Q&A: China and Europe Relations in BRI environment and changing the world order
What is the New Silk Road or the Belt and Road Initiative (BRI)?
I am going to try to throw out some pointers. The New Silk Road comes from the ancient Silk Road which traditionally was on shore unlike Belt and Road which is off and on shore. China’s global project is about two international trade connections: The land-based "Silk Road Economic Belt" and oceangoing "Maritime Silk Road." It will stretch from Xi’an in central China through Central Asia to Moscow, Rotterdam, Athens and Venice.
Sometimes it seems to me the one world will not be sufficient for BRI development goals. There are people who fear it will fulfil all empty spaces of the world with new bridges, ports and highs speed railways.
The New Silk Road is very positive and optimistic project aimed to bring the world shared growth, development and connectivity. I understand it as a way forward that Europe needs to travel. It offers many opportunities but they will not last forever.
Who stands for BRI?
The Belt and Road has the highest political backing from Xi Jin Ping who presented it three years ago in Central Asia and since than it has been accepted by more than 65 countries and this acceptance could turn The Belt and Road into a process that could become pivotal for economic and people to people connectivity among Asia, Europe and Africa. It does have support in Asia and in Europe and Africa. The project is backing by China’s top planning body, the National Development and Reform Commission.
When is possible to see full results of BRI
Like all of you I don’t have crystal ball. BRI has made a good start, but its final results could be considered in 2049.
Is it the current world context supportive to BRI’s ideas?
We already live in the flows of universal reciprocity and it is very hard and dangerous to think about alternatives to the world shaped for more than twenty five years as interdependent. The future of economic globalisation depends very much on political decision of the United States of America’s, the EU’s and China’s liberal forces. The economic interdependence tissue is a consequence of political decisions of big economic powers.
The crucial question is has the ideology and reality of economic interdependence strength to stay the Zeitgeist of the next decade? There are many signs that next decade could be very different from last 25 years. Many people explain the result of US presidential election 2016 as an introduction to ending of current era of free trade agreements, return of “economic nationalism, and America’s rejecting of globalisation. The first victim of “America first” protectionism might be the Trans-Pacific Partnership trade agreement signed in 2016 but not yet ratified. TPP could be replaced with the Regional Comprehensive Economic Partnership (RCEP) tha thas been under negotiation since 2013 and includes China that is not willing to see the end of globalisation.
We are witnessing walls are going back in Europe and the Middle East stands as an eternal “shatter belt" part of the world. And China has also experienced its share of geostrategic tensions and challenges especially in the South China Sea. The course of geopolitical events and driving forces behind them could move the world closer to a state of division, locking and exclusiveness. It is not just my fear. This summer World Bank’s President praised China for its commitment to international economic cooperation at a time when the West very clear rejects of globalization and multilateralism. Even IMF has fear that all those networks of interdependence could fall down to dust. Since 1990 a significant segment of workers of America and Europe have been left without prosperity and they blame free trade and abroad investments for that. The brave political measures to make globalization more fair and balanced have not been taken yet. The governments can do much more to ensure the prosperity of free trade and globalisation be shared by all.
Besides of restoring of geopolitics and anti globalisation rhetoric in Europe and America there is a fierce competition among big powers for high value-added and high-profit business and it spills over to politics making the world more insecure place.
What is novelty of BRI?
PATTERN FOR SHARED GROWTH: The Initiative is a bold solution for improving state of multilateral cooperation between China, Asia, Europe and Africa through a new generation of multilateral cooperation based on high standards of coordination focused on shared development and growth policies among China, Asia, Europe and Africa. China has set up BRI as a pattern for shared growth and development through connectivity of infrastructure, multilateral trade and investment and this approach could be described as an extraordinary novum or novelty of BRI.
HELPING THE WORLD TO STAY GLOBALLY CONNECTED: The New Silk Road is set to stop anti global tendencies and for me that is a strong reasons to be supportive of it. The globalization has been a factor which facilitate the world and China’s growth enormously. Behind China is thirty eight years of reform and opening up with feeling stones strategy. China has power to awake the force of economic cooperation and help the world to stay globally connected. China uses BRI and other projects and the G-20 to fight a weakening of consensus about the benefits of cross border integration and free trade. It is also about preparing for more multipolar world order.
