The EU is ready to stand with China in the fight against protectionism, but Beijing needs to reform to be fair to investors, EU trade commissioner Cecilia Malmstroem said on Monday (7 February).
"If others around the world want to use trade as a weapon, I want to use it as a tonic; a vital ingredient for prosperity and progress," she said without mentioning US president Donald Trump by name, who has been promoting protectionist policies.
"If rising protectionism from elsewhere is a threat to the Chinese economy, we stand ready to engage and fight against it together. If others are closing their doors, ours are still open. As long as the trade is fair," she told a business conference on EU-China relations in Brussels.
Malmstroem commended Chinese president Xi Jinping's speech at the World Economic Forum last month, where the Chinese leader stood up for globalisation and multilateralism.
However, the trade commissioner added that China needed to back up rhetoric with reforms.
"That would really indicate taking a stronger role in the world," she added.
Malmstroem said that "many barriers and irritants" remained in the EU-China trade relations, which were "far from balanced".
She highlighted that reform plans announced four years ago to give the market a more decisive role in the economy and reinforce the rule of law and independence of the judiciary have not materialised.
Malmstroem added the European investors were increasingly concerned about "the deteriorating situation on the freedom of expression and association".
After the US, China is the EU's second biggest trading partner, and the EU is China's largest.
Trade with China was worth one fifth of EU imported goods but only one tenth of its goods exports.
Chinese investment flows into the EU rose to a record high of almost €40 billion last year, while EU investment into China fell to a 10-year low of less than €8 billion.
Malmstroem said she hoped the issue could be addressed with an EU-China investment agreement now under negotiation.
She said she hoped the EU could see a "new impulse" in talks this year.
The deal would mean better market access for European investors, a level playing filed "without discriminations based on origin or ownership", and "greater certainty, transparency, fairness".
She stressed that the European Commission had recently proposed measures that would reinforce EU trade defence tools, among them possible higher tariffs, faster investigations against China, but negotiations are ongoing on that between member states and the European Parliament.
These instruments are aimed at reducing the damage Chinese overcapacity in steel has caused to European businesses.
Last month, Malmstroem lashed out against Trump, saying that new efforts to reimpose trade barriers were "doomed to fail" after the US president withdrew from the TPP agreement, a free trade deal between 11 Pacific region countries.
As tensions rise between Asia’s economic giants, China and Japan, over a small group of uninhabited mini-islands in the East China Sea, reaction from the EU remains conspicuous by its absence.
The world’s second and third largest economies are at loggerheads over an unresolved territorial dispute involving the Senkaku (in Japanese) or Diaoyu (in Chinese) islands in the East China Sea. Ships from both countries are encircling the islets attempting to assert their sovereignty. Rising tensions have raised the possibility of conflict in East Asia amidst the ongoing exchange of threats and warnings. However, there has been no reaction from the EU. This is despiteChina and Japan being two of the EU’s ten strategic partners as well as key trading nations.
The archipelago, consisting of five islands and three reefs, is currently under Japan’s administrative control and has a total surface area of around 7 km sq. But it lies in an area rich with hydrocarbon and marine resources. Trouble broke out when Japan claimed earlier this month to have purchased three islands from a private Japanese owner for 26 million USD. China reacted by sending over two patrol ships. A further six Chinese surveillance vessels have been dispatched to the area where Japanese coast guards already maintain presence. Both nations claim they are patrolling sovereign territory.
The longstanding dispute to which Taiwan is also party (called Diaoyutai Islands by Taipei) has caused large scale protests in all countries involved. Rising nationalism is perhaps the biggest source of escalating tensions. the dispute has now become a dangerous ‘prestige issue’. As elections loom in Japan, and a once-in-a-decade leadership transition takes place next month in China, leaders from both countries have come under enormous pressure.
Maritime disputes in East Asia, including the famous South China Sea dispute, have remained unresolved for a long time. While dispute resolution remains desirable, quick fix solutions like the purchase of these islands are not only unrealistic, they can also be potentially dangerous for the entire region.
A real crisis could also hold catastrophic consequences for the EU and international commerce at large.
