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Uniqueness: No China in Europe Now

Their evidence is old – the EU is pushing back against China now in order to protect its own interests and align with the US

Gonzalez & Veron, August 2019, Anabel González has been nonresident senior fellow at the Peterson Institute for International Economics since October 2018. She was senior director of the World Bank’s Global Practice on Trade & Competitiveness (2014–18), where she led the Bank’s agenda on trade, investment climate, competitiveness, innovation, and entrepreneurship. She previously served as minister of trade of Costa Rica (2010–14), where she headed the strategy to join the Organization for Economic Cooperation and Development, negotiated and implemented six free trade agreements, and contributed to attract over 140, Nicolas Véron, senior fellow, joined the Peterson Institute for International Economics in October 2009. Véron is also a senior fellow at Bruegel, a Brussels-based economic policy think tank he helped cofound in 2002–04. A French citizen and graduate of Ecole Polytechnique and Ecole Nationale Superieure des Mines de Paris, he has held various positions in the public and private sectors, including as corporate adviser to France’s labor minister (1997–2000), as chief financial officer of the publicly listed internet company MultiMania ,, 19-13 EU Trade Policy amid the China-US Clash: Caught in the Cross-Fire?, https://www.piie.com/system/files/documents/wp19-13.pdf

In the past months, the EU has been rethinking its trade and investment policy towards China. While recognizing that China’s increased participation in the global economy has opened and will continue to represent new significant opportunities for European companies, the EU and its member states have become increasingly critical in their pronouncements about China. The European Parliament has played a significant role in developing this renewed policy stance, and will presumably continue to do so following its renewal in the May 2019 election. From describing China as primarily a strategic partner and a source of growth and jobs, the EU has moved to a more nuanced and occasionally hawkish framing of its approach to China (Legrain 2019). An important recent EU strategy paper states that “China is, simultaneously, a cooperation partner with whom the EU has closely aligned objectives, a negotiating partner with whom the EU needs to find a balance of interests, an economic competitor in pursuit of technological leadership, and a systemic rival promoting alternative models of governance” (European Commission 2019a). Strategic political concerns, 17 including over China’s growing economic presence in Europe and potential influence on EU policy making, also underline this change (Morelli 2019). Ostensibly, the shift in the EU’s position stems from the concern that China has failed to reciprocate market access and maintain a level playing field; thus the need for a new EU approach, where Europe becomes “more strategic in planning its technological and industrial future, and far less naïve with regard to unfair competition from other countries” (European Political Strategy Centre 2019). For example, one area of worry relates to China’s apparent pursuit of unique standards and technical regulations in a number of sectors, including autos, telecommunications equipment, Internet protocols, wireless local area networks, software encryption, mobile phone batteries and others, a strategy that shields domestic firms from competition and can potentially create significant barriers to access the Chinese markets (USTR 2017a). In addition, the new stance may be motivated by increased defensiveness on the part of European businesses that are feeling more competitive pressure than in the past from their Chinese peers; and by a willingness to align as much as possible with the US, thus limiting the scope for transatlantic conflict.

France won’t join BRI now

Carolyn Bartholomew, Chairman, U.S. – China Economic and Security Review Commission, June 12, 2019, China’s Belt and Road Initiative https://www.finance.senate.gov/download/06122019-bartholomew-testimony

Interestingly, President Macron of France announced 15 business deals worth about $45 billion including 300 Airbus planes, but carefully noted France was not “joining” the BRI and, in fact, pushed back against it, noting that Silk Road cooperation must work in both directions and meet international norms.

Any French and German interest about the BRI is in relation to Africa not Europe. Their cards aren’t talking about actions that will get 5G into Western Europe

People’s Daily August, 3, 2019, Xiplomacy fosters more solid ties, promising common prosperity

Italy is the first Group of Seven country that has signed such an agreement with China, while France and Germany also showed interest in boosting BRI-related cooperation through third-party markets to improve infrastructure in Africa.

European countries become more concerned about the BRI

Cui Hongjian, May 14, 2019, Global Times, Europe gets jittery with Belt and Road Initiative, https://www.pressreader.com/china/global-times/20190514/281788515506884

They have already maintained good bilateral economic and trade cooperation with China, and are positioned at the top of the value chain in the regional economy. They are satisfied with the existing labor-division pattern as well as the benefit structure. Therefore, after the launch of the BRI, they adopted a wait-and-see attitude.When the prospect of the BRI becomes clear and the participants start to benefit, the business circles in these European countries took the lead and eagerly urged their governments to change their attitude. The governments did show their flexibility, but also displayed a strong reservation.On the one hand, those governments do not oppose their business communities’ participation in the BRI. On the other hand, they are reluctant to take an official stand. It is typical of developed European economies to act in a practical, defensive and flexible way.Moreover, European countries over-interpret the BRI as a geopolitical tool, concerning that China will be the biggest exporter to the countries along the route, suspecting the BRI carries China’s so-called strategic intentions. Those countries worry that China will display the advantages of its rules and systems and then compete with Europe. This fear has gradually merged with Europe’s concern about its internal and external difficulties, thus also amplified. It has shaken the confidence of Europe, with some countries not being able to figure out whether China-Europe cooperation is an opportunity or a challenge.Finally, some major European powers and institutions hope that Europe can participate in the BRI as a whole, in an integrated way, to avoid losing the institutional advantages of European integration.