MULTI–DIMENSIONAL OPENNESS:China’s BRI is not a one-state show. It is transparent and it is not imposed to anybody. It is an invitation open to all countries along the New Silk Road. It is some kind of living project. The participants have opportunity to improve its mechanisms and even set new goals. The Belt and Road’s geographic scope will evolve over time. Even though Professor Justin Yifu Lin recently spoke of an extra “One Continent”. It could be about South America.
The ideas on stronger and shared development, the world connectivity and win- win formula sound nice but at the end of the day everyone wants to see the money.
China is backing the plan with considerable resources, setting up a New Silk Road Fund of $40 billion to promote private investment along the New Silk Road, The Fund is supported by the Asian Infrastructure Investment Bank (AIIB), the New Development Bank of the BRICS countries and The China Development Bank. It will invest almost $900 billion into more than 900 projects involving 60 countries to bolster the initiative. The Economist magazine reported that $1 trillion in “government money” would be spent on BRI.
In 2015 China invested $120 billion overseas in non-financial fields benefiting the economies of destination countries. The Export-Import Bank of China, has its Europe headquarters in Paris, lent more than $80 bn in 2015. More than 1,000 projects financed by the Exim Bank were in 49 countries involved in BRI. If you look what is driving growth in Central Asia it is Belt and Road initiative. In Africa it is China’s investment in infrastructure.
Which projects are eligible for funds of the New Silk Road Fund and Asian Infrastructure Investment Bank?
The projects which are financially stable, environmental friendly and socially acceptable.
Is it BRI about establishing China’s own sphere of influence in Europe?
There is a lot of disagreement whether China’s offensive in Europe presents a hidden geopolitical strategy to challenge the current economic and political order or it is evidence of China's foreign policy choice to improve its economic cooperation with European states.
Whether we agree on it or not I think it is not a geopolitical strategy. Though some of BRI’s corridors, particularly in Asia, could help China to upgrade security of its energy and resources supply or to counter geopolitical risks with regard to America’s pivot strategy on “Asia rebalancing”.
In a nut shell BRI has strong economic background but long term its implications could enhance China’s global influence. China has already brought many positive things in the global system. In global crisis 2008. China’s growth was driving force for the global recovery. China’ government spent trillions on stimulating the economy showing China is already a responsible global power. The AIIB includes many of Washington’s closest allies, as well as four of the five permanent members of the United Nation’s Security Council, half of the European Union, and all 10 members of the Association of Southeast Asian Nations.
China's “peaceful development” diplomacy is envisioned to oppose classical notions of the balance of power system and present a bolder platform for building a stronger interdependent world.
How China understands Europe within BRI?
China’s perception of Europe’s future is optimistic despite the Greek economic crisis, BREXIT, refugee crisis and terrorism. China was supporting Britain remaining in the European Union and wished that Greece remain in euro zone. London has been China’s financial service hub of Europe that offers easier approach to the EU’s single market. China's private banks established its European headquarters in London.
Its European policy has three levels: bilateral with individual states, the EU level and the 16 plus 1 format for cooperation between China and Central Eastern European countries. The Region is included in all three levels. China’s view on Europe is shaped by economy. The New Silk Road involves Europe in the fields of infrastructure, energy, trade and finance including the internationalization of China’s currency.
There is a growing China’s direct investment in Europe and it is about long term commitment. China’s goals are expansion to European Market, entering a new HT sectors, capital investments and acquisition of companies. It has different goals and business approach for every part of Europe. In finance China develops special cooperation with UK, France, Luxemburg, in high technology with Germany, Italy. The Chinese positioning in infrastructure is concentrated on the economic periphery of Europe, Greece Portugal, Central and East Europe, the Balkans.
How China views South East Europe countries within BRI?
In 2015 at Suzhou summit of PMs of China and 16 Central and Eastern European Countries agreed to develop their relation in sync with the Belt and Road Initiative. Hungary in 2015 and Latvia in 2016 signed Silk Road Economic Belt MoUs.
