Eng | Pyc

 

   

Bolatkyzy N. China and the European Union: cooperation at the present stage

Chinese-European cooperation in various fields is becoming an increasingly important factor in world economy and politics. The role of this factor becomes ever more significant as the relations deteriorate between the EU and the USA, and between the EU and Russia.

 

New stage of the China-European strategic dialogue

China’s interests in the EU include:

– Free access to the European single market;

– The security of their investments;

– A significant diplomatic alternative as a counterweight to the United States [1].

As for the EU, in 2016 it adopted a 5-year strategy “Joint Communication on elements for a new EU strategy on China”. This document defines the main cooperation opportunities, in particular, with the aim of creating jobs and economic growth in Europe, as well as the active promotion of greater openness of the Chinese market for European businesses [2].

Today, China and the European Union (EU) are the largest trading partners in the world [3]. In 2016, the total trade turnover between China and the EU amounted to €514 billion. Chinese exports to the EU amounted to more than €344 billion; exports of European goods to China totaled €170 billion [4]. In 2016, the volume of Chinese direct investments into the EU reached €35 billion (77% more than in 2015). Chinese investors are showing great interest in technology and advanced manufacturing assets [5].

After joining the WTO, China have committed to reform and liberalize important sectors of its economy. However, a number of issues remain unresolved: lack of transparency, non-tariff measures that discriminate against foreign companies; strong state intervention in the economy; unequal access to subsidies; protection of intellectual property rights [6]. The EU demands that China led fair and transparent trade relations, respect intellectual property rights and comply with its obligations as a WTO member [7].

In addition, there are fundamental contradictions in the relations between China and the EU: from the EU embargo on deliveries of weapons and military equipment and claims of the Europeans on human rights in China to some disagreements with individual members of the EU, for example, on the issue of Taiwan [8].

In 2016 China investments to the EU increased by 77% and investments of the EU to China, on the contrary, decreased. The EU intends to compensate the inequality in bilateral trade by means of tariffs. The EU already approved new restrictive measures against Chinese steel. In April and May 2017, import duties on steel were increased to 55%. At the same time, European countries confirmed that they did not intend to grant China the status of a country with market economy in the WTO [9].

Nevertheless, Chinese experts believe that the relationship between China and the EU have reached a new level, characterized by the following trends:

  • Transition from “simple” trade to mutual investment;
  • Enhanced strategic dialogue (China and the EU consultations on Africa, Central Asia, Latin America, etc.);
  • Active involvement of the EU in the Asia-Pacific region security issues (Chinese experts believe that “the EU has overcome the shadow of NATO”);
  • China’s desire to attract European countries to the “Belt and Road” project [10].

Number of visits of Chinese President XI Jinping to the EU demonstrate that the “Belt and Road” project has become the main driving force of cooperation between China and the EU. During these talks in Europe, XI Jinping introduced “a new concept of partnership”, which he positioned as a diplomatic innovation of the new leadership. In addition, China recalls that the EU has two permanent members of the UN Security Council that “makes the Chinese-European cooperation more meaningful” [11].

Several EU member-countries have already declared their support for the Chinese initiative. However, bureaucratic opacity and uncertainty in the project constitute serious obstacles to China’s efforts aimed at persuading European partners to finance infrastructure projects [12]. In this regard, China and several EU countries are cooperating mainly on a bilateral basis and not in the framework of the common strategy of the EU. Chinese investors have focused mainly on the countries of the “big three” (Germany, France and the UK).
 

Chinese strategy towards Germany

Currently, China is seeking to use the tension in transatlantic relations in order to strengthen their relations with Germany. For example, in 2016 the volume of Sino-German trade reached €170 billion. China has become the largest trading partner of Germany, ahead of the United States. This was due mainly to increased Chinese imports, which also created a trade deficit of Germany in China’s favor for €17 billion. The volume of Chinese investments in Germany in 2017 has reached more than €12.5 billion [13].

The unique geographical position of Germany opens new opportunities for the implementation of the project “Belt and road”. In particular, the Chinese goods come into Europe via sea routes, mainly via Hamburg. In addition, transport and freight route Chongqing-Duisburg is very important. In May 2017, Deutsche Bank, 10% owned by the Chinese Fund HNA has signed an agreement with China Development Bank on the €2.7 billion to finance “Belt and road” projects [14].

