Arthur Poot

Student nr. 14D626282

S h a n g h a i U n i v e r s i t y



Sino-Dutch Trade Relations
INTRODUCTION
The trade relations between the Netherlands and China have not always been as good in
the past as they are today. Since the first contact in the 16
th
century the Dutch attempted to
establish trade relations without success. After the Opium War halfway the 18
th
century, China
opened up for trade with the Netherlands. Trade deteriorated in the 19
th
century as China
because of political strains. After 2004 trade between China and Europe took off, resulting in
a flourishing trade relation with the Netherlands.

SINO-DUTCH TRADE IN THE PAST

Attempts for Trade (17
th
& 18
th
Century)

The first Dutch contact with China took place at the end of the 16th century when a Dutch
sailor joined Portuguese trade missions to Macao. The Dutch already had established trading
posts in Indonesia with the Dutch East Indies Company, and in 1601 and 1603 were the first
attempts to establish trade relations with China. However, the Dutch only succeeded only to
attain superficial trade relations. In 1655 the first diplomatic Dutch trade mission left for Beijing,
but failed to gain permission for trade on regular basis. Subsequent attempts failed as well
until 1686, when the Dutch gained allowance to send ships to Beijing every 5 years (Kroese,
1973).
For a short time in the 17
th
century, The Dutch East Indies Company had a colony on the by
natives inhabited island Taiwan. The colony was very prosperous within a short time, which
lead to a constant migration of Chinese people. Soon the Dutch colony was plagued by
economic problems and rebellions of the Chinese immigrants. Finally, the Dutch lost Taiwan
to the Chinese (Yong Liu. 2007).

Gradual Development (19
th
Century)

In 1842, the Opium War formally ended the Treaty of Nanjing, which meant the end of the
exclusive regulated trade of China with the British. This led to other European powers being
allowed to have official trade relations with China again as well. The Chinese appointed
certain ports to be used for trading purposes. The Dutch chose the port of Xiamen on the
coast of Fujian and established their first consulate there in 1857. Trade relations continued to
gradually develop between the two countries, but it was not until 1863 that the first treaty of
friendship was concluded between the Netherlands and China, the Treaty of Tianjin. Finally in
1880 the Dutch legation in Beijing was established. Thereafter relations between Holland and
China were maintained on a regular basis (Yong Liu. 2007).

Turbulent Trade with Peoples Republic of China (19
th
century)
The Netherlands was one of the first nations to recognize the newly established Peoples
Republic of China. This was mainly done to establish better trading relations with China. In
1954 the first trading deals arose, however this didnt result directly into big trading deals,
because Chinese trade was mainly conducted with the U.S.S.R. and other communist
countries. From both sides trade controls were executed on which items were allowed to be
trade between pacts of Western countries and China. Chinas involvement in the Korean
war worsened the trade relations and increased the control on trade even more.
The failure of the Great Leap Forward and the ensuing depression, exacerbated by
successive crop failures for several years, combined with bitter Sino-Soviet dispute to cause a
sharp decline in the total volume of Chinese trade in the 60s. The Cultural Revolution in 1966
caused another drop in trade. The same year, the Netherlands abstained from voting for
Chinas admittance into the United Nations, which severely worsened Sino-Dutch political
relations and trade (Kroese, 1973).
In 1980 another political issue distorted trade. The Dutch government exported two
submarines to Taiwan. After long discussions between the two governments the decision was
made that in the future no additional supplies would be allowed. However this did not stop
the Chinese government from putting the diplomatic relations to the level of charge
d'affaires. The distortion of trade ended in 1984, when the Dutch government declined
another trade request of the Taiwanese government to buy more submarines.
In 1985 the EU-China Trade and Cooperation Agreement became the main institution to
regulate trade between the Netherlands and China. The EUs interest in China led to high-
level exchanges in the 1990s. Economic cooperation increased even more when the EU
launched their "New Asia Strategy" and the first AsiaEurope Meeting in 1996 made the ties
even stronger. When the 1997 Asian Financial Crisis took place and China weathered the
crisis well it became the major focus of EU trade (CBS, 2010).

