Wary China watches for risks to trade and investment in EU as cracks begin to emerge in union
The continent has traditionally been a reliable bet for Beijing, but a political tide against integration, emerging in Italy, Austria, Norway and elsewhere, could threaten that certainty
China is anxiously watching political developments in Europe, concerned that a weak and fragmented European Union could seriously undermine the country’s trade and investment strategies, observers say.
The latest blow to the EU was the resignation on Monday of Italian Prime Minister Matteo Renzi.
Renzi, a politician with a European vision, stepped down after Italians rejected his constitutional reform proposal in a referendum on Sunday.
Zhao Junjie, a European affairs specialist from the Chinese Academy of Social Sciences, said the Italian referendum would have no direct or immediate impact on China, but revealed a huge political risk.
“If ultra-rightist political forces come to power in Italy, Italy could leave the euro zone or to hold a referendum to leave the EU,” Zhao said.
“That would create a lot of uncertainties and negative effects for Europe’s future ... and the outlook for Sino-European ties would not be optimistic.”
Europe is China’s biggest trade partner and key to its economy. According to Chinese customs data, China registered US$278 billion in exports to the EU, including Britain, in the first 10 months of the year. Its imports from the EU amounted to US$170 billion over the same period.
China is also a growing investor in Europe, ploughing US$23 billion into the EU last year, up from US$18 billion in 2014, according to a report by law firm Baker & McKenzie.
Italy was the top destination for that money, attracting US$7.8 billion last year, the report said.
Beyond the numbers, China is eyeing London as a key offshore yuan market in its push to internationalise the Chinese currency.
It also needs a strong and stable Europe for its “One Belt, One Road” scheme and its vision for a “multipolar world” rather than one dominated by the United States.
But the tide of European integration could be turning as right-wing parties emerge as serious players in Finland, Hungary, Latvia, Lithuania, Norway and Switzerland, observers say.
Cui Hongjian, from the China Institute of International Studies, a foreign ministry think tank, said China could not do much politically to help Europe, but there would be increasing political risks for Chinese trade and investment deals with the continent.
“Europe has been a key long-term investment destination for China ... but with all the political uncertainties, Europe is no longer safe for many Chinese investors,” Cui said.
Nevertheless, the prospect of complete disintegration of the euro or the European Union is still very small, observers say. In Austria, far-right presidential candidate Norbert Hofer, who said he would call a referendum on EU membership if the bloc took further steps towards integration, was defeated.
And European states are likely to remain keen to work with China.
Hungarian Foreign Affairs and Trade Minister Peter Szijjarto told the South China Morning Post last week that Europe needed to work with China to stay strong.
“In order to make the EU strong, we have to build strategic cooperation with those countries that are booming, like China,” Szijjarto said.
“Our aim is that when Chinese think about the economy and Europe, they should think about Hungary first, because we understand there are many Chinese companies looking for European footprints to increase their market share in Europe,” the Hungarian foreign minister said.
Additional reporting by Sidney Leng