In the past 4 years, China has become the most significant new economic actor in South East Europe. The process of China’s growing economic presence in the Region have started in 2012 when China launched new mode of economic diplomacy called „China and Central and Eastern European Countries” or “16 plus China”. The China’s banks established fund of 10 billion dollars for financing projects inside this framework. China initiated these new formats after an assessment that its relations with this part of Europe are in deep imbalance in respect with its economic relations with post-industrial Europe. The new diplomacy contributed to bilateral and multilateral relations between China and South East European countries and improved people to people cooperation.
How South East Europe countries view BRI?
South East European countries are mainly interested in partaking in this new type of integration to become transit points of the Belt and Road and translate this into more jobs and benefits for people. In the Balkans a need for prosperity is so strong, some countries are on the edge of being economic failed, that even a membership in NATO is presented as a means for strengthening of economic development. The years of recession has made the condition of the poor in the Region much worse. There are no HSR connections. Traveling from Zagreb to Munich by train takes nine hours. And these problems are going to persist if the countries continue to follow an anti-regional approach.
Which Region’s country could take a lead in developing multilateral BRI diplomacy?
It seems Serbia has ability to take a leadership. It is already significant country in” 16 plus China” format. Like the UK that wants to be the best friend of China in the West Serbia wants to be it in the Balkans. In June 2016 Chines President visited Serbia and the strategic cooperation has gained a new dimension with signing of an all encompassing strategic partnership between China and Serbia. Beijing strongly supports Serbia’s policy towards Kosovo at international level.
In 2014 Premier Minister Li Keqiang visited Serbia to attend the third summit between China and the Central and Eastern European countries held in Belgrade. The visits are marks of Belgrade's importance to China's diplomatic offensive to the Balkans. Serbia has become a centre for coordination of all infrastructure projects under the 16+1 format
China considers Serbia as a strategic partner in its operations in the Balkans through its Piraeus hub. China's direct investments in Serbia are on rise and are about 3 billion dollars in 2016. China’s favourable loans to Serbia have grown remarkably since 2012. Many agreements have been announced and Memorandums of understanding signed.
In November 2016 China and Serbia signed in Riga an agreement on modernisation of the Serbian section of the Belgrade – Budapest HS railway after long and tough negotiations. Serbia wanted to find a best modus for financing this project and to increase number of Serbian companies involved in it. Serbia lacks fiscal resources to finance its infrastructural development and like most South East European countries it should be very careful with borrowing money from Chinese banks.
Is the New Silk Road initiative bringing risk for Europe and opportunities for China?
European countries are entering in a new era of Chinese capital and it requires of political leaders around Europe to adjust their economic policy towards China both to benefits of this next stage of economic integration as well as to minimize potential new risks.
There is a view that China will benefit disproportionately enormously in Europe with the Belt and Road project. Please, be very careful before reaching that kind of conclusion. European high technology companies could be inside new infrastructural projects of New Silk Road in Asia, Africa and Europe. And Chinese exports to the EU is in a large percentage exports of Japan, South Korea and companies from the EU operating in China. In the largest category of Chinese exports to the EU - machines and electronics - Chinese entrepreneurs have a 10 percent profit from these sales and 90 percent belong to foreign companies in China. In textiles Chinese entrepreneurs gain is less than 5 percent.
The European Union wants Belt and Road to work because of its potential to bring more new economic opportunities. There is possibility that overproduction in China could put European Union producers in some sectors out of business. President Juncker was twice this year in China to address this issue. I have no doubt that overcapacity is an essential factor in China’s economic diplomacy but don’t think it is the whole story on BRI.
How South East Europe could benefit from the initiative?
BRI could bring new dynamics for business and growth of jobs through prudent opening to the phenomenon of growing Chinese investment in Europe. BRI should be seen as an additional source of investments and trade. Europe is neither materially nor civilization superior to Asia.
The world has changed and the Region should do the same rejecting the battles of the past and adapting to the moment focusing on strengthening of its integrative power to benefit from this new “roads”. South East European countries cannot afford themselves to stand passive in the era of such vast and sweeping changes.
What is the biggest risk for South East Europe?
It pains me to say but the biggest risk for the Region could be that it will not be capable to profit from the Belt and Road as developed economies of Europe and will miss out this shining moment of Europe China relations. In five or ten years people will talk about the success and benefits of the Belt and Road, and The Region could find itself in position to ask why did we miss it?
