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China Trends #5 - EU-China: Towards a Chinese Win

China Trends #5 - EU-China: Towards a Chinese Win
 François Godement
Special Advisor and Resident Senior Fellow - U.S. and Asia

One would never guess it from the storms that have brewed publicly in Europe about China - the slide in public opinion mood about China in most (but not all) EU countries; the controversies surrounding the "wolf warrior diplomacy" adopted by several Chinese ambassadors (and renamed "Kung Fu Panda" by China’s envoy to Rome); the popular, if not completely accurate, perception that China is responsible for the Covid-19 epidemic; the mixed results of Beijing’s "mask diplomacy"; the increasing media criticism over Xinjiang, Hong Kong and the renewed interest for Taiwan in several EU Member States, and in the Commission.

But the perception of EU-China relations remains largely positive among Chinese foreign policy elites, for good and (from our perspective) less good reasons.

China Trends is meant to understand and communicate how the other side thinks because ignoring the ideas and feelings of other parties can lead to policy mistakes. In the case of China, this is of course easier to ascertain for official, second track expert and analyst views than for public opinion as a whole. It is what the three articles collected in this issue do, and some of the results are indeed surprising. EU-China relations remain on track because both sides share "pragmatism" and support for multilateralism, while China supports European integration. In what could be a very controversial policy for Beijing, a young expert sees the EU’s coming investment screening regulation as a clarification and homogenization of what was a juxtaposition of national systems, or simply absent.

China Trends is meant to understand and communicate how the other side thinks because ignoring the ideas and feelings of other parties can lead to policy mistakes.

Others just warn Chinese investors not to tread on risky grounds – such as high tech or areas that affect national security and to focus on the scope that remains for welcoming Chinese FDI in Europe. On the 17 + 1 (formerly 16 + 1 before the addition of Greece) format for summits and other meetings with China, some of the views found by our guest author, Justyna Szczudlik, seem to focus on successes with the 5 non-EU participants (which indeed have been courted more successfully by Chinese lending), and they dismiss an overall €45 billion trade surplus with Central and Eastern Europe.

Some clouds in the relationship are acknowledged – Europe’s increased "assertiveness" which would be the cause of its March 2019 depiction of China as a "systemic rival"; China should work more with third parties (and especially Germany) in CEE countries to lessen reluctance from the EU; the investment screening process is unclear and creates new uncertainties and compliance costs. Interestingly, the three themes – criticism of "assertiveness", need to work with third parties, and request for clarity of rules and a negative list – are an exact mirror image of what is constantly requested from China by Europe! Strictly no value issues appear in our selected sources– whether it be human rights, divergences over international law (for example over the South China Sea), or the competition between democratic and socialist governance models captured by the notion of "systemic rivals", which is also present in many Chinese policy documents.

Do Chinese experts on the EU see only what they want to see? There may be another underlying explanation for some of this optimism. For another opinion that recurs is one of European weakness. CEE countries are classified as developing or emerging economies. Trends that are critical of China are ascribed to US pressure, particularly successful in Poland. Binding EU decisions on investment would require a treaty change. This is an honest Chinese analyst’s mistake since the Lisbon Treaty gave the EU exclusive competence on investment: but it is true that member states are far from politically accepting this. Ironically, China trusts the rule of law in the EU to limit some of the more negative policies towards market play: the European Court of Justice can prevent the EU or member states basing decisions on an abusive view of public order and security (and indeed, we know there have been hints of Chinese companies going to the ECJ on this basis).

EU’s toughened stand on investment is akin to protectionism, and crucially, Europe’s value chains are now less efficient than Asia’s. CICIR’s well-known European expert expresses it most crudely: Europe is "powerless in spite of its intentions". It will have no other choice but to move to flexible integration – in other words, to a two-tier or three-tier Europe? – and to be "pragmatic" (read, accommodating) to its outside partners and therefore to China.

Ironically, China trusts the rule of law in the EU to limit some of the more negative policies towards market play

Our selection does not cover some of the central and sometimes burning issues of this year: decisions on 5G, controversies over human rights that grow larger every year, the growing perception that supply chains must be made more secure, the lack of discernible progress on a new investment agreement or on climate change mitigation, the new Hong Kong crisis which is bound to have consequences for European presence as well. But on 17 + 1, investment screening and the overall relationship, it shows a Chinese expert trend that is trying to put a brave face on a deteriorated environment for the relationship. That this makes them overlook some issues, or that they have to rely on an assessment of European weakness, may lead to Chinese policy mistakes. But it is still better than some of the other manifestations of China’s new push abroad, from cyberwar to threats and fake news condoned by resident diplomats.


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