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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.

Western Europe not supporting BRI

Kent Calder, 2019, Kent E. Calder is a distinguished Edwin O. Reischauer Professor. He currently serves as the Vice Dean for Faculty Affairs and International Research Cooperation at the Paul H. Nitze School of Advanced International Studies, Johns Hopkins University.  Super Continent: The Logic of Eurasian Integration, Stanford University Press, Kindle edition

By mid-2017, however, due to deepening trade and investment concerns, several were more hesitant. The prime ministers of Spain, Hungary, and Greece, together with the Polish president, all participated in China’s May 2017 Belt and Road Forum, chaired by Xi Jinping, and made laudatory speeches about BRI. None of the major West European leaders, the EU president, or the EU Commission’s director attended, however. Calder, Kent E.. Super Continent . Stanford University Press. Kindle Edition.

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.

Czech Republic pushing back against China and the BRI

Michael Kahn, 8-30, 19, https://www.reuters.com/article/us-czech-china-relations/chinas-czech-advance-hampered-by-huawei-jitters-tibetan-flags-idUSKCN1VK1NO, China’s Czech advance hampered by Huawei jitters, Tibetan flags

PRAGUE (Reuters) – Fizzled investments, cyber security warnings and a Prague mayor defying Beijing by forging his own diplomatic path are muddying inroads China has made into the Czech Republic as it seeks to extend its influence in Europe. Passengers queue at check-in counters of Smartwings airline at Vaclav Havel Airport in Prague, Czech Republic, August 20, 2019. REUTERS/David W Cerny Finding a more hospitable reception on eastern ground than in western Europe in recent years, China had been keen to take advantage of a Czech hunger to foster ties, led by President Milos Zeman, who has curried political favor with Beijing since taking office in 2013. From the Czech perspective, the relationship was aimed at drawing Chinese investment into the nation of 10.7 million and opening the door for Czech companies to do business in the world’s second-largest economy. But a series of diplomatic spats since the start of the year has frayed relations, and highlighted the limited returns the Czechs have received for Zeman’s goodwill. “It must be a big surprise for the Chinese,” said Vaclav Kopecky, a China expert at Prague’s Association for International Affairs. “They expected… they wouldn’t have any problems. It turned quickly in a very different direction.” The Czechs had kept Communist-run China at arm’s length following the 1989 Velvet Revolution that propelled Vaclav Havel – a personal friend of the Dalai Lama, the exiled spiritual leader of Chinese-ruled Tibet – into office. ADVERTISEMENT That changed under Zeman. In 2015, he attended a military parade in Beijing to mark the end of World War Two, the only Western leader to do so, and he has visited China five times, more than neighboring Germany. He also took the Czech Republic’s richest man, billionaire Petr Kellner, to a meeting with Chinese President Xi Jinping in 2014. Kellner’s Home Credit has become one of the biggest consumer lenders in China. These better relations, analysts say, aligned with China’s global Belt and Road Initiative (BRI) aimed at linking trading networks to Beijing, and a series of “16+1” economic summits to whip up Chinese-led investment into central and eastern Europe. CYBER-SECURITY HIT But the burgeoning friendship took a hit with the Czech cyber security watchdog’s December warning – the first explicit one in Europe – that infrastructure operators should guard against security threats from equipment made by Chinese telecom suppliers Huawei and ZTE. Prague Mayor Zdenek Hrib’s refusal to eject a Taiwanese diplomat from a conference at the demand of a Chinese official, and his decision to fly the Tibetan flag at City Hall to highlight human rights issues, further fractured the relationship. ADVERTISEMENT “We want to have an apolitical relationship with partner cities, based on mutual cultural exchange,” Hrib, who spent two months in Taiwanese capital Taipei as a medical student, told Reuters. Those cultural ties have come under strain, however, with China cancelling tours planned by at least two Czech orchestras in the last two months. While a foreign ministry spokesman warned in July that the Prague mayor’s actions could harm relations, the Chinese foreign ministry assured Reuters on Friday it was “willing to work hard with the Czech side to continue to strengthen bilateral cooperation”. But overall, Chinese investment has failed to deliver jobs or the flow of money into the country envisioned when President Xi visited Prague in 2016. Up-and-coming Chinese conglomerate CEFC China Energy led the Chinese investment charge in the Czech Republic, splashing out over $1 billion on Czech company stakes. Zeman appointed its chairman Ye Jianming as his largely symbolic economic adviser. CEFC, which opened its European headquarters in Prague in 2015, took holdings in high-profile firms including J&T Financial Group, the Lobkowicz breweries, Czech soccer team Slavia Prague, and its largest airline Smartwings. But in 2017, its chief lobbyist was arrested in the United States on bribery and money-laundering charges. The following year its founder Ye was detained and the firm imploded, with Chinese state-owned investor CITIC taking over its Czech interests. Slideshow (4 Images) According to the Czech central bank, foreign direct investment from China, which reached 713 million euros ($795 million) in 2015-2016, turned negative to the tune of 642 million euros in 2017 and 2018. “It wasn’t so much about business and investments,” said Kamila Hladikova, a China expert at Palacky University in Oloumoc. “It was more about finding political support for China in the European Union.”