Uniqueness – Germany rejecting BRI investment now

Kastener, July 30, 2019, JENS KASTNER, contributing writer, and MITSURU OBE, Nikkei staff writer, China’s European outreach hits a wall in Germanyhttps://asia.nikkei.com/Spotlight/Asia-Insight/China-s-European-outreach-hits-a-wall-in-Germany

BREMEN, Germany/TOKYO — The German tabloid Bild has a reputation for being staunchly pro-American, but one particular article left a Chinese diplomat in shock. The newspaper had blasted the Federal Association of the German Silk Road Initiative, or BVDSI, for unscrupulously teaming up with China despite its “aggressive economic policy” and “blatant human rights abuses.” This struck a nerve in Du Xiaohui, the Chinese consul general in Hamburg, who complained at the association’s launch event that some Germans have a “sick immune system” that makes them allergic to their country’s largest trade partner for the three years through 2018. Germany, Europe’s largest economy, has in recent months taken a series of steps that discourage Chinese investment in its industries. Ambitions on both sides to nurture more competitive “champion” companies are complicating the relationship, as are persistent concerns about individual liberties and U.S. President Donald Trump’s policies. Though Berlin and Beijing do share common interests, China is encountering pushback at the farthest reaches of the Belt and Road Initiative. The BVDSI exists to promote participation in the Belt and Road — China’s drive to build an infrastructure network that bridges Asia and Europe. A local banker attending the event with Du on March 29 reminded members that the city of Bremen, connected by a river to the North Sea, had flourished through free trade with Asia back when “Mr. Trump’s America hadn’t even been discovered.” Public opinion and the government, however, are turning against the group and Chinese companies that are hungry for European expansion. Although German Chancellor Angela Merkel joined Chinese President Xi Jinping in calling for “win-win cooperation” at a summit in Paris in March, the reality is far from that, a BVDSI representative argued. Chinese President Xi Jinping, center, and German Chancellor Angela Merkel, right, are seen with U.S. President Donald Trump and other world leaders at a G-20 summit in Hamburg in 2017. © Reuters “Cooperation with China presents great opportunities for German small and medium-sized enterprises in all the economies along the BRI route, but there are strong headwinds from Berlin and the European Commission, with no improvement perceivable whatsoever,” said Hans von Helldorff, the association’s spokesman. “The German government does not only reduce the opportunities by restricting Chinese investment in German firms,” he continued, “but also by not delivering regulative measures that are needed for German SMEs to actively engage in the BRI countries.” In December, the government tightened the foreign trade law, allowing Berlin to intervene for the sake of public order or security if a non-European investor buys 10% of a company. The threshold had been 25%. Then, in February, Economic Affairs Minister Peter Altmaier revealed a “National Industry Strategy 2030” designed to push back against powerful Chinese state-backed enterprises. Altmaier called for creating a state fund that could outbid any foreign investor targeting German companies with critical technology. All this has coincided with a steep plunge in Chinese investment. Research by Baker McKenzie and Rhodium Group shows China invested $380 million in Germany in the first half of 2019, down 75% from $1.51 billion a year earlier, as the U.S. warned allies to keep cutting-edge technology out of Chinese hands. Europe as a whole saw a 26% decline, to $9 billion — the lowest first-half total since 2015 and 83% below the peak of $53.9 billion in 2017. Baker McKenzie said the deal pipeline offers few reasons for optimism about the second half. Beijing’s controls on nonessential investments, from soccer clubs to real estate, are a significant factor in the decline. The rules were tightened last year in light of decreasing foreign exchange reserves and China’s deteriorating current account.

Uniqueness – China not effectively making its way into Eastern Europe now

Tom Holland, July 15, 2019, Tom Holland is a former SCMP staff member who has been writing about Asian affairs for more than 25 years, China’s sinister plan to buy Eastern Europe is exaggerated

In short, the concern is that Beijing is using its investments to drive a wedge between EU members in order to neutralise European policy towards China. China thinks it can weather Trump’s trade storm. It can, but not for long It would be a troubling idea – if it did not massively overstate what is actually happening in Eastern Europe. As Tom Miller, author of China’s Asian Dream: Empire Building Along The New Silk Road, points out in a recent paper, the attention paid to China’s pledges far exceeds the investments it has so far made on the ground. And where China has invested, its projects have frequently run into trouble. For example, the main Chinese contractor was kicked off a 50km highway contract in Poland after it struggled to meet its obligations to local subcontractors. In Romania and Hungary, US$18 billion of contracts to build new power stations have yet to see construction begin some six years after they were signed. And the railway between Belgrade and Budapest is already two years overdue, with construction work yet to begin on the Hungarian section. Altogether in the last two decades, China has pledged investments of only US$5 billion to US$10 billion to the EU’s eastern members (different estimates give different amounts). Those sums may be significant locally, but on a European scale they are small. In comparison, China has invested some US$47 billion in Britain…In short, fears that Beijing is buying sinister political influence in the EU with lavishly funded infrastructure projects in the bloc’s poorer eastern members are greatly overstated. That may have been Beijing’s original plan. But investing in viable infrastructure projects is no easier in eastern Europe than anywhere else in the world. And in many ways that’s a shame. After 75 years, it’s probably about time someone reconstructed the Gorgopotamos viaduct in a fashion built to last. ■