SINO-DUTCH TRADE TODAY
Trade in the Netherlands
Trade is the driving power of both the Dutch and the Chinese economy. The Netherlands
derives more than two-thirds of its GDP from trade with an $556.5 billion and import of $490.1
billion in 2012. In the past 10 years the Netherlands has seen an increase in its trade balance to
a mean of around 3.5 billion Euros in the last 5 years, resulting in one of the most export-
oriented countries (see Figure 1). Its main export products are: machinery and transport
equipment (28%), mineral fuels (23%) and food (11%). The Netherlands main imports are: fuel
(29%), machinery (26%) and food and livestock (8.6%). Main trading partners are the
neighboring countries Germany and Belgium. France, China and the United States follow
next as important partners in trade (Trade Economics, 2014).



The numbers of trade are high for a small country as the Netherlands. This is because, many
products move in and out of the Netherlands, because of its logistical importance in Europe.
The Netherlands boasts Europes largest port and fourth largest airport. Transportation costs
through these main ports are low and connections to other European countries by land and
water are well-developed (Dutch Ministry of Foreign Trade, 2013).
For example, the import and exports of mineral fuel in the Netherlands are very high, because
of the logistical significance in the Netherlands. Value is added by refineries in the
Netherlands, but the geographical location and logistics serve for the largest part as the
competitive advantage that attracts the trade in mineral fuels.


The competitive advantage of the Netherlands lies in its innovative capacity in logistics, high-
end agricultural products and services, food technology, wind and solar energy, water
management and urbanization and infrastructure solutions.
Fiscal incentives and a strongly skilled labor force are also important factors that attract
countries to trade or develop business in the Netherlands. The Netherlands offers a low
corporate tax rate of just 25.5% and has signed the largest number of tax treaties with
countries around the world. Furthermore, Dutch workers are highly educated, multilingual and
flexible (Dragon Plaza, 2012).

Sino-Dutch Trade and Investment
n 2011 the trade deficit with China amounted to 23.8 billion.

Since 2004, trade between China and Europe has sky-rocketed, including with the
Netherlands. Globally speaking, the Netherlands is China's tenth most important trading
partner. The European Union as a whole is China's most important trade partner; within the EU,
the Netherlands is in second place, behind Germany. Total export from China to the
Netherlands amounted 35.0 billion in 2011 and imports 11.2 million resulting into a trade deficit
of 23.8 billion for the Netherlands. The high deficit can be explained, because the
Netherlands serves as a transportation hub for other European countries like Germany and
Belgium. Export from the Netherlands was $8.3 billion in goods and $2.9 billion in services to
China which makes up 0.7% of the Dutch GDP. Remarkable is that the Netherlands has a
trade surplus in services with China. Butter and Hayat (2013) elaborate in a paper that this fits
neatly to the theory of trade in tasks. Dutch have outsourced tasks such as assembly and
production to China and other Asian countries, while China has been outsourcing distribution
and trade management activities to the Netherlands (Butter & Hayat, 2013).
Also more Dutch businesses are moving to China as trade relations are getting stronger. All
Dutch multinationals have offices in China. A recent survey found that 13% of Dutch
companies plan to do business with Chinese companies and invest in manufacturing plants in
China.
Chinese investment in the Netherlands has so far been limited, but is growing steadily. About
300 Chinese companies have created a location in the Netherlands employing more than
6,000 people. The Netherlands is the third largest EU investor in China, and the third largest
recipient EU country of Chinese investment.
Institutions to support Sino-Dutch trade
There are many legal and physical institutions that help develop and advance a favorable
trade climate between the Netherlands and China. Those institutions consist of governmental
organizations such as chambers of commerce, but also legal institutions as treaties and pacts.
Most legal affairs and treaties are dealt with by the European Commission and hardly by the
national government. In the event of a trade dispute, it follows its procedures, in compliance
with EU law and WTO obligations.
One example is the latest trade issue between China and the European Union was
concerning solar panels. The European Commission found in an investigation that Chinese
companies were selling solar panels in Europe at far below their normal market prices and
were receiving illegal subsidies, causing significant harm to EU solar panel producers. In
reaction to the dumping of solar panels, the EU imposed import duties at an average of 47.7%
until December 2015 (European Commission, 2013).
Furthermore, many treaties and pacts have been designed on national level concerning
taxes and conjoint development focus. An example of a pact that focuses on innovation is
the the most recent Trade Pact has been signed in March 2014, when President Xi Jinping
brought a state visit to the Netherlands. The trade pact states that the Dutch government will
help China to increase its milk production to 40 billion kilograms in the coming years. The 2008
melamine scandals have damaged the trust of Chinese in local milk brands. Imported milk
products have a reputation for safety in China, but are far higher in prices than local brands
(China Daily, 2014).
Institutions in terms of organizations have been well established in China and the Netherlands.
The Netherlands has six Netherlands Business Support Offices (NBSOs) in China, that support
Dutch businesses through information provision, matchmaking, market scans, promotional
activities, economic diplomacy and support for trade mission (Dutch Government, 2014)s.

