Sunday

27th May 2018

Analysis

Trump is 'gift' for China's EU agenda

  • There's no such thing as a private company in China, Garcia-Herrero said. (Photo: China Daily)

US president Donald Trump is seen in China as a "gift" for closer EU relations and for tipping the "geo-strategic balance" of power toward Asia.

That is the feeling in Beijing and beyond, according to Alicia Garcia-Herrero, a Hong Kong-based economist from the Bruegel think tank in Belgium, who co-wrote a new study on how to unlock tens of billions of euros in China-EU investment and trade.

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  • Xiaobo memorial in Hong Kong. (Photo: Etan Liam)

"Last year, my children, who go to school in China, didn't know why so many of their classmates wanted Trump to win the [US] elections, but it was because even normal Chinese families understood the implications. He [Trump] just looked so dumb and so creepy," she told EUobserver on Tuesday (12 September).

"Trump is the greatest gift that we [the West] could have given to China", she said.

Garcia-Herrero spoke amid a Chinese push to develop closer economic and diplomatic ties with the EU.

The country is rolling out infrastructure investments in the so-called Belt and Road project to help ship goods to Europe.

It is pouring money into central and eastern European states, such as Hungary and Poland, and southern EU countries, such as Greece and Portugal.

Its state-linked experts, from the China Centre for International Economic Exchanges in Beijing, also cowrote the study - EU-China Economic Relations to 2025 - that Bruegel's Garcia-Herrero took part in.

They said the EU and China should quickly conclude an "investment agreement" that would pave the way for a future free-trade pact and that they should relax visa requirements for each other's businessmen and students.

They also called for joint research and innovation projects and for greater cooperation on energy security and climate change.

China (€515bn of goods a year) is already the EU's second largest trading partner after the US (€610bn).

But the study said there was scope for an "enormous increase" in China-EU investments, with just €203 billion of cumulative foreign direct investments between the EU and China compared to the EU-US figure of €5 trillion.

The EU and the US were also in advanced talks on a free-trade pact, with diplomats on both sides saying the treaty would cement the trans-Atlantic bloc's dominant position in world affairs.

But that fell by the wayside after Trump's election and his "America first" economic policy.

Trump's isolationism has even called into question the future of trans-Atlantic security cooperation in Nato, prompting the EU to speed up defence integration, while his "dumb and creepy" personal image has stoked anti-American feeling in European society.

Garcia-Herrero said the EU should not underestimate the "geopolitical consequences" of a free-trade accord with Beijing.

"It is very keen on this because it would tilt the balance toward a more China-centred world", she said.

"It has geo-strategic motives beyond any commercial motives. Europe will not grow fast enough to remain China's number one market - it's rather about tilting the balance of world power toward Asia, which means toward China," she said.

Tim Summers, a Hong Kong-based expert for Chatham House, a British think tank, who also co-wrote the new study, added: "In future years, China's trade with south-east Asian states will overtake China-EU trade".

He said the fact that the UK, which accounts for one sixth of the EU's economy, was leaving the bloc, would accelerate that process.

Sensitivities

Trump's antics aside, Summers told EUobserver on Tuesday that the EU was "less sensitive" to the rise of China because it did not see itself as being in competition for global superpower status.

"Some people in the US see China as a potential competitor for the US status as global number one - I don't think Europe has that concern because it's not a global superpower and that creates a little more space for EU-China relations", he said.

He said there were concerns in both the US and the EU over China's acquisition of strategic assets, such as power plants or ports, but he said these were often overstated.

"Would China switch off the lights [in Europe]? No. I don't think it would," he said, referring to worries that Chinese firms were arms of the Chinese state.

The study on EU-China economic relations noted that there were "significant differences between the political and economic systems of the EU and China" that would act as "challenges" for "deepening their bilateral economic ties".

Private is public

Garcia-Herrero said that even so-called private Chinese companies were, in reality, state firms with deep ties to the ruling Communist Party.

She said she used to work for a "private" Chinese bank, but that this bank still based its planning on the same five-year cycles as the government.

She noted that the EU would have to accommodate the way that China subsidised its top firms, even though this clashed with European anti-trust laws.

"The two systems are not compatible, but China is not ready to give up its model, because the prize [greater EU trade and investment] is not big enough," she said.

She added that the political differences stretched to the human level of China-EU business.

She said Chinese CEOs owed their loyalty to the party rather than to their investors or shareholders.

"There is a revolving door system in which successful CEOs become party officials and vice versa … if you're the CEO of a big bank, then one day you will be the regulator of that same bank," she said.

"The party always has the upper hand and you can end up in prison if you go against its interests," she said.

Human rights

The political differences remain on show in the EU's arms embargo on China.

The ban was imposed after China massacred pro-democracy protesters in Tiananmen Square in Beijing in 1989.

It was never lifted in part due to US and British concerns over technology transfer to China, but also due to China's ongoing human rights abuses.

That issue was highlighted in July by the death in prison of Liu Xiaobo, China's leading pro-democracy activist and a Nobel peace prize laureate.

Summers, from Chatham House, said the arms embargo was unlikely to be lifted any time soon, despite Brexit.

He said it remained an irritant in bilateral relations, but would not act as a barrier to closer ties.

"It's still an issue but not a central one - it's more symbolic," he said. "From the Chinese point of view, if that were lifted, it would be welcomed, but there's also some realism," he said.

He added that human rights defenders in Europe were mistaken if they thought the EU could exert pressure by threatening to withhold trade and investment unless China made reforms.

"I don't see it as a simple trade off if we're looking at human rights … you've got to question what the EU's leverage is and how to deliver that [China reforms] and I'm not sure trade is a way of making progress in that area," he said.

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Stakeholder

Openness for greater prosperity, innovation for a better future

Reform and opening-up is a great process that has seen China and the world achieve development and progress together, with more than 700 million Chinese people lifted out of poverty, China's president Jinping told the Boao Forum for Asia.

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