EU remains a big external challenge to China's economy

Weak demand globally especially in the EU is the biggest external challenge for China's economy in 2013, said European economists.

The experts made the comments after the Chinese government released economic figures on Friday.

"Weakness in developed markets, especially the EU, will remain a major challenge," said Duncan Freeman, researcher of Brussels International Institute of Contemporary Chinese Studies.

Freeman said domestically the biggest challenge will be pushing forward a clear reform agenda while supporting strong in order to create long term sustainability for the economy.

Rainer Gehnen, general manager of the German-Chinese Business Association in Cologne, said that externally China will remain to be strongly depended on the overall economic and financial developments in the EU and US. "China is asked to help where it can. However, the major homework is to be done by the governments in Washington and the European capitals," said Gehnen, adding that they must mainly reset a sustainable global banking and financial system and must end their policies of high deficit spending which puts too much burden on future generations.

Both Freeman and Gehnen said China's performance was strong in 2012, in the context of the economic problems in the developed world.

Freeman said one problem is that China will continue to have a significant level of dependence on external markets, although this has been declining in recent years as a result of the collapse in demand in the developed markets.

"The structural shift to domestic consumption will remain a key long-term policy challenge. Investment remains a problem in the Chinese economy," said Freeman.

While the Chinese economy needs investment and high levels of investment are likely to continue, Freeman said a key problem is directing investment efficiently into those sectors where it is actually needed and avoiding the type of redundant investment that has occurred in the past.

Freeman said the crisis in the EU will continue to be a significant factor in bilateral relations, and will limit prospects for a revival in Chinese exports to Europe.

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