Uniqueness – Conte resignation means greater Italy pushback against China

Keegan Elmer, 8-21, 19, https://www.scmp.com/news/china/diplomacy/article/3023787/could-giuseppe-contes-exit-be-end-italys-closer-ties-china, Could Giuseppe Conte’s exit be the end of Italy’s closer ties with China?

The resignation of Italian Prime Minister Giuseppe Conte spells uncertainty for the country’s warmer ties with China. Conte, a staunch defender of closer relations with Beijing during his 14 months in office, resigned on Tuesday amid a stand-off with League party leader and Interior Minister Matteo Salvini, a vocal critic of China. Tensions had been brewing between the ruling coalition government of the Five-Star Movement, the League and Conte, an independent serving as prime minister. Salvini had suggested earlier this month that Italy hold new elections, and moved for a vote of no confidence against Conte. Addressing parliament on Tuesday, Conte said Salvini was “irresponsible to initiate a government crisis”, and announced his intention to resign. Italian President Sergio Mattarella accepted Conte’s resignation. If a new government cannot be formed, snap elections will be held. Relations between China and Italy have improved under Conte, with Italy signing a memorandum to join China’s Belt and Road Initiative despite warnings from the United States. Is Italy experiencing buyer’s remorse after signing up to China’s belt and road scheme? SUBSCRIBE TO US CHINA TRADE WAR Get updates direct to your inbox your email SUBMIT By registering, you agree to our T&C and Privacy Policy Conte also met Huawei founder Ren Zhengfei in April during a visit to China and assured Ren that the company would not face discrimination in Italy’s 5G market – again, despite warnings from Washington. Salvini has said he opposes Huawei having access to Italy’s 5G networks. Lucrezia Poggetti, a research associate at the Berlin-based Mercator Institute for China Studies, said that China would not likely be a major issue in Rome but that the political turmoil could result in a shift in Italy’s position on contentious issues like Huawei. “Salvini … has recently adopted a tougher line on China and Huawei,” she said. But Poggetti added that views on China varied within the League party. “[W]e should not forget that the architect of Italy’s China-friendly policy shift … is Michele Geraci, a League member who was personally picked by Salvini as undersecretary for economic development,” she said. “While Salvini has adopted a tougher rhetoric on China, he has so far not done anything concrete to prevent Rome from pursuing closer political ties with Beijing.” Italy’s critics are jealous of its China deal, says Rome’s lead negotiator Regardless of its China policy, Italy would likely have a much closer relationship to the United States if Salvini gains greater say. In June, he said Italy was the US’ “most solid” ally in Europe.

