conflict factors, which can be seen as a return to political economy. In the face of politics, the economy has become trivial.

Since Williamson proposed the "Washington Consensus," we have been using the term "open economy" when analyzing economic issues. However, for now and for a considerable period in the future, we are facing the need to use the term "under the G2 structure." As I have been working in investment banking research, our research conclusions need to be applied to asset allocation. When geopolitical conflicts intensify, our first thought is that global investors will reduce their risk appetite and choose to return to core assets.

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Now let's return to discuss the China-Europe economic and trade relations. Currently, the development of China-Europe economic and trade relations faces an unavoidable "wall," which is the "security" issue that the EU cares about. I think not only the EU will care the most, but any economic entity would also care. The Russia-Ukraine conflict and the Israel-Palestine conflict, apart from the countries involved, have the most impact on the EU. The Russia-Ukraine conflict first cut off the relatively cheap raw materials and energy supply that European industry relies on. More importantly, Europe began to worry about its own security, fearing that the war would spread to itself.

The instability in the Red Sea has led to an impact on European cargo trade with Asia and Africa. The impact on maritime trade will inevitably affect European prices and economic development. Everyone has seen that Europe has recently been unable to withstand the pressure and has taken the lead in lowering interest rates.

On the issue of "security and development," Europe will definitely choose "security" because it is related to its own "survival." However, Europe's security defense relies on the United States. The crux of Europe's integration, which has been going around in circles, is also here. Since the United States provides defense security for it, Europe will find it difficult to deviate too far from U.S. policies in economic and trade relations. Once there is a deviation, the "security issue" will be brought up, and the wars around Europe will appear like a "ghost." Let's take a look at the global currency settlement system (SWIFT). Before the Russia-Ukraine conflict, the proportion of the euro once rebounded, showing a trend of replacing the U.S. dollar. After the Russia-Ukraine conflict, there was a sharp decline. The euro not only declined in settlement but also sharply declined in the proportion of global currency reserves. Economic development without independent security defense is doomed to be awkward.

This reminds me of the "China-Japan-Korea Free Trade Zone" in East Asia. Before the pandemic, the three countries went through many negotiations and were about to sign, but the United States announced the deployment of the "THAAD system" in South Korea. On the issue of "security and development," they chose "security," and the free trade zone has been delayed indefinitely, with no clear prospect so far. Similarly, the security defense of Japan and South Korea is provided by the United States. Once the United States feels that the development of economic and trade relations has deviated too far from the track they expected, the security issue will be brought up, and at this time, the economic and trade relations will generally fail.

Now that Europe cares most about "European security" and the challenges posed by Russia to it, if they believe that China has provided convenience in the military aspect in the Russia-Ukraine conflict, it will definitely affect the development of China-Europe trade. The total trade volume between China and Europe last year was 780 billion U.S. dollars, and this number reached 840 billion U.S. dollars in 2022. The total trade volume between China and Russia last year was about 240 billion U.S. dollars, with an increase of more than 60%.

The current trade level between Europe and Russia is less than 90 billion euros, which was about 230 billion euros before the Russia-Ukraine conflict, a decline of about 147 billion euros, and it is still declining further. Before the Russia-Ukraine conflict, European industry enjoyed cheap energy and raw materials from Russia. Now, it is facing the need to import from the Middle East and the United States at relatively high prices, which is fatal for industrial manufacturing in terms of cost increase. However, it can also be seen that on the issue of security and development, Europe will choose security.From the proportion of sales in different regions, we should also be able to discern where our production capacity is primarily sold and where our major clients are located.

So, the question we face now is what to do?

This reminds me of the sport of boxing. When the opponent is too strong, one strategy is to hold on tightly, at least to deplete their energy, and then look for opportunities and solutions. Therefore, in the face of the United States defining China as a competitor, whether it's imposing high tariffs or building high walls around small yards, our choice is still to form alliances and divide and conquer, seeking space for our peaceful development.

We need to recognize that although the European Union relies on the United States in defense, it maintains a relatively strong independence in economic and trade relations, and is not a monolithic bloc. Thus, in the development of China-Europe relations, we should fully understand Europe's demands. Our approach is to conduct peaceful business with everyone, engaging in trade with all but坚决 not supplying fire to anyone, and in cooperation with anyone, we will not cross the boundary of "security". Trade between China and Russia is also open and transparent. Once the Russia-Ukraine conflict is eased and moves towards peace, the mistrust between China and Europe will also dissipate. Therefore, in dealing with this geopolitical conflict, we still need to promote peace as soon as possible.

Nationalism is on the rise globally, with right-wing political forces emerging in the United States and Europe. At this time, we must go against the tide. Our national condition remains that of a developing country with relatively low per capita income. We must be vigilant against the rise of narrow nationalism. The Boxer-like nationalism cannot save the country. By doing more business with everyone, improving the standard of living for our people, and strengthening our national power, to use a phrase from people in Hunan, it's not too late to "hold the board duck" then.