As EU member states struggle to save the eurozone and boost faltering economies, China continues to enjoy robust economic growth. Beijing’s relationship with Europe is increasingly complex, with a combination of infrastructure projects, soft loans, massive investment, and conditionalities that could compromise European economic ideals.

Jonas Parello-Plesner, senior policy fellow at the European Council on Foreign Relations, and Alice Richard, coordinator of the China Programme at the European Council on Foreign Relations, discussed these issues and presented the findings of their latest report, The Scramble for Europe. They were joined by Paul Haenle, director of the Carnegie-Tsinghua Center. Carnegie’s Jan Techau moderated.

The Scramble for Europe

  • The Bilateral Dynamic: Parello-Plesner characterized the relationship between Europe and China as one of consenting partners rather than Beijing exploiting a moment of relative weakness. Inasmuch as there is a ‘scramble for Europe’ occurring in European-Chinese economic relations, he attributed the competition to EU member states competing over deals with Chinese businesses, adding that Chinese corporations are faced with a significant learning curve when doing business abroad.
     
  • Strategic Objectives: Chinese engagement in Europe is mostly concerned with acquiring the knowledge necessary for China’s own transformation towards an innovation-driven economy, Parello-Plesner suggested.
     
  • European Perceptions: While there had previously been some belief among Europeans that conditional engagement with China would lead to a transformation in Sino-European relations, that has not occurred, Richard stated. She added that it is important to note that European countries do not have a harmonized strategy toward economic engagement with China; in fact, some European countries compete with others for business.
     
  • Bond Purchases: China’s role within the Euro crisis is that of a risk-averse, strategic bondholder, not a game changer who bails out countries through bond purchases, Parello-Plesner said. He added that Beijing does have a significant stake in the recovery of the European economy. Haenle pointed out that Chinese bond purchases could serve to stabilize European economies and satisfy Chinese interests in export markets, although Parello-Plesner suggested that Chinese investors were more interested in bonds of the more solvent countries that do not need stabilizing.

Trade Relations between Europe and China

  • Investment: China has not yet become a large investor in Europe, but its share is rapidly increasing, Parello-Plesner stated. Haenle added that The Scramble for Europe report rightly mentioned that competition for Chinese investments was creating fault lines within the European Union.
     
  • Reciprocal Market Access: Parello-Plesner pointed out Europeans face significant investment hurdles in the Chinese market. Haenle added that concerns over symmetry and open markets resonated both in Europe as well as in the United States.
     
  • Intellectual Property Rights and Transparency: Differences over intellectual property rights and a lack of Chinese transparency were prominent obstacles for Sino-European trade relations, Haenle said.

Key Policy Recommendations

  • Mutual Interests: Haenle stressed that trade relations between Europe and China were not a zero-sum-game but rather should be understood as symbiotic.
     
  • Increasing European Leverage: Europe should take measures to prevent China from using its financial power to gain undue political leverage in Europe and ultimately create a level playing field, allowing for a more symmetrical trade relationship, Parello-Plesner suggested. Richard added that the Chinese desire to attract foreign direct investment was still increasing, which could aid the EU in creating more open markets for investment. Haenle noted that Beijing also had an interest in maintaining stable, good relations with Europe, especially given China’s upcoming leadership succession.