The main challenge of China's growing presence in South East Europe is not geostrategic but cultural one. The business culture differences could have impact on implementation of shared development aims and economic growth. South East European countries efforts to promote favourable business environment for Chinese companies could increase pressure on labour and environmental standards.
The Initiative promotes the idea of using infrastructure investment to spark economic growth. The problem is that South East Europe countries lack fiscal resources to finance economic development. The program of investments in infrastructure could cause a rapid increase of debt in South East European countries so we suggest them to develop other forms of business cooperation like joint venture, leasing and green field investments.
How could Croatia benefit from the Belt and Road?
BRI’s sea corridors are stretching from the port Piraeus to the port Venice passing close to Croatian coast and its ports. Croatia with its favourable geo traffic position has an opportunity to become a part of 21st century Maritime Silk Road. Today, nearly 90 percent of all trade traffic from Asian countries with the European Union is by sea through the Suez Canal, through the Northern European ports (Hamburg, Rotterdam), while only 10 percent of transport takes place through ports in the Northern Adriatic. BRI opens a possibility that for twenty or more years vital entries of goods from Asia to Central and South Eastern Europe, become ports of the Adriatic and Ionian Sea. China needs many gateways in Europe.
China Ocean Shipping Company (COSCO) and the state railways of Greece, Serbia, Hungary and the Czech Republic plan to open a new traffic route from Piraeus to Belgrade, Budapest and Prague. Regardless of constructing many new rail corridors along the new Silk Road China’s trade with Europe will continue to focus on the Suez and the Mediterranean. Croatia could take a bigger part of that traffic, and become one of important hub in the economic cooperation between Asia and Central and Eastern Europe.
Croatia should also research a potential of the Central land corridor of the New Silk Road which passing very close to Croatia. If Croatia “reads” carefully the map of the new economic corridors it will see BRI could bring it many direct and indirect benefits that lie in opportunities to develop deeper economic relations with China and the other countries of Asia.
For Croatia, geographically located in South East Europe where interests of global powers intersect, and has an open economy dependent on situation in the world, it is essential to modernise and enlarge its foreign policy view directing it to Eurasia, and adapting to a new hierarchy of the world economic powers. Croatia needs to reshape its foreign policy aims, measures and influence focusing its diplomacy on building economic networks with its neighbourhood, Europe and Eurasia. That requires development of, I would call it, integrative diplomacy capable to work at national and transnational level enabling Croatia to affirm itself in modern international relations as an important and satisfied country.
What has to be done to benefit strongly from BRI?
South East Europe is not going to be developed by inertia but by political choices of those who should think about the rise of this part of Europe. We need evolving leadership capable to think strategically and accept that China now has more influence on the global economy and Europe than at any other time in modern history. Having profit of BRI demands of the Region a new approach to multilateralism. Today bilateral ties with China are not sufficient to rise Chinese investments in this part of Europe. The first task is to shape of a South East European perspective of BRI capable to recognize and seize opportunities through aligning South East European’s transport infrastructure, and logistics with new economic land and sea corridors.
If we closely look at China's economic diplomacy initiatives China plus 16 and Belt and Road we will see that their norms of economic cooperation are multilateral. The SEE countries need to shape their diplomacies with China not only as self-serving but also regional, Europe and global serving. This could have a favourable impact on stability in the region too.
The second task is to dare breaking of a trap that the EU as the only guarantee of the Region’s economic growth and only way of integration. The countries could remain committed to the objectives of the European Union, to membership and accession and parallel open itself to The Belt and Road which is about pursuing Eurasian direction of economic integration. Unfortunately this approach has raised the concern that China’s influence over the Balkans may have negative geopolitical consequences for the EU.
Since 2009 Serbia has started to lead diplomacy of strengthening its integrative power in foreign economic relations. Today it has been involved in membership negotiations with the EU, has begun negotiating a trade regime unification with the Eurasian Economic Union as well as processes of strengthening infrastructural and economic links with the Black Sea countries.