US pushing Poland away from China and off China’s 5G

Maggie Miller and Brett Samuels, 8-30, 19, U.S. and Poland may sign 5G network security agreement this weekend, https://thehill.com/policy/technology/technology/459503-us-and-poland-may-sign-5g-network-security-agreement-this

The United States and Poland may sign an agreement on 5G wireless network security during Vice President Pence’s visit to Poland this weekend, officials told reporters Friday. A senior administration official told reporters ahead of Pence’s trip to Poland that there could be an announcement “in the next day or two involving a secure 5G network.” The official added that “important steps are being taken, some of which we may be able to announce in the next day or two, to develop a common approach to a 5G network security between our two countries to ensure a secure and vibrant 5G ecosystem.” The agreement may address threats from Huawei, the Chinese telecommunications group that the Commerce Department added to its “entity list” earlier this year, citing national security concerns. U.S. companies are banned from doing business with companies on this list, though President Trump said in June that he would allow some U.S. companies to sell to Huawei. The administration official referred to the need to protect 5G networks against “adversarial nations” in describing the threat from Huawei, which is one of the largest telecommunications suppliers in the world.

US pushing to keep allies off of China’s networks

Katy Stech, 8-30, 2019, https://www.wsj.com/articles/trump-administration-aims-to-reach-5g-agreement-with-poland-11567207759, Wall Street Journal, rump Administration Aims to Reach 5G Agreement With Poland

The Trump administration is working with Polish officials to take steps toward protecting the security of that country’s telecommunications systems. The administration is hopeful that Vice President Mike Pence will sign an agreement with Poland focused on 5G network security during a coming visit to Warsaw, according to a senior administration official Friday who said the issue was “at the top” of the list of the trip’s priorities. The agreement would come as U.S. officials pressure other allies to cut ties with Chinese telecom giant Huawei Technologies Co. over national-security concerns. The U.S. and Poland are working to develop a shared approach to 5G network security and aim to protect those networks “from unauthorized access or interference by telecommunications suppliers,” said the official. Poland has been one of Huawei’s top markets in Central and Eastern Europe. When asked if the agreement would mention Huawei, the official said the Trump administration doesn’t “typically talk about any specific company.” “What we are after here is to protect from unauthorized access or interference by telecommunications suppliers—some of whom you know well, controlled by adversary nations—the security of our networks now and into the future,” the official said. The U.S. Case Against Huawei (Jan. 29) U.S. officials have warned that Huawei products could be used to spy on or disrupt telecom networks and have tried to dissuade allies abroad from using its telecom equipment. Huawei officials have denied claims that its products could be used for espionage. Trump administration officials have spent months lobbying their foreign counterparts in several countries in an effort to convince them that buying products from the Chinese manufacturer comes with security risks. The campaign has made little headway, though some countries, including Australia, the U.K., Germany, New Zealand and Japan, have agreed to review their telecom-gear supply chain or restricted the sale of Chinese gear. The campaign comes as many wireless carriers around the world are poised to spend billions of dollars on equipment to build out their 5G networks, the latest version of mobile technology with faster connections. Within the U.S., Huawei has for years been effectively blocked from supplying equipment to major telecom networks. Earlier this year, Polish authorities arrested a Huawei sales director they said spied for the Chinese government. Huawei later fired the worker. Neither the worker nor a lawyer for him could be reached for comment. Polish officials said Huawei hasn’t been charged with wrongdoing in relation to the case. Polish counterintelligence agency officials also confiscated documents and electronic data from Huawei’s local office. Mr. Pence is traveling to Poland for events commemorating the 80th anniversary of the outbreak of World War II. He is making the trip in place of President Trump, who has forged close links with the nationalist Polish government but chose to remain in Washington to monitor Hurricane Dorian.

Czech proves Eastern Europe pushing back against China, particularly China 5G

Michael Birnbaum, 8-19, 18, https://www.washingtonpost.com/world/europe/china-is-investing-in-europe–but-there-are-strings-attached/2019/08/18/35407f32-b2d1-11e9-acc8-1d847bacca73_story.html, China is investing in Europe — but there are strings attached

