The highly ambiguous relationship between the EU and China becomes evident in the many roles the EU ascribes to China; “cooperation partner”, “negotiating partner”, “economic competitor” and “systemic rival” are references within just one document published by the EU Commission in March 2019. This is quite a range for a trading relationship that averages around €1bn a day. Emblematic of this changing and diverse nature of approaches is Germany’s stance towards the Asian powerhouse.
Over the last decade, Germany had taken numerous successful steps to improve relations with China. It ranks as a top three import/export partner for China and is one of only three countries running a trade surplus with it. However, recently Angela Merkel denoted China as a “systemic competitor”, which appears to agree with a report published by the Federation of German Industries earlier in 2019, cautioning companies in business with China and their dependency on them.
The list of grievances Europe has with China is long. Foreign Affairs point to the Made in China 2025 strategy intending to propel China forwards as the world’s leader in high tech manufacturing, which was widely received as a threat from Europe as it aimed to replace foreign technology with Chinese-made alternatives, leading to investment limitations in important industries the 5G networks would cover, such as robotics and advanced railway equipment. Other Chinese missteps such as the LinkedIn scandal, intellectual property theft accusations, unfair treatment of foreign companies and its authoritarian political turn bringing with it an avalanche of human right issues, continues to put a strain on relations.
Its Belt and Road Initiative (BRI) has also caused Europe concern. In particular, it has taken issue with so-called debt-trap-diplomacy, referring to predatory practices through which BRI projects have entrapped countries with debt and exerted control over key infrastructural points. It is also increasingly seen as an encroaching and infiltrative attempt to introduce Chinese technological clout.
So far 13 EU member states have signed up to the BRI, but Italy’s decision to officially join was received with much unease as the first G7 country that joined the BRI efforts and alarmed many European leaders.
Despite being promoted as a tool to link and increase financial integration and solidarity across the respective regions and alleging to encourage foreign companies to participate in tenders, the reality is that only a small percentage of them sign projects, compared to their Chinese competition, which is awarded 80% of projects. Considering the influence it is exerting through countries such as Greece, Portugal, and Hungary that repeatedly veto measures and water down language directed towards China, it paints a less than ideal picture for project EU.
It will be in the best interest of the EU to resolve the absence of a comprehensive strategy. Its inconclusiveness has resulted in an uneven, porous structure with differing levels of sympathy towards Chinese investments in the continent and peripheries, crippling efforts in finding a common strategic goal. China’s (more) difficult relationship with the US and its transition into a consumption-led economy provides a major opportunity for European export growth. This could in time lead to a re-balancing in East-West trade, which would lower logistics costs by reducing the amount of empty containers returned to China. However, the state of the relationship at present means the potential for growth is less than certain. Ultimately, it will be a matter of managing the risks that come with a close EU-China relationship, while balancing and reaping the inherent benefits China and the BRI still offer the EU.
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)