How will China handle European disenchantment?

European Commission concerned about state-induced distortions in Chinese economy

PUBLISHED : Monday, 08 January, 2018, 1:02pm
UPDATED : Monday, 08 January, 2018, 9:58pm

There is little doubt Beijing will move to seize each opportunity offered by the US retreat from global governance and international hotspots to expand Chinese influence.

Deng Xiaoping’s low profile doctrine is now history but the extent to which China will take more risks and become a key player in international crisis management remains unclear – and a major question for international politics this year.

China is already taking a more visible profile on Afghanistan, Myanmar and the Israel-Palestine conflict. At a minimum, these recent moves seek to send a signal to the world and to the domestic audience about China’s perception of its new status in world affairs.

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In China, Marxist analysts of President Xi Jinping’s work report to the Communist Party’s national congress in October place most emphasis on the new key contradiction in Chinese society, “unbalanced and inadequate development and the people’s ever-growing need for a better life”, to explain what Xi’s “new era”means.

But besides the domestic order, the “new era” outlines a clear vision of a leadership status for China in international politics, a goal stated in black and white in the report. What will follow is a top-down adjustment of foreign policy to that vision. In a speech last month, Foreign Minister Wang Yi raised a new term, “resolving hotspot disputes with Chinese characteristics”. Wang ended his speech with a poetic quote: “with the rising tide and favourable wind, it is time to sail the ship and ride the waves”.

In recent years, the main driver of policy adjustment in China regarding involvement, intervention and power projection has been the notion of “overseas interests” – how to protect overseas workers and assets from security risks. This year, the ambition to exploit each misstep of the Trump administration in the United States will provide an additional driver to the emergence of a more interventionist China in international politics.

But will China deliver beyond statements of intention on Wang’s promise to play a “bigger and more constructive role in upholding world peace”?

This is where Europe comes in. Clearly, relations with Europe will not define China’s positioning on international crises. But Europe matters in China’s balancing act between intervention and risk avoidance for three reasons. First, relations between the European Union and China relations are currently in a stalemate. China needs to deal with the awakening of European realism on trade and investment and is tempted to link international and bilateral economic issues. Second, the engagement school, which has so far dominated the EU’s thinking on relations with China, articulated very early the goal of a peace and security partnership. But the enthusiastic appeal for more international engagement with China is receding under a wave of disenchantment and scepticism. Third, faced with the deepening of quadrilateral cooperation by Australia, India, Japan and the US against its rising global influence, China has an interest in preventing Europe from explicitly joining the “quad”.

It is no secret that the main engine of EU-China relations, trade and investment, was coughing constantly last year, even though, at 500 billion (US$602 billion) from January to October, bilateral trade was up 16.2 per cent year on year. Policy discussions in Brussels tend to focus on problematic Chinese practices rather than on success stories and last year ended with the EU adopting an ambitious reform of its anti-dumping rules, with subsidies and dumping to meet heavier taxes and a faster decision-making process.

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Simultaneously, the European Commission issued its first country report under the new rules – on China. The 466-page document details the state-induced distortions which make it impossible for the EU to treat China as a market economy. The central argument is the very nature of the Chinese political system. Indeed, according to the Chinese constitution, China is in the “primary stage of socialism”, has a “socialist market economy” and views the state-owned economy as the “leading force” of national development.

New rules will follow on foreign direct investment. There is no doubt that the environment in Europe for accommodating Chinese direct investment will become more selective this year. A commission proposal on screening foreign investment has put Chinese strategies to acquire niche technologies and build industry leaders in the spotlight. The move has also started a parallel discussion to the issue of reciprocity – Europe’s openness versus Chinese strict rules restricting or prohibiting foreign investment in many sectors.

The toxic politics of trade and investment in EU-China relations undermines an already weak dynamic on international security cooperation. If “resolving hotspot disputes with Chinese characteristics” implies seeking the cooperation of third parties such as Europe, China would find an open door in Brussels, but a sceptical interlocutor.

Scepticism dominates precisely because Europe has long pushed with little success for such cooperation with China. It was only after Xi entered office that China abandoned its practice of making international cooperation conditional on the lifting of an EU arms embargo. In this context, it came as a surprise that Xi proposed a “partnership for peace” to the EU when visiting Brussels in March 2013.

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But even after that new language was enshrined as the first of four pillars in EU-China relations, very little happened on the ground.

The two sides agreed last year to set up a communication framework in Mali to improve the efficiency of the UN peacekeeping operation in the West African country. It calls for information exchanges between diplomats and officers from the political sections and defence missions of their embassies in Mali and in the peacekeeping force. On paper, this is modest but significant – the only problem is that it has yet to be implemented.

Another example is the Gulf of Aden, where interactions take place regularly between the naval missions of the EU and China. Now that China has a permanent naval base in Djibouti, more may be possible. Escorts of World Food Programme shipments to Somalia are a good example of the EU and China working together for human security purposes. But the reality is that the EU carries out 10 times more escorts than China on behalf of the WFP, raising again the problem of China prioritising the projection of positive images rather than working on substance.

Wang captured the European disenchantment when he called for a “global perspective” on relations with Europe and promised the “managing and handling [of] differences on the basis of mutual respect” to “expand the strategic substance of China-Europe relations”.

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China knows that Europe is neither Australia, nor Japan. Like Australia, Europe is having a debate on influence operations that undermine the proper functioning of liberal democracies. But the focus is on Russia, even though a similar discussion has begun about China given some of the friendships Beijing is cultivating in populist political parties working against the EU. As in Japan, many in European defence ministries raise questions about Chinese strategic intentions. But no EU member is as active as Japan in raising global awareness of the Chinese military build-up.

China may choose to ignore problems in relations with Europe and focus on expanding its influence in areas where it does not meet resistance. However, given the current emphasis on a higher international profile, it is not entirely out of question that China concludes that a more constructive approach is needed to overcome the stalemate with Europe. If this is the final assessment in Beijing, it should come with an awareness that cosmetic moves will not be sufficient to restore a positive dynamic in the relationship.

Dr Mathieu Duchâtel is senior policy fellow and deputy director of the Asia and China programme at the European Council of Foreign Relations