The third task is forming a regional forum responsible for partnering with China on a regional basis. That body could serve for improving relations with China through permanent consultations among South East Europe countries, for sharing information on regional interests, preventing of possible surprises. What South East Europe countries need is a serious dialog on Chines supports to regional development. With strong, visionary, intelligent leadership South East Europe could place itself at the heart of BRI working in cooperative way and without the constraints that history imposed.
What are the implications of China’s economic reform at home for Europe?
If China reforms non markets elements that distort competition with Europeans companies from European perspective it will be understood as a concrete contribution to economic cooperation. China’s economy rebalancing at home is aimed to open more space market forces in financial sector in order to eliminate distortions in resource allocation and reduce reliance on administrative controls.
The European Union should support China’s reform at home and both should fight to stop a tendency to protectionism that is on rise. In an environment hostile to free trade and economic integration China and Europe will harder rebalance their economies, develop new lines of exports and connectivity and expand their roles in global economic architecture.
At the moment China needs more solidarity from the West instead of constant claims on near collapse of China’s economy. In the world interest is that it never happens.
China has proved itself as a responsible power in many events unlike some other big powers that acted unilaterally. In 1998 China acted multilaterally in Asian financial crisis deciding to maintain its currency stabile what helped other Asian countries to recover. And in global crisis 2008. China’s growth was driving force for the global recovery. China’ government spent trillions on stimulating the economy.
All powers, not only China, should behave as “responsible stake holders” regionally and globally.
Does China seek to radically change existing pillars of the global order?
It is obvious China is not a status quo power it is openly interested to upgrade the world economic order. China has a tradition of playing vital role in the world economy. When Marco Polo, who to my mind remains a great reference for today's Euro-China relation, travelled the Silk Road China was 15 percent of the world economy. Last year it share was 25 percent of global GDP. In a few decades it could be 50 percent.
China has already been successful in moving the geographic centre of the global economy towards Asia and this could be describe as a radical change in the global order. The AIIB shows China’s power to make a replica of the Asian Development bank which has become weak to finance Asia’s infrastructure needs. China intends to transform G-20 –together with the other emerging economies and the established powers – from a crisis response mechanism focusing on short-term policies to medium and long – term policies governance. Recently Yuan has become a part of IMF’s basket of five major currencies. “One belt, one road” initiative might be particularly influential in building a new global economic order in monetary, investment and trading spheres. China views this changes as a contribution to constructing a more robust set of rules to make the global order works better.
China also supports institutions that were created under US leadership at Bretton Woods. The norms which the United States and its partners have created over the past sixty years has helped China’s spectacular economic growth and integration into the world economy. It is counterfactual to assert that China works on an alternative economic order that excludes the United States. China is a part of a dense network of global institutions, treaties and regimes supports them but also rejects some and seeks to build new institutions and regimes more adequate for boosting the global economy. China tries to adapt its role within the existing global system to its economic might. Chinese authorities believe that the rise of China as a first class world power might be in harmony with the interests of the world.
What kind of new, redefined international order Europe and China advocate for?
A multipolar world order is an important aspiration for Europe, China, and other emerging powers. The EU cooperation with China through the UN, WTO, G-20 and other multilateral fora is very much focused on bringing development, stability and peace to the global system. Europe and China share interest in transformation of the chief institutions of the world how they could be able to function in accordance with this new world we live in. They have made little progress in Ukraine or the conflict in Syria but had successful results in in defining the 2030 Agenda for sustainable development.
Recently The EU has launched a new Global Strategy that underlines “engagement” and “cooperation” principles crucial for a partnership among the world powers. The EU believes only cooperation can make Europe, China and the United States of America stronger and more prosperous.
Could The European Union and China be essential driving force for moving the world closer to a state of multipolarity?
The European Union as a highly developed economic interdependence system has a rich experience of multilateralism. It has made great leap forward in changing Europa’s system of governance. Making Europe as one place was the political decision not just a logical evolution of economic relations between European states. Today the EU’s power for building a more multipolar world is weakened by its inability to address jointly to Europe’s migration crisis and terror attacks. These things and Britain’s historic vote to leave the EU present a test to its political stability. The EU is now in position that the purpose of its existence is being questioned but this should not undermine China’s economic relationship with the EU.