Trend and future expectations
The expectation is that China will even surpass the US in the next 10 years. China has big
ambitions: in its 12th Five Year Plan (March 2012), China aims at economic restructuring,
coupled with environmental and energy efficiency. This will have significant consequences
worldwide and in Europe.
Chongqing, Chengdu and Qingdao are especially attractive areas for Dutch companies,
because these cities have a strong and urgent need for Dutch products, services and
knowhow (Dragon Plaza, 2013).
If this growth in Chinese direct investments continues, by 2020 China will have invested a
massive sum of 400 billion Euros in the EU alone; which is more than all FDI received by
European countries combined today. Looking at the number of FDI projects, in 2011, Chinese
companies established 140 facilities in Europe, an increase of 22% compared with 2010.
Furthermore, Chinas WTO membership, its economic growth, and developments like the
Eurasia-corridor will make it even more attractive for Dutch companies to expand their
business to China (Ernst & Youngs European Investment Monitor 2012).

References
Butter, den F. & Hayat, R. (2013). Trade between China and The Netherlands: a case
study of trade in tasks. Journal of Chinese Economic and Foreign Trade Studies 2013
6:3, 178-191
China Daily (2014). China, the Netherlands seek closer co-op.
http://www.chinadaily.com.cn/world/2014xivisiteu/2014-
03/24/content_17371816.htm
Retrieved on 05-10-2014
Dragon Plaza (2012). Trade in Our DNA: Sino Dutch Trade.
http://dragonplaza-nl.com/en/newsdetail.asp?id=37
Retreived on 04-10-2014
Dutch Government (2014). Relations the Netherlands China
http://www.government.nl/issues/international-relations/china
Retreived on 03-10-2014
Dutch Ministry of Foreign Trade. (2013). Trade and Investment Relations Between The
Netherlands and China.
http://china.nlambassade.org/Zakendoen_in/bijlagen/rapporten/trade-and-
investment-relations-between-the-netherlands-and-china-2013.html
Retreived on 13-10-2014
Ernst & Youngs European Investment Monitor. (2012).
http://www.eyeim.com/pdf/E&Y%20European%20attractiveness%20survey%202012.p
df
Retreived on 09-10-2014
European Commission (2013). EU imposes definitive measures on Chinese solar
panels, confirms undertaking with Chinese solar panel exporters.
http://europa.eu/rapid/press-release_IP-13-1190_en.htm
Retrieved on 05-10-2014
Kroese, C. E. (1973). Dutch Trade with the People's Republic of China. Law and
Contemporary Problems, 230-239
Trade Economics (2014). Netherlands Balance of Trade
http://www.tradingeconomics.com/netherlands/balance-of-trade
Retreived on 01-10-2014
Treaty Database (2014).
https://treatydatabase.overheid.nl/en/Verdrag/ZoekResultaat?searchTerm=china&p
agina=1Retrieved on 07-10-2014
Yong Liu. (2007). The Dutch East India Company's tea trade with China. TANAP
monographs on the history of the Asian-European interaction, 91117