For the moment, the likelihood of a full blown armed conflict remains distant as both economies are highly interdependent. Japan is China’s third largest trading partner and China Japan’s largest, with bilateral trade standing around 340 billion USD. The real danger is if trade wars were to break out. Asian stocks have already recorded a noticeable fall, which struggling European economies can simply not afford.
The EU has remained relatively quiet, making its engagement with the region look rhetorical and unconvincing. EU high representative Catherine Ashton may have made a good effort with Asia this year (five visits including attending the ASEAN Regional Forum after a two-year gap), but consistency will be a key factor in determining the EU's political relations with Asia.
The recent shift in US policy (including military presence) towards Asia has been followed by a lot of debate in Brussels about the EU enhancing its own engagement in the region and exploring a possible transatlantic partnership focussed on Asia.
Earlier in July, an EU-US joint statement called for greater coordination of their efforts in the Asia-Pacific on security, development and trade issues. But maintaining visibility will be a key prerequisite for any substantial EU role in Asia. US Secretary of State Hillary Clinton and her number two, Kurt Campbell, have both called for the two nations to solve their dispute bilaterally and peacefully. But while levels of interest in Asia have certainly risen within EU circles in Brussels, a similar response remains missing from EU high offices.
At the EU-China Summit this week, the EU can make amends by holding comprehensive discussions with China on this issue and urging both parties to intensify dialogue, de-escalate tensions and perhaps orchestrate a synchronized retreat.
A communication hotline between China and Japan to this extent would be beneficial. As East Asian geopolitics become increasingly significant for the rest of the world, the EU cannot afford to remain detached. Asia is not only the fastest growing economic region, but is deeply integrated in economic, if non-institutional, terms. It also contains some of the world’s most volatile security hotspots. Any conflict in this region could have deep implications for the EU which is a significant trading partner and the largest investor in Asia. The EU can become a harbinger of peace by engaging its Asian partners in conflict management in the region but visibility must be ensured as a first step.
Gauri Khandekar is Researcher at FRIDE, and head of its Agora Asia-Europe programme.
Chinese Prime Minister Wen Jiabao on Thursday (30 August) offered vague promises to buy bonds from troubled euro-countries, but said that it is ultimately up to Germany and France to solve the crisis.
"The European debt crisis recently has continued to deteriorate, giving rise to serious concerns in the international community. Frankly, I am also worried," Wen said during a joint press conference with German Chancellor Angela Merkel.
She had travelled to Beijing with half of her government for a joint session with the Chinese government, Germany being the only country with which China holds such meetings.
Despite her reassurances about "absolute political will" to save the euro, Wen expressed concern about the speed of the response.
He pointed to the possibility of Spain and Italy also asking for bailouts as well as uncertainty regarding Greece's future in the eurozone. "The solution depends on the will and decisiveness of the big euro-countries, Germany and France, to help them out."
China will continue to buy European bonds, Wen said, but he did not make any concrete pledges regarding Italy or Spain and noted that any purchases would require a full risk evaluation.
Merkel said she wants Greece to remain in the eurozone and praised Italy and Spain for their reforms. "Both countries are on a very intensive reform path, which I am strongly convinced will bear fruits."
The chancellor's display of power - it is the second time this year she meets with top Chinese officials and signs lucrative deals - such as an order for 50 Airbus planes worth €2.8 billion - is in stark contrast with the yearly EU-China summits which produce statements and pledges for cooperation.
A question about freedom of the press, with increasing restrictions by the Communist Party imposed on foreign correspondents, went unanswered by Wen. As for Merkel, she said: "We have a joint conviction that allowing for fair reporting is a basis for our nations to get to know each other better and to cooperate better."
She also played down a dispute over solar panels, with European producers calling on the EU commission to impose tariffs to punish the Chinese competitors for unfair subsidies received from Beijing.
"Protectionism cannot be the answer for certain difficulties, we have to try to solve existing problems by the way of talks, problems we have in the field of solar energy, for instance," Merkel said.
"We should endeavour to do so because there is still time and we will discuss with our colleagues in the European Union that we should give it a try."
Ever since Europe’s economy began spiralling downwards a growing number of people from Dublin to Athens is taking to learning the language of opportunity: Chinese.
Aggregate data are not available, but figures from local language centres across the continent suggest that the number of people in Europe enlisted in taking the official Chinese Proficiency Test - or HSK - over the last two years has grown by close to a factor five.
