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France and Germany are leading a push for the European Commission to review its strategy in relation to business competition from China. Photo: EPA

‘The time of naivety is over’: Europe’s China problem is on the agenda at next European Commission meeting as states focus on competition

  • France and Germany lead the push for a common strategy to deal with competition from Chinese giants
  • Adviser to French president says the time of naivety is over

Competition from China will be in the spotlight at next month’s meeting of the European Commission, with Germany and France expected to push for a new common strategy that may include changes to the EU’s industrial policy.

While no details have been released, China is on the agenda for the March 21 meeting, after calls from business leaders to help European industries cope with greater competition from their Chinese counterparts.

Clement Beaune, adviser to French President Emmanuel Macron, said it was important that EU leaders use the meeting to define a common strategy on China.

“Five years ago, the member states were still divided and naive in relation to China, now the time of naivety is over,” he told leading German financial newspaper Handelsblatt.

An adviser for French President Emmanuel Macron (pictured on Wednesday) says Europe can no longer be “naive” about China. Photo: pool AFP

The French and German governments have become increasingly concerned about the strength of European firms against Chinese competition, particularly after the commission blocked a merger between the rail assets of France’s Alstom and Germany’s Siemens earlier this month.

The deal would have created the world’s second largest rail company, although it would have been half the size of China’s state-owned railway.

The commission ruled against the deal, based on EU competition law, which aims to maintain downward pressure on prices in the European market by discouraging the creation of industrial giants. China, the commission said, did not present a competitive risk in high speed trains.

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Bruno Le Maire, the French finance minister, said that blocking the deal had been a “political mistake” by the commission, and that it would “serve China’s economic and industrial interests.”

There have been growing demands from business communities for more support from governments to help boost competitiveness. Last month German business lobby BDI published a list of 54 demands for a tougher EU strategy on China, addressed to the German government and the European Commission.

Container vessels are loaded with cargo in the Chinese city of Qingdao, Shandong province, in May 2009. Phoo: EPA-EFE

Frans-Paul van der Putten, a senior research fellow at the Netherlands Institute of International Relations, said any new industrial strategy that emerged from the March 21 meeting was likely to reflect demands raised by the French and German business communities, and would be directed primarily at China.

“We have entered a totally new phase now where it’s not driven by the European Commission but by those two big member states, Germany and France,” van der Putten said.

He said the influence of the two countries on the EU’s China policy had become “stronger and stronger” in the past year or two, including in its new investment screening mechanisms, seen by many as a way to counter China’s influence in Europe.

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Beijing, meanwhile, is planning to focus on consolidating ties with Europe, with a trip to the continent by Chinese President Xi Jinping expected in late March.

Any new industrial policy is likely to be seen as a sign that Europe’s position is becoming less favourable towards China, van der Putten said.

China's President Xi Jinping meets German Chancellor Angela Merkel at the Great Hall of the People in Beijing in May 2018. Photo: pool via AP)

“China has been trying to convince Europe that China and Europe should stick together with what Trump is doing to the international economic system. This [new policy] will be quite worrying from the Chinese point of view,” he said.

Jan Weidenfeld, head of the European China Policy Unit at the Mercator Institute for China Studies, said the shift in Europe’s view of China in recent years was due to a fundamental non-convergence between the two.

“China is not becoming more like the EU,” he said.

EU-China relations face a bumpy road in the year ahead

“Recent trends are a bit of a departure from the past. The question for Europe has changed from how can we get China on board to how can we increase our resilience, and do better economic policy, in light of this massive challenge?”

Cui Hongjian, a senior research fellow with the China Institute of International Studies in Beijing, said big European countries like Germany and France had been pushing hard over the past couple of years for a common position on China, due to a fear that its influence with particular European countries would make it impossible for them to take a common stance.

“Of course, China supports a strong EU and greater unification, but China will only be concerned with the direction of this unification – it could go in many different directions,” he said.

This article appeared in the South China Morning Post print edition as: Europeans set to push tougher strategy on China amid competition fears