THE HAGUE, 15/09/06 - The Netherlands has no need to fear China's emergence as an economic power. The country's spectacular economic growth in the past decades has on balance had a positive effect on the Dutch economy, concludes the Central Planning Bureau (CPB) in the report 'China and the Dutch economy; stylised facts and prospects'.

Dutch trade with China currently yields the Netherlands 23,000 jobs. China has grown to be the Netherlands' fourth most important supplier, accounting for nearly 8 percent of imported goods. Cheap imports from China brake Dutch inflation by 0.2 percentage points annually, resulting in savings of around 300 euros for the average Dutch household. Expectations are that these Chinese exports will double again in the next five years, added the CPB.

Dutch exports to China currently account for 0.9 percent of total exports. As a percentage of GDP (0.6 percent), China's significance for the Netherlands is comparable with that of the other EU member states in the eurozone. No less than two-thirds of what the Netherlands imports from China is immediately re-exported, mainly to other EU countries.

Goods exported a lot by China are relatively unimportant in the production range of Dutch companies. This applies both to goods made with plentiful low-skill labour (textiles, shoes, toys) and to technology-intensive consumer electronics assembled in China. "The competition effects for Dutch companies are thus limited, meaning that the rise of China will not lead to drastic sectoral shifts."

Dutch direct investments in China are very limited in size. In 2005, these investments totalled 1.7 billion euros, just 0.3 percent of the total foreign investments of Dutch companies. Dutch companies have mainly invested in China because they consider it an interesting market. The low wage costs are a much less important motive. In due course, opportunities are expected to arise for Dutch companies in China, particularly in the market for services.

CPB concludes that "specific policy measures to prevent the rise of China turning out to the disadvantage of the Dutch economy are not necessary," though innovation is important. It is wise "to create favourable preconditions for companies that want to obtain access to the Chinese market via exports or foreign investments." Additionally, the emergence of China offers opportunities to the Dutch economy for strengthening its function as gateway to Europe.

The CPB worked in partnership with the Dutch central bank (DNB) and the London-based National Institute of Economic and Social Research on the study. The research was carried out at the request of Economic Affairs State Secretary Karien van Gennip.