It's time for a united Europe to stand up to China

#CriticalThinking

Picture of Neena Gill
Neena Gill

Member of European Parliament

Neena Gill CBE is a British Member of the European Parliament and a member of the Foreign Affairs Committee

“I am for free trade … but I am not for naivety,” vowed Emmanuel Macron before coining the phrase “buy European.”

France’s youthful, globalist President may ironically provide the long-needed leadership for the European Union to protect itself from aggressive and lopsided Chinese expansion. We have been naive in failing to counter the Chinese expansion strategy with our own long-term plan. And we have been reactive, putting out the fires of individual crises rather than pro-actively pursuing one linked-up agenda.

Over the past year there has been a 76% rise in Chinese investment into the EU, including a €6.7bn takeover of Supercell, the Finnish gaming company, a €4.4bn investment in German robotics firm Kuka, and a €1.7bn investment in British travel tech firm Skyscanner. In Greece, China has capitalised on a deep mistrust of the EU’s austerity policies by turning Piraeus into a hub of the ‘One Belt One Road’ initiative, with state-owned Cosco investing more than €500m to gain a controlling stake of the port.

Early signs of a tougher, united response to China’s strategic takeover of key EU industries are welcome, but we need to move beyond the traditional ideal of simply reducing tariffs if we are to adequately stand up to China. The cocktail of Chinese anti-competitive policies includes state-owned businesses, protectionist domestic policies and currency manipulation.

In the future, reciprocity – a key tenet of the multilateral trading system – must replace imbalance. While the EU is generally open to all Chinese investments, except in the sensitive defence industry, China assesses each foreign investment on a case-by-case basis. In 2016 China ranked as the 59th most restrictive country to foreign investment out of the 62 economies in the Organisation for Economic Co-operation and Development index. So it is no surprise that Chinese businesses invested four times more on acquiring EU companies than European investors in China in 2016.

But just because Chinese investment across Europe is less brash than enormous, free buildings, it is no less aggressive or strategic

In developing nations Chinese aggression is clear. As an active member of the European Parliament’s Foreign Affairs Committee, I have seen the impact of this first-hand. A striking example is the enormous, Chinese-built Vanuatu National Convention Centre, which sits incongruously among modest houses and shops. While China paid the full US$16.4m cost, the tiny island nation must now front all maintenance costs without the trained workforce that would have come with a more sustainable investment. The vast parliament gifted by China to Myanmar is another white elephant.

But just because Chinese investment across Europe is less brash than enormous, free buildings, it is no less aggressive or strategic. The Asian hegemon uses a divide-and-rule strategy to split the EU, dealing bilaterally with nation states and avoiding the leadership of the Commission. The result is growing Chinese influence in the EU’s less wealthy countries, particularly in Greece. Interestingly, in 2016 Greece was one the few countries that prevented the EU from issuing a united statement condemning aggression in the South China Sea. It is unlikely to be a coincidence that Hungary, which will soon benefit from a nearly €3bn Chinese-built high-speed railway linking Budapest to Belgrade, was another. It appears that Chinese investment is already reaping political reward.

“If you’re down and someone slaps you and someone else gives you an alm, who will you help – the one who helped you or the one who slapped you?”, said Costas Douzinas, the head of the Greek Parliament’s foreign affairs and defence committee, to the New York Times.

In our neighbouring countries – some of which are in the process of accession – China provides a no-strings-attached alternative to slow and conditional EU investment. Serbia, an important country for stability to our east, has been the recipient of vast investment, including the Belgrade-Budapest rail link, a €170m bridge over the Danube in Belgrade, and a €700m thermal power plant. While European nations pounce on any opportunity for quick profit and development, China is playing the long game.

Macron may be the loudest voice in favour of a more equal relationship with China but he does not stand alone

The most populous country in the world wants to gain soft power on every continent. And with Brexit leaving the UK in desperate need of new partners, China has another way to gain influence in Europe. For years now I have been urging the Commission to put Asia, and particularly China, at the heart of its agenda. In 2015, former Commissioner Jonathan Hill responded to my question by saying: “Chinese investment … still represents only a marginal part of the whole investment inflow”. With exponential increases in Chinese investment in the EU, up to €35.1bn in 2016, it is now time to take it seriously. We need to review our scattergun approach and develop a coherent strategy.

Macron may be the loudest voice in favour of a more equal relationship with China but he does not stand alone. Crucially, Angela Merkel is believed to be sympathetic. But reported opposition from eastern European countries dependent on Chinese investment meant that Macron’s June proposal to control and block foreign investment at an EU level was resisted.

To win these countries’ support, and therefore ensure a united strategic voice for the EU, we must stress the added value that accompanies European rather than Chinese investment. One key advantage is that EU investment is more sustainable: it encourages the training of local workers to build infrastructure, leaving in place a skilled workforce, long after the money has been spent.

For too long, we have been allowing China to avoid reciprocity. If EU High Representative Federica Mogherini does not stand up to China soon with a united voiced and a modern strategy, we will mourn the loss of jobs, businesses and strategic influence for many years to come.

This article was first published in Europe’s World print issue number 35. Read more on the issue and order your copy here.

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