China and the European Union - A Common Future?

By Hannes Swoboda

The role of China in international relations - especially concerning the relations to the EU - is highly contested. Can China be regarded as a friend of the European Union, should it be treated as a dangerous enemy or as a competitor and challenger?

Friends are rare in international relations, perhaps we should rather speak about allies. But with allies, there is always the question against whom the alliance is directed? Even if the US and Europe have some basic economic conflicts with each other, I do not see China as an ally of the EU in this conflict. It is not an enemy either, as the EU has no conflicts with China in the Asian area. It is true, China is extending its political and military influence, but this region is not of prime importance for the EU. So China's position is rather one of a competitor and a challenger in many respects.

The economic development has given China an enormous push in the global arena. Figures for economic growth and technological developments show an increasing role of and for China and that will continue in the future. Neither the US, nor Europe or the other Asian superpowers like India and Japan can put a break on China's development. As China was dominating world trade already in the past - in the nineteenth century - so it will do it in the future again. That the future will "take place" in Asia, especially in China, Europe has to accept. But does the EU have to accept, that Europe will be a region without a say in that future, that globalization will be organized without European influence? Is the European destiny to be just a taker of influences and facts created by China without also to be a giver, an influencer itself?

It is strange to see, that especially the nationalists inside the EU are uncritically accepting a strong Chinese role in Europe itself, but also in Asia and Africa. They are just interested in short term gains and not considering a common policy, which would define, how Europe could deal in a strategic way with China. Because China has a long-term strategy and Europe could learn from them how to use globalization also its interest. Instead of an active strategy, Europe let the Chinese having a monopoly in this respect. And even the nationalists in Europe cannot believe, that they may control China' activities and lead them to their own national interests.

The US especially under Trump - who is anyway a friend of European nationalists - has another policy, which can be called a strategy, even if it is very simple minded. China is, according to Trump, an unfair player who robbed the US of many jobs and intellectual property. In addition, it is challenging the role of the US in Asian waters and the whole Pacific area. The US authorities are very critical concerning the role of "sensitive investors" and "sensitive technologies", especially in the area of security. The US fight against Huawei and its eagerness to be part of the future 5G networks around the globe is fought also vis-a-vis EU member states.

Forgotten are the times when Henry Kissinger could speculate of a Pacific Community. In his book "On China" he wrote: "One of the great achievements of the generations that founded the world order at the end of the Second World War was the creation of the concept of an Atlantic Community. Could a similar concept replace or at least mitigate the potential tensions between the United States and China? It would reflect the reality that the United States is an Asiannpower, and that many Asian powers demand it. And it responds to China's aspiration to a global role".

But not with Trump. He has another strategy and is even ready for a trade war, although at present both countries are trying to find a compromise. Europe, on the other hand, is far from having a clear policy - which should not go into the direction of a trade war, but in expressing precise demands for fruitful cooperation and fair competition. Only recently the EU Commission published a document which should be a guideline for the EU and its member states in dealing with China.

Belt and Road Initiative (BRI)

An important element of the Chinese globalization strategy is the Belt and Road Initiative or One Belt, One Road Initiative or New Silk Road. There is a lot of discussion about how much already has been really invested and about the economic and political effects of these investments. Clear is, that this initiative is not an aid program but that it is a money-making investment for China and that it should strengthen China's global economic and political role. In this respect, it is "the most gigantic attempt of supra-regional spatial planning". (Heiko Borchert, "Flow Control Rewrites Globalization”)

But it is more. It is a comprehensive geo-strategic project. Looking into the many investments into existing and new ports, one must come to the conclusion that a military dimension - even if still hidden - cannot be denied. These investments do also coincide with increased oversea activities of the People's Liberation Army Navy (PLAN). Obviously, these activities have also the role to accompany and safeguard the economic connectivity and the control of goods and

services flow to and from China. Insofar, economic and military interests are closely interlinked. Anyway, the naval activities have the purpose to reduce or prevent access to areas of vital interests of China (Anti Access/Area Denial - A2/AD)

Peter Frankopan writes in his "The New Silk Road" (p 246): "It is also important to recognize the fragilities that come with the transference of the economic center of gravity and with the uncertainty of a period of transition. The Chinese army is suffering from "peace disease", according to a recent front-page article in the "People's Liberation Army Daily' newspaper, because it has not fought a war so long." And in connection with a recent parade at sea, which should demonstrate the strength of the Chinese navy the Financial Times (23.4.2019) wrote: "After more than two decades of increased spending, China is transforming a navy once limited to coastal defense into a force capable of patrolling its near seas and venturing out into the high seas globally - two steps it considers vital for protecting its national interests, but which put it in conflict with the US, the military hegemon in the Pacific since the Second World War."

 

Infrastructure initiatives by China

Coming back to the core of the BRI activities one must recognize the attractiveness for many countries of the infrastructure investments, especially in the transport sector. One reason for the eagerness of many governments to receive Chinese investment is the reduction of World Bank activities in that field. "Originally the World Bank and other development banks were set up for this core function, but frankly, they've gotten out of business. Only about 30% of World Bank lending is for infrastructure these days." (David Dollar in "Foreign Policy”, April 2019) The decreased activities of the World Bank and a mixture of too bureaucratic rules in combination with justified social and ecological conditionality have opened many possibilities for China to convince governments to accept the "easier" Chinese offers.