PRAGUE — The mayor of this capital city was shaking hands down a line of diplomats when the Chinese ambassador to the Czech Republic did something decidedly undiplomatic. He strode to the front of the line, pushing past puzzled envoys holding champagne flutes, and demanded that a top Taiwanese diplomat be asked to leave the mayor’s reception — in deference to the one-China policy — or he would walk out himself. “There is only one China. I am the ambassador,” Ambassador Zhang Jianmin later recounted to The Washington Post. “I tried to point out the mistake that he made, and I advised him to correct the mistake.” But Mayor Zdenek Hrib knew what he was doing. He had worked at a teaching hospital in Taiwan while training to be a doctor and was well aware of China’s claim on the island. He refused to accommodate Zhang’s request. “I explained to him we don’t kick out guests that we’ve invited,” Hrib told The Post. The Chinese ambassador left. Months later, even as Beijing is embroiled in a trade war with the United States and facing protests in Hong Kong, Chinese officials and the Czech mayor are still sparring. The feud offers an especially raw example of how Beijing is trying to flex its muscles in Europe — with little tolerance for objections. China has been investing in Europe in conjunction with its broadly defined Belt and Road Initiative. And it has focused special attention on Central European countries. “They’re looking for a way to project their political influence,” said Czech Foreign Minister Tomas Petricek. For many European Union decisions, each country has an equal vote, meaning China needs to win over only a few leaders to nudge E.U. policy in a favorable direction. The Czech Republic previously held China at arm’s length. The late president Vaclav Havel, a hero for leading Czechoslovakia out of communism, was deeply cautious about Beijing when he was in office, said Pavel Fischer, a member of the Czech Senate and a former Havel adviser. As Havel sometimes said about China, “Even an elephant will recognize the courage of a small bird and change his posture,” Fischer recalled. But China has been able to make inroads since Havel’s death in 2011. Chinese President Xi Jinping and Czech President Milos Zeman review an honor guard at Prague Castle in March 2016. (Michal Cizek/AFP/Getty Images) Czech President Milos Zeman has met with Chinese President Xi Jinping eight times — an unusual amount of face time for the leader of 10 million people. Zeman has welcomed Chinese investment and tried to position his country as China’s portal to Europe. He even appointed a Chinese business tycoon, Ye Jianming, as an economic adviser. Ye, the chairman of energy company CEFC China, proceeded to buy stakes in a Prague soccer team, a brewery, an airline, a media company and an investment bank. Meanwhile, China hired former Czech ministers and other retired politicians to press its case in Prague. “They’re trying to rearrange the political arrangements to be more conducive to Chinese interests,” said Martin Hala, director of Sinopsis, a group that studies Chinese influence in Central Europe. “Some systems are more resilient than others.” The relationship has hit some serious bumps. Ye, the adviser to the Czech president, has not been seen since March 2018, when he was arrested in China for unclear reasons. A top executive at Ye’s nongovernmental organization, the China Energy Fund Committee, has been convicted in a New York court for bribing officials in Chad and Uganda. And Ye’s energy company has been absorbed into a Chinese state-owned company. With Ye gone, the Czech president has indicated some disappointment with Chinese promises that have failed to materialize. “I consider the absence of large Chinese investors a stain for Czech-Chinese cooperation,” Zeman told China’s CCTV broadcaster this year. Other Czech policymakers have taken a tougher approach toward Beijing. Ultimately, it is Prime Minister Andrej Babis, not Zeman, who is responsible for setting Czech foreign policy. And Babis leans more in the direction of President Trump than toward China. An exhibition on the grounds of the Czech Senate commemorates the Tiananmen Square protests and massacre. (Michael Birnbaum/The Washington Post) China’s Huawei and ZTE are being phased out from Czech government agencies and the country’s mobile networks after the Czech Republic’s cybersecurity agency issued a warning. The risk from China is “unambiguous,” said Michal Thim, the senior China analyst at the Czech National Cyber and Information Security Agency. “Such an important system as the mobile network could be taken down in the most extreme threat.” Zhang, the Chinese ambassador, appealed to Babis. The Chinese Embassy later posted on Facebook that Babis had promised to set things straight. The prime minister denied saying any such thing, and the breach of diplomatic etiquette infuriated the Czechs. “There might have been some misunderstanding,” Zhang said. But the agency’s warning “ruins the atmosphere of cooperation,” he said. And then there’s the Prague mayor, who has stood in opposition to Zeman’s Beijing overtures. Hrib, 38, a member of the insurgent Pirate Party, said in an interview in Prague’s art nouveau city hall that he just wants to promote the best policies for his city. All the same, he has embraced his fight with Beijing. In March, he reinstituted the practice of flying the Tibetan flag from city hall in honor of the 1959 uprising. He allowed an exhibition on city property commemorating the 1989 Tiananmen Square protests. He hosted the leader of Tibet’s exiled government and made an official visit to the Taiwanese capital, Taipei. And he has called for Prague to renegotiate its 2016 sister-city agreement with Beijing, removing the acknowledgment of the one-China principle, which states that China, Taiwan and Tibet are a single country that should be ruled from Beijing. Hrib said it’s not a city’s place to recognize countries. He acknowledged that he developed sympathy for Taiwan while studying and traveling there. He keeps a Taiwanese tea set on his desk, underneath a gigantic map of Prague. Prague Mayor Zdenek Hrib keeps a Taiwanese tea set on the desk in his office. (Michael Birnbaum/The Washington Post) The Prague-Beijing fight has had collateral damage. China canceled a 14-concert tour by the Prague Philharmonic that had been scheduled for the fall. Orchestra leaders say Chinese officials asked them to issue a statement condemning the mayor and embracing the one-China policy. When they refused, the tour was called off, leaving a 10 percent hole into the orchestra’s budget. “It’s because we have ‘Prague’ in our name,” said Iva Nevoralova, an orchestra spokeswoman. “We really don’t want to have anything to do with politics.” Petricek, the Czech foreign minister, said that the fight “certainly does raise some questions about the prospect of further Czech-Chinese relations, where our cooperation goes.” Beijing has issued its own warning. “What they did has severely hurt the sentiments of the Chinese people and undermined the good atmosphere for bilateral relations,” Foreign Ministry spokesman Geng Shuang said last month. He demanded that they “correct their wrongdoing as soon as possible and not recklessly damage overall China-Czech relations. Otherwise, their own interests will be harmed at the end of the day.” Hrib offered no apology. The “one-China policy does not mean that you will do exactly everything that China says,” he said. He noted that when Prague city leaders originally signed the sister-city agreement with Beijing, it was with the hope that the Prague Zoo would get a panda. There’s still no panda. But he said Taipei has offered pangolins.

