This is the first part of a two-part conversation on EU-China relations. Next week, YCW will return to our participants for final thoughts.

In the span of a few weeks this year, the leaders of Germany, the UK, and France held bilateral meetings with Chinese President Xi Jinping. When Xi visited the UK in October 2015, Chancellor of the Exchequer George Osborne heralded a “golden era” of the Sino-British relationship and declared Britain China’s best partner in the West. Up to £45bn in trade and investment deals were signed during Xi’s state visit. Just one week later, German chancellor Angela Merkel visited China and was assured that Germany remains a priority for the Chinese government. Trade with Germany accounts for more than 40% of total EU trade volume with China—more than the UK and France combined. Young China Watchers (YCW) invited Angela Stanzel (ECFR), Shada Islam (Friends of Europe), and Damian Tobin (SOAS) to discuss the heightened competition between European countries when it comes to China.

 

angelaAngela Stanzel is a Policy Fellow at ECFR’s Asia & China program. Angela earned a PhD from Freie Universität Berlin and worked for the BMW Foundation, the Koerber Foundation, the German Marshall Fund, and the German Embassy in Beijing. Alongside China’s history, politics, and economics, her research work focuses on East and South Asia’s foreign and security policy. Angela is the latest addition to YCW’s Berlin team.

 

Islam_ShadaShada Islam is Director of Policy at Friends ofEurope. She is responsible for policy oversight of Friends of Europe’s initiatives, activities, and publications, including the Asia Programme. Shada is the former Europe correspondent for the Far Eastern Economic Review and has previously worked at the European Policy Centre. Shada also writes on EU foreign and security policy, EU-Asia relations, and trade and development issues for leading international press. Shada spoke at YCW’s Brussels launch in October 2015.

 

dtDamian Tobin is Lecturer in International Management at the Department of Financial and Management Studies (DeFiMS), SOAS, University of London, and academic director of the MSc International Business Administration distance-learning program. Damian earned a PhD in Finance and Management at DeFiMS. His current research focuses on state enterprise reform in the petroleum and banking sectors and the topic of RMB internationalization.

 


Young China Watchers

To begin, Angela, what is the German reaction to the proclaimed “golden era” of Sino-British relations? To what extent do you see a strategic shift of Chinese trade streams from Germany to the UK?

 

Angela Stanzel

The UK-China warming of trade relations has been seen in Germany as an attempt by British policymakers to copy Germany’s close economic relations with China. There does not seem to be much envy or concern in Germany about London’s proclaimed “golden era” of Sino-British relations—this is because China and Germany have established a “special relationship” that is not easy to copy. China and Germany have developed an increasingly close relationship over the last decade based on the exponential growth of German exports to China, but both countries have also begun to broaden their relationship on political issues, including security issues.

Compared to the pompous visit of Xi Jinping to the UK in October, Merkel visited China one week later with a delegation that consisted only of 20 business representatives, a far cry from past visits with up to 100 people in a business delegation. A German official I spoke to commented that this might have been an intentional contrast with the Xi visit to the UK.

At this stage, the question might not be whether there is a strategic shift of trade streams, but rather what kind of special relationship the UK wants to have with China. Looking at Germany, its dependence on China has begun to look particularly problematic as the Chinese stock market crashed in July 2015, leading to much speculation about the potential effect on German exporters. In the near future, British policymakers will have to evaluate whether they want to lift relations with China to a “new height” if China’s own economic future is in question—be it because of a “normal” transition to slower growth or a deep-rooted economic crisis.

 

Shada Islam

It is significant that Xi’s visit to the UK came quickly after his trip to the U.S., highlighting China’s interest in developing closer relations with Washington’s closest European ally, Britain.

Xi’s UK visit doesn’t distract from Beijing’s interest and determination to deepen and expand ties with Europe per se. The Chinese see Europe as one entity, with 28 national components as well as the EU institutions. They are working to improve relations with “all parts” of Europe. Building stronger China-UK ties will not impact Beijing’s long-standing relationship with Germany.

This is also true for China’s dialogue with the Central and Eastern European Countries (CEEC), which was once seen by the EU as a sign of China’s ability to “divide and rule” Europe. I don’t buy into that argument. All countries—the U.S., India, Russia—have bilateral ties with individual European states and the EU as well. China is no different. All these different partnerships add to China’s overall, multifaceted relationship with Europe.

In fact, even as Beijing schmoozes national capitals, EU-China ties are also improving with the launch of the connectivity platform, the working group on investments, and an agreement to cooperate on developing 5G networks. There is a focus on synergies between the “One Belt, One Road” project and Europe’s own investment blueprint for transport, digital, and technology networks.

The Chinese economy may be slowing down, as Angela Stanzel underlines, but I don’t think this will impact on Europe-China relations in any major way: The European market will remain important for Chinese businesses and investors. European expertise and know-how is critical to help meet China’s urbanization, climate, innovation, and other developmental challenges. And it’s not just about trade and business—although this remains the backbone of the Europe-China relationship. It’s also about tackling challenges in a multipolar and multi-complex world, including on issues like the Middle East, Iran, and North Korea.

There used to be a time not-so-long ago when China’s friendships with individual EU member states were viewed with suspicion by Brussels. Fortunately, such unease is now mostly gone, with many policymakers agreeing that stronger bilateral ties between the China and individual EU member states help to consolidate and deepen the wider EU-China relationship. It’s the wisest approach to take.

 

Damian Tobin

As pointed out by the other contributors, the visit of Xi Jinping to the UK was greeted with pomp and ceremony. More importantly it offered the UK a chance to shed the impression that it has been “too late to the party.” The early part of the visit was to some extent overshadowed by the news of further job losses in the UK steel industry and the potential impacts of Chinese involvement in the UK’s nuclear industry. While President Xi would have been all too familiar with the problems of falling prices and the unemployment threat posed by steel industry consolidation, the UK was portrayed as being reluctant to raise these issues. The Chinese president may also have understood well concerns about foreign participation in key strategic power projects. Unlike its European counterparts, the British nuclear industry has not had the same history of technical cooperation with Chinese firms and tends to lack competencies in large-scale projects. Consequently the participation of Chinese firms in UK infrastructure projects means fewer opportunities for UK firms.

When then-Vice Premier Li Keqiang visited Europe in 2011, it was apparent that Chinese interests lay mostly in European infrastructure and German car-makers. The UK’s financial sector seemed of rather distant interest. The UK has since upped its game, essentially playing its trump card: financial services and the City of London. If, as Angela Stanzel has pointed out, risks to the German strategy have been amplified following this summer’s stock market rescue, then the risks for UK-China economic links are even greater. The stock bailout highlights obvious mismatches between the Shanghai Stock Exchange and its London counterpart.

While I agree with the general comment that future EU countries’ relationships with China are less dependent on competition among member states, I offer a caveat to Shada Islam’s point: The way the UK economy has chosen to engage with China means that it is far more dependent on China reaching its targets of creating a moderately prosperous society and liberalizing its capital account by 2020. If China does not reach these development milestones, the outcome for UK-China relations could well diverge from that of other European countries. Furthermore, if the UK cannot resolve longstanding bottlenecks to trade with China by itself—a lack of airport capacity, for example—cooperation with other EU countries on a unified China trade policy may be in Britain’s best interests.

 

— Conversation by Insa Ewert

Featured photo credit: European External Action Service/ Flickr.

 

YCW Conversation – Part I: Scramble for China? European Countries Between Competition and Cooperation
Facebooktwitterlinkedin

Leave a Reply

Your email address will not be published. Required fields are marked *