Along with impressive economic indicators, there are contradictions related to the limitations of the Chinese market for German companies. Thus, more than 5,000 German companies operate now in China but they do not have access to the ICT sector, cannot bid for procurement deals, and face restrictions under the country’s cybersecurity law (binding from 1 June).

Meanwhile, the EU market is open to Chinese investors in line with the rules of free competition. [15].

In 2016 the Chinese companies made 68 acquisitions in Germany – more than in any other European country. In particular, in 2016 the Chinese company Midea acquired a large German manufacturer Kuka robotics for € 3.7 billion, which caused an outbreak of grievances from the political opposition and American authorities [16]. Washington fears that Western technology could be used by Beijing for military purposes. In turn, the German experts are outraged that the process of acquiring companies is one-sided – German companies face many obstacles in the acquisition of shares from the Chinese side [17].

In this regard, the Chancellor said that it is necessary to block the purchase of shares of important companies and foreign investors, “if countries like China just want to buy something that was created with a lot of subsidies, we have to respond to it” [18]. At the same time, Western experts are concerned that the tough stance of Germany may lead to the fact that Chinese investors will try to circumvent the rules and get access to the main intellectual property through affiliate companies outside of Germany [19].

 

French vector of Chinese foreign policy strategy

In 2016, the China-French trade turnover exceeded € 68 billion. France is the 8th largest trade partner of China. It accounts for €16 billion, i.e. 1.6% of the total volume of foreign trade of the PRC.

In turn, China is also one of the largest partners of France (after the USA and Britain) with a total turnover of € 40 billion (9% of the French market) [20].

In recent Chinese investments in France years has increased significantly, and stocks of direct investment at present is about €5 billion. France supports Chinese investments that create jobs; there are more than 45 000 people working in 700 branches of Chinese and Hong Kong companies in France [21].

The volume of French direct investment in China reached €33 billion in all sectors, including agricultural production, industry, transport, urban development, major retail and financial services. In China, there are more than 1,100 French companies.

The development of cooperation between China and France to some extent hindered the rapprochement of the latter with the United States. The President of France Emmanuel Macron supports the United States on security issues, including the elimination of North Korean nuclear threats [22].

In addition, Beijing seeks to build its own security system in the Asia Pacific region and gradually extend it to the Indian Ocean that may be in conflict with the interests of France and its strategic partners (Japan, India and Australia). The concern of France is the successful cooperation of China with Djibouti [23]. On August 1, 2017, China opened its first foreign military base on the territory of the East African state of Djibouti, which is the area of the French military base [24].

Macron policy is forcing Beijing to rely mainly on the countries of the South and East of the EU, many of which have been critically dependent on Chinese investment in recent years. China hopes that the opposition of Portugal, Greece, Sweden and Spain will allow avoiding the introduction of new restrictive measures from the EU [25].

 

The China-British strategic partnership in the context of Brexit

In 2016, the trade turnover between the two countries exceeded £60 billion [26]. In general, Britain was one of the “conductors” of Chinese investment in the EU. A special center of the Chinese telecommunications giant Huawei was established exactly in Britain, for the study of technologies and to ensure of Huawei product compliance with European safety standards. Currently, the share of Huawei accounts for over 20% of the infrastructure costs of mobile networks in European countries, in North Africa and the Middle East [27].

A major joint project, realized today, is the construction of NPP Hinkley Point with a total cost of £18 billion ($24 billion). The project’s first 20 years of the nuclear power plants in Britain involves the construction of two nuclear reactors in southwest England. It is jointly funded by the French Electricite de France (EDF) and a consortium of Chinese investors led by China General Nuclear (CGN). The first supply of electricity is planned for 2025 [28].

Despite the diplomatic and economic rapprochement, the future of relations between China and the UK looks uncertain today, especially in light of Brexit. Some economists believe that the UK will become a more attractive market for China after the liberation from the trade rules of the EU.

 

Conclusions

First, the European Union and China are not considered as geopolitical or military competitors. The locomotive of Chinese-European relations is economic cooperation.

Second, unequal conditions for European companies in the Chinese market cause discontent of Germany, France, and the UK, which lead to the adoption of retaliatory restrictions for Chinese companies on the European market.

Thirdly, despite the intensification of trade-economic and investment cooperation between China and the EU, there remain some problems: the EU embargo on arms to China, recognition of China as a market economy, the absence of a common position in relations between China with EU and individual countries-EU members and etc.