The United States is not seeing its interest in building a multipolar world. There is distrust between China and The United States the world’s two largest economies. China wants to play a larger role within the UN and other international organizations but America does not wish the world where the Chinese people have strong say. European leaders don’t think Americans leaders have right to feel like that. This difference could be drama of the future.
Is BRI a threat to Europe that could fuel the intra-European rivalry and divide the European countries?
There are people in Europe who have concerns about an outward-looking China. I am not among those; I am not worried about China’s rise. Because I am convinced that China’s greater engagement in Europe economy affairs can open many opportunities on many issues of common interest for us Europeans. It is very hard to find arguments, based on empirical events, which could support explanation of the New Silk Road as a threat to the EU unity. After all the greatest blow to the EU stability and unity has come from its member the United Kingdom.
The European Commission strongly supports The Belt and Road. In 2015 China and the EU has started to talk on China’s contribution to The European Fund for Strategic Investments (EFSI) aimed at mobilising at least 315 billion euros in private investment until 2018. So far, the instrument has attracted investments worth 82 billion euros. This is a visionary and strategic approach that fully meets the EU and China’s long-term interest.
China was the first non-EU country to announce its contribution worth 10 bn euros to the EFSI. To date, the biggest national contribution has come from the United Kingdom, with €8.5 billion!
In 2014 china signed strategic partnership with Germany, France, The UK and Portugal. Europe is already one of principal destination for Chinese capital. In October 2016 China General Nuclear Corp (CGN), Electricity of France Group (EDF) and the UK government signed a final agreement on Hinkley Point C project. This nuclear project is the largest single investment China has made in Europe.CGN will finance one-third of that investment. If Chinese technology passes a process called Generic Design Assessment (GDA) of new nuclear power stations assessment China could expect to have a significant role in future reactors at Bradwell in Essex which plans to use China's third generation nuclear technology Hualong One. Several Chinese banks, including China's Construction Bank and the Bank of China, have adopted London as their European financial centre. The UK and China are working to join China's Belt and Road Initiative and its Made in China 2025 strategy with UK Industry 2050 plans.
Chines tourists are becoming more interested in Europe. Greece has become popular destination for Chinese travellers because of Chinese romance film “Beijing Love Story” released in 2014. The movie includes scenes shot in Santorini and Athens.
While China and European advanced economies relations are generally viewed mainly from an economic perspective, Chinese economic activities in the Balkans are interpreted as geo-strategic. Why this should not be ignored?
I see it as a beautiful contradiction or double standard which is not doomed to last. When in 2012 China launched „16 plus 1” diplomacy, of 16 countries 11 are members of the European Union, backing with a Fund of 10 billion dollars, Karel de Gucht, Commissioner for Trade (2011-2014) sent a letter to Prime Ministers of South East European countries, intending to constrain and control development of„16 plus 1” diplomacy. Hope this anti – Chinese moment became past and did not stop China’s growing presence in South East Europe.
It is not only China’s diplomacy or the Region’s geographic favorable position and cheaper labour costs that have opened a space for China’s economy offensive in South East Europe. The passivity of the EU has been also helpful because the 25 years of long economic opening of South East Europe toward the EU did not bring stronger prosperity to the Region.
Central and Eastern European and China relations are still unfolding but it is clearly visible that their main feature is economic not geostrategic one.
Nothing would give me more pleasure than find a merit in a claim that the Balkans is in a danger to become dependent on China but only I can see is the whole world depends on China’s economy growth.
Will the European Union grant China market economy status in 2017, and if not how it will influence Brussel’s relationships with China?
Whatever the EU decides this very sensitive issue will influence trade relations between the EU and China which is now the second largest trading partner of the EU and major trading partner of 123 countries. The EU needs to build an effective and balanced partnership with China. The imbalance of bilateral trade in China’s favour of 180 billion EUR in 2015 has potential to undermine prospects for EU China cooperation. Over the last decade, international trade rules have created significant friction between China and the EU which is focused on maintain strong anti-dumping instruments to protect jobs in Europe from unfair competition. Chinese companies were accused of selling in European market at less than the cost production and taking jobs to the Europeans through cheap labour, heavy pollution, intensive resource consumption, and unfair competition strategies. Many people see China’s economy as hybrid market capitalism due to the government control of prices of land, capital and energy.