One critical issue which is connected with the infrastructure investments is the rising debt of some of the countries which accept Chinese investments and loans. Deborah Brautigam, an American expert at Hopkins University, underlines that in some countries China's loans are responsible for a decisive increase in debts, but concludes, that the risks are overstated. In a recent article in the New York Times International (April 27-28), she writes: "There certainly are problems with China's approach to overseas lending. For one thing, Chinese banks still rely too heavily on Chinese construction companies to fund and develop BRI projects. Deals are often struck without any open tenders, creating opportunities for cronyism and kickbacks, and lending credence to accusations that projects bankrolled by China are sometimes overpriced".

So the message is, that Americans and Europeans should be more sophisticated and careful in their criticism of Chinese investments and lending. Again, more transparency and competition would be helpful to and benefiting receiving countries. But as such it doesn't match Chinese interests.

Recently Christine Lagarde, managing director of the IMF, expressed some optimism after China promised to "create a new framework to make the hundreds of billions of dollars of debt more “sustainable', in both a fiscal and environmental sense." (Financial Times, 3rd of May, 2019). And Gillian Tett concludes her contribution: "It would be naive to think this will deliver real transparency anytime soon nor will it prompt China to take the next obvious step and join the Paris Club of responsible creditor nations (…) the wider world shouldnapplaud and strongly encourage these hints of change, particularly at a time when relations between China and the west are deteriorating in so many ways."

But not only the failures of the World Bank and Western weaknesses gave China many opportunities to extend its power and influence. Geopolitical Russia's concentration on its European neighborhood and on the Middle East has also opened doors for China's global activities. Only slowly Russia wakes up and is enhancing its activities in Africa, but mainly in the military sector and here with the arms trade. The US under Trump is still not waking up or has only a "negative" strategy promoted by Security Advisor John Bolton, who is accusing China with words which can be easily turned against the US itself.

 

China as - informal - European power

So it would be up to Europe to act in a determined but reasonable way. But is Europe still independent enough from Chinese interventions to design such a strategy? Andrew A. Machita writes in The American Interest (April 2019) "Ranging across loans, infrastructure projects, stocks, real estate, and technology acquisition, China has embedded itself in Europe in a way that is poised to change both Intra- European relations and the very foundations of security cooperation across the Atlantic". Unfortunately, the US has no viable multilateral strategy and is embedded in short term self- interest. So Europe is left alone and even concerning the inner- European decision making, China has become a European power - via some of its partners amidst the member states.

Nevertheless, Europe has to defend its economic and its security interests and its values on which the EU has been built and which are at stake with new technologies, in which also China has a lead. Europe's participation in a global world does not mean that one should open all the markets without looking into the consequences and asking for reciprocity.

China with reference to its development character rejected often reciprocity, especially when it was helpful to gain advantages. It used that position to develop highly sophisticated technologies - often by using western technologies as starting points. Some of these technologies are used to develop a comprehensive system of personal control and guiding and if necessary enforcement.

These new developments towards a totalitarian "Surveillance State" must be of grave concern. The use of facial recognition systems to control the citizen's behavior and especially the activities of its Muslim/Uighur population is extremely worrisome. In the meantime, Chinese surveillance equipment is also exported. 18 countries are using Chinese made intelligent monitoring systems and many more have received training to use such systems for surveillance and censorship. Many experts fear that with Huawei technologies built into our 5G infrastructure China would, on the one hand, introduce such systems into these infrastructures and on the other hand use it for spying on activities by users of 5G systems.

 

Is there an alternative to bowing to China"s "rules"

"China's understanding of order emphasizes the role of relations rather than actors. Togetherness results from different forms of interactions that are not driven by clear-cut rules and procedures, but are deliberately informal, unstructured and opaque." (Heiko Borchert) If China's attempt to control the flow of goods and services it needs and it wants to export is very "informal, unstructured and opaque", so the West should demand more formal, structured and transparent participation of China in global activities. Bill Clinton underlined in a speech at Yale University in 2003, "that the only way to manage the next superpower is to create multilateral rules and partnerships that would tie it down"(Kishore Mahbuhani, "What China Threat?" in Harpers Magazine, February 2019). But today's US administration is not interested in any multilateral structures.

Therefore, it would be up to Europe to develop such a strategy. In a joint Communication by the European Commission and the EU High Representative, the EU asks China "to support effective multilateralism" and "to uphold rules-based international order". Not that the EU is perfect in this respect, but the real question is if China is ready to cooperate with the EU in effective multilateralism in Europe itself or in Africa for example. Another issue where the EU is clearly demanding action from China is reciprocity in public procurement and enforcing a high level of labor and environmental standards as well as transparency of state ownership and state financing. A special case is the critical digital infrastructure. Here a "common EU approach to the security of 5G networks is needed." But it seems that the EU Commission is coming too late with its willingness to "issue a Recommendation following the European Council".

Because of some pressure of the EU at the recent EU-China summit, China promised to be more open and ready for discussions of its strategy and plans. One has to see if these principal declarations are followed by relevant actions.

Without stronger pressure and clear demands from the EU - as far as they can find a common policy - China will only do the minimum of adaptations. And consequently, China will continue to work on individual member states and try to be an important unofficial member state of the EU. Insofar the Chines foreign minister must not correct his statement he issued after his last visit to Brussels: "Overall China and Europe relations are in good shape. There are far more areas where we agree than disagree."