“I think the economic reason plays a very important role,” says Lili Lei of the Confucius Institute in Munich, where the number of students rose by more than 100 percent in 2011 and is expected to grow even further this year. “Many people learn Chinese because they must or want to work in China. Many even think [it] can bring them a better future.”
Lu Zhu of the Confucius Institute in Dublin, where attendance this year rose from an average of less than 50 students per year to almost 100 so far, says that “apparently, the job opportunity is the main reason [for the increase].”
In Athens, where Europe’s woes are most acute, the number of test-takers went from 100 in 2010, to 400 in 2011, to 300 so far this year. Asked whether the increase could have anything to do with Greece’s dire state of affairs, Xiuqin Yang, co-director of the city’s Confucius Institute, responded with a simple “yes.”
Capitalising on strong economic performance and an increasingly prominent place in the world, China over the last couple of years has invested in building a physical presence across the globe.
Not unlike the UK’s British Council, France’s Alliance Française or Germany’s Goethe Institut, China now has the Confucius Institute, a centre for the promotion of Chinese culture and language. In Europe today, there are some 230 of such institutes.
And while the actual knowledge of Chinese - or Mandarin, the official language of China - in Europe remains relatively low (in 2007, according to the EU’s latest figures, it was around 0.2 percent), the current crisis, China’s gradual rise towards superpowerdom, and its promotional efforts are proving an effective cocktail of incentives.
Underlying that assumption is an EU survey published in June this year of “Europeans and their languages”, showing an increased interest in Chinese in every single member state.
On average, 6 percent of Europeans think of Chinese as the most useful foreign language (up from 2 percent in 2005), and 14 percent think it is an important language for their children to learn (also up from 2 percent). Inversely, there is a drop in the share of people who feel that way about either French or German.
EUobserver spoke to ten official Chinese language centres - in Athens, Dublin, Edinburgh, Ghent, Cracow, Lancashire, London, Munich, and two in Rome - and all reported a structural increase in the number of people enlisted in taking the Chinese Proficiency Test.
China and the EU are facing a trade war after a group of European solar panel producers this week lodged an anti-dumping complaint, sparking immediate threats of retaliation.
The complaint comes from Germany's SolarWorld and a newly formed coalition of some 25 companies, according to spokesperson Milan Nitzschke, most of whom choose to remain anonymous "for fear of repression."
The companies accuse China of giving out “immense subsidies”, Nitzschke said, helping its own industry to gain market share in Europe by selling its products at artificially low prices - a practice known as dumping and illegal under international trade law.
Citing Goldman Sachs, they say China’s share of the EU market for crystalline solar modules has increased from 63 percent in 2009 to 80 percent in 2011. Ten years ago, that number was close to zero.
“China is not competing,” Nitzschke told EUobserver. “It is breaking the rules.”
It did not take long before warnings came from the East of swift retaliation.
China’s four major solar panel producers issued a statement denying the allegations and urging the government to take the “necessary measures to protect our ... interests”.
State-run news agency Xinhua, for its part, on Friday (27 July) left little doubt over what those measures may consist of.
It cited Meng Xiangan, a high official charged with renewable energy, as having said that if the EU decides to start investigations, “China will likely initiate anti-dumping and anti-subsidy probes on EU-imported [products]”.
It also cited the country’s ministry of commerce as having said that any “protectionist measures will harm the European solar industry”.
If deemed viable, the complaint may lead to import tariffs on solar panels from China. In May in the US, such action was already taken. In response, China last week launched investigations into possible dumping from the US and South-Korea.
“There is nothing else China can do if the EU follows the precedent of the US and imposes duties on Chinese solar products,” Li Junfeng, another high official, was quoted as having said.
Meanwhile, the European Commission is doing its utmost to keep things quiet.
It now has six weeks to decide on the way forward: to proceed with investigations or not. Until then, it refuses to comment or even to confirm the existence of the complaint.
Yet one spokesperson, Joe Hennon, on Thursday during the executive’s daily press briefing said it had not yet received an official complaint.
His comment was later removed, however, from the commission’s website.
“It was asked for,” said an official from the commission’s audiovisual services who did not want to be named.