EU can block bilateral investment agreements between China and individual EU countries

Peter Hirst, July 29, 2019, Mondqa, http://www.mondaq.com/uk/x/830276/international+trade+investment/China+Italy+The+European+Union+And+The+Belt+And+Road+Initiative, Worldwide: China, Italy, The European Union And The “Belt And Road Initiative”

Apparently in response to these concerns, on 5 March 2019, the Council of the EU � one of the EU’s main decision-making bodies預dopted Regulation (EU) 2019/452 which established a framework for the screening of foreign direct investments into the EU (the “Screening Regulation”). According to the Screening Regulation, security screening is necessary in a number of areas including: food supply, energy and raw materials; access to sensitive information such as personal data; critical infrastructure such as transport, energy, water, communication, defence; critical technologies such as artificial intelligence, robotics, cybersecurity, aerospace, nano and bio technologies; and the freedom and pluralism of the media. Furthermore, if an investment concerns several EU Member States, or if an investment could affect a project or programme of interest to the whole EU (such as Galileo28 or Horizon 202029), then the EU Commission will be empowered to issue opinions on the admission of the investment.30 The Screening Regulation thus grants significant powers to EU bodies and has the potential to significantly impact upon Chinese investment into Italy and elsewhere in the EU. How much it will impact such investments will ultimately depend on how the screening process is implemented in practice.

Financial problems forcing a China economic pull back

Michael Ezrati, July 26, 2019, Milton Ezrati, I consult on economics and investment strategy and serve as chief economist for the NY-based communications firm, Vested, China Retreats Globally, https://www.forbes.com/sites/miltonezrati/2019/07/26/china-retreats-globally/#cbbdbe03d153

China has retreated globally – not from its artificial islands in the South China Sea but economically and financially. It seems just yesterday that the Middle Kingdom, as China calls itself, resembled an unstoppable juggernaut, cutting constructions contracts and buying properties all over the world. That is no longer the case. Trade war with the United States bears much of the blame (or gets the credit, depending on one’s perspective), but even if Washington and Beijing were to sign a deal tomorrow, China would not regain its old momentum. Official Ministry of Finance (MOF) figures, not surprisingly, offer a soothing picture of moderate decline, but private sources tell a much more dramatic story. According to the American Enterprise Institute’s well-regarded China Global Investment Tracker (CGIT), Chinese overseas investments of all kinds in the first half of this year averaged only $27.5 billion, half the rate averaged during the same time in 2018 and barely a quarter the rate of 2017’s first half. This year’s figures are lower than any time since 2008. Construction contracts, largely in the third world as part of China’s Belt and Road initiative, have fallen off, too, but less dramatically. China clearly has become much less engaged with the world than it was. Two things have caused this retreat. One is a growing hostility among host countries toward Chinese investment. Especially developed countries, the United States in particular, have balked over the Chinese practice of extracting technology. Suspicions along these lines have held up approvals for Chinese purchases and other direct flows of funds. Some familiar with Chinese practice have gone a step further. The European Chamber of Commerce has warned against developing a dependence on China and Chinese funds. This combination of concerns and suspicions have centered primarily on China’s huge state owned enterprises and less on private Chinese investment. But if private investment has fallen off less dramatically, this growing reluctance in the West has had its effect there, too. More significant is China’s relative shortage of hard currency. Despite Beijing’s efforts to make the yuan a global currency, it is little used in currency transactions – no more than 2% of the total in fact – and so is of little use in overseas purchases. Meanwhile the trade war with the United States has already begun to cut into Beijing’s supplies of foreign exchange. Beijing actually anticipated the problem and in 2017 and began to ration foreign exchange even before the White House added any tariffs. The first major investment declines occurred in late 2018, when the While House first imposed 10% tariffs on a range of Chinese products. The next drop coincided with this past spring’s increased tensions. To be sure, Beijing’s foreign exchange hoard remains huge, but officials are wary of how rapidly it has shrunk, falling some 25% from almost $4 trillion at its peak in 2014 to barely over $3 trillion during the first half of this year. Beijing’s rationing of these financial resources has affected the state-owned sector in particular. Private companies have a greater willingness and ability to borrow hard currencies abroad. Within the investment pullback, North America, which historically has accounted for some 17% of China’s overseas investment flows, has seen the biggest drop. No doubt, the hostility created by trade friction has played a role