________________________________

[1] Yu J. After Brexit: Risks and Opportunities to EU–China Relations //http://onlinelibrary.wiley.com/doi/10.1111/1758-5899.12440/full?wol1URL=/doi/10.1111/1758-5899.12440/full&regionCode=KZ&identityKey=84470729-d838-4fd2-bd9c-2caa92852df4.

[2] ЕС утвердил новую стратегию сотрудничества с Китаем на ближайшие 5 лет //http://www.eurointegration.com.ua/rus/news/2016/06/22/7051087/.

[3] China //http://ec.europa.eu/trade/policy/countries-and-regions/countries/china/.

[4] Client and Supplier Countries of the EU28 in Merchandise Trade (value %) (2016, excluding intra-EU trade) //http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_122530.02.2017.pdf.

[5] Hanemann T, Huotari M. Record Flows and Growing Imbalances: Chinese Investment in Europe in 2016 // http://rhg.com/reports/record-flows-and-growing-imbalances-chinese-investment-in-europe-in-2016.

[6] China //http://ec.europa.eu/trade/policy/countries-and-regions/countries/china/.

[7] China //http://ec.europa.eu/trade/policy/countries-and-regions/countries/china/.

[8] Кузнецов А,В, Перспективы отношений ЕС и Китая. Китай и глобализация, М.: ИМЭМО РАН, 2012. С. 55-66.

[9] Макрон атакует Пекин: США и Франция объединяются против Китая //https://ria.ru/world/20170701/1497545092.html.

[10] Виноградов А.О. Европейский визит Си Цзиньпина: новая китайская дипломатия в действии //file:///C:/Users/user/Downloads/evropeyskiy-vizit-si-tszinpina-novaya-kitayskaya-diplomatiya-v-deystvii.pdf.

[11] Там же.

[12] Yu J. After Brexit: Risks and Opportunities to EU–China Relations // http://onlinelibrary.wiley.com/doi/10.1111/1758-5899.12440/full?wol1URL=/doi/10.1111/1758-5899.12440/full&regionCode=KZ&identityKey=84470729-d838-4fd2-bd9c-2caa92852df4.

[13] Китай покупает Германию //http://expert.ru/2016/12/27/kitaj-pokupaet-germaniyu/.

[14] China’s Plans to Strengthen Relations with Germany //https://www.pism.pl/publications/bulletin/no-65-1005.

[15] Там же.

[16] Chinese-Owned Robot Maker Is Gunning for No. 1 in Booming Market //https://www.bloomberg.com/news/articles/2017-03-08/midea-eyes-top-spot-for-kuka-in-china-s-booming-robot-market.

[17] Китай покупает Германию //http://expert.ru/2016/12/27/kitaj-pokupaet-germaniyu/.

[18] Сhina, Germany Step Up as U.S. Retires From World Leadership //https://www.bloomberg.com/news/articles/2017-07-03/as-u-s-retires-from-world-leadership-china-and-germany-step-up.

[19] Germany is trying to stop China from gobbling up its companies — but there may be a downside //https://www.cnbc.com/2017/08/23/germanys-chinese-takeover-regulations-could-have-a-downside.html.

[20] France-China, a global strategic partnership (Infographic) //http://www.diplomatie.gouv.fr/en/country-files/china/france-and-china/france-china-a-global-strategic-partnership/.

[21] France and China //http://www.diplomatie.gouv.fr/en/country-files/china/france-and-china/presentation/.

[22] Трамп заявил Макрону о готовности применить против КНДР военные меры //http://www.mk.ru/politics/2017/08/12/tramp-zayavil-makronu-o-gotovnosti-primenit-protiv-kndr-voennye-mery.html.

[23] Гомар Т. Франция и «большая тройка» //http://www.globalaffairs.ru/number/Frantciya-i-bolshaya-troika-18922.

[24] Китай открыл первую военную базу за рубежом — в африканской Джибути //http://www.newsru.com/world/01aug2017/basedjibouti.html.

[25] Макрон атакует Пекин: США и Франция объединяются против Китая //https://ria.ru/world/20170701/1497545092.html.

[26] China – UK Trade: The Effects of Brexit //http://www.china-briefing.com/news/2017/03/03/china-uk-trade-the-effects-of-brexit.html.

[27] Половина Е.В. Факторы влияния в европейско-китайских отношениях //http://politika.snauka.ru/2014/05/1645.

[28] В Великобритании началось строительство первой за 22 года АЭС //http://www.interfax.ru/world/561796.