Likely the European Commission will agree to meet its WTO obligations regarding China’s Market Economy Status (MES) but it will continue to tackle Chinese dumping and illegal subsidies with new kind of measures to defence European industries and jobs. The EU is on the way to establish a brand new mechanism to protect the market. In his 2016 State of the Union address President Juncker announced change in the methodology of imposing tariffs what China has understood it as an intention of the EU to maintain “discrimination of Chinese enterprises”. China is also prepared to legally fight for its WTO rights. It is recognised as a market economy by up to 100 countries such as Brazil, New Zealand, Switzerland, Iceland, Australia and Russia while the US, Canada, Mexico and India still treat China as non-market economy.
What China expects from the EU?
To grant China market economy status and eliminate its anti-dumping procedures after 15 years, respectively in December 2016 in accordance with WTO China’s accession protocol. The EU is divided on this issue. The industry associations and trade unions oppose to plan to grant MES to China. The Netherlands, Hungary and the Nordic countries support China's market economy status. Germany is, in principle, supportive while Italy and France are opposed.
China will not be willing to consider removing of restrictions at its services sectors and investment markets for European companies without being recognised as a market economy.
Will the Union if the new President Trump administration slowdowns TTIP trade talks, started in 2013, speed up BIA negotiations with China?
The Bilateral Investment Agreement (BIA) negotiations should become a matter of priority and play an important role in the further upgrading of the EU China relationship. The EU mentions BIA explicitly in its "Elements for a new EU strategy on China". The Agreement could give an opportunity to both parties to increase bilateral investment and address existing barriers in a constructive way.
China is seeking to formalize a bilateral investment treaty (BIA) with the EU to not remain outside the major free trade negotiations. Chinese companies seek strong investment agreement and the EU see it as an opportunity to negotiate for more access to China services sector and investment markets. The life or free trade it is always a story on reciprocity – you get what you give.
The Commission is decisive that any further negotiation with China on BIA should be based on The Comprehensive Economic and Trade Agreement (CETA) and its new Investment Court system. The EU views this trade deal as the most progressive trade agreement that EU has ever concluded. It is determined to apply the same approach to TTIP and all future agreement. The EU is right now negotiating over 20 agreements that cover more than 50 countries and all of them are vital for the European economy.
Will the EU develop a more comprehensive and coherent strategy for engaging with China?
The EU-China 2020 Strategic Agenda for Cooperation, developed on the basis of the 1985 EU-China trade and cooperation agreement, and agreed at the EU-China Summit in 2013, is the guiding document of the relationship. The three pillars of China- the EU relation are High-Level Strategic Dialogue; High Level Economic and Trade Dialogue; and High-Level People-to-People Dialogue. Sino European communication depends very much on the EU’ ability to act as united actor and have a single voice in its relationships with China.
In June 2016 The EU adopted "Elements for a new EU strategy on China" to align itself closer to China in the next five years. This Document and The Belt and Road share similar words: “closer”, “joint research and innovation activities” and ideas on “connecting the Eurasian continent via a physical and digital network through which trade, investment and people-to-people contact can flow”. The Elements and BRI have a strength to add a new dimension to the EU China economic and strategic relations in Asia- European space and to answer challenges of economic interdependence.
As strategic partners they increasingly cooperate with each other on key international and regional issues, security matters and international challenges such as climate change and global economy governance. China does not understand Europe as a strategic threat to its key interest globally and in Asia, particularly in South East Asia.
China has very many friends in Europe and significant support of the EU to transform global economic order in accordance with the standards of multilateralism of 21st century. I will say it again a multipolar world order is an important aspiration for Europe and China.
Perhaps BRI implementation will face many challenges in the future but it is natural because there is no such a thing like a permanent progress without crisis. In five or ten years, people will start to talk about the success and benefits of the Belt and Road and I hope South East European countries will be a part of BRI’ success.
BRI is not only about economic cooperation and roads it is an effort to bridge two great civilisations European and Chinese through exchanges of people and knowledge. We could see more of that BRI perspective if pursed Matteo Ricci’s wisdom: "A nation may survive without wealth, but it cannot survive without friends.”
Illustration by JP