US and Western Europe pushing against the BRI

Asia Times, 8-19, 19, https://www.asiatimes.com/2019/08/article/challenges-in-belt-and-road-construction/, Challenges in Belt and Road construction

Fourth, they feel anxious about the geopolitical and economic impact of the Belt and Road and worry that the Belt and Road will alter the supply chain, RMB will be widely used, and China’s technical standards will be widely accepted, making China a center of the global economy, which in turn encourages countries along the Belt and Road to rely on or attach to China. In view of this, major countries in Europe and the United States have actively developed and proposed various countermeasures. First, they have implemented the programs such as the “Indo-Pacific strategy”, “high-quality infrastructure”, and the “Eurasian Interconnection Strategy”, and the United States has also strengthened the “long-arm jurisdiction” of the Foreign Corrupt Practices Act and other acts. Second, they have strengthened the utilization of foreign economic policy tools, such as the establishment of international investment and financing companies, so as to give full play to the role of international multilateral financial institutions and domestic policy banks, thereby helping domestic companies compete overseas. Third, relying on the advantages of discourse resources, they have conducted public opinion attacks on the Belt and Road, creating concepts such as “sharp strength” and “debt trap”. In Addition, they have united with relevant countries along the Belt and Road to question and oppose the Belt and Road Initiative by supporting research and launching a dialogue. Fourth, they have promoted China to shift from “responsible stakeholder” or a role to “share the burden” to a role of “transfer burden”, so as to reduce the resources input in areas where China and the West have high overlapping interests or where China’s national interests are large enough. Fourth, most of the so-called “international rules” are mainly promoted by developed countries. China and the developing countries are limited in participation, and some rules are not applicable because they are too demanding for developing countries.

US pressure on European countries not to use Huawei products

James Bratton, July 10, 2019, https://www.developingtelecoms.com/telecom-business/Categories/vendor-news/8623-polish-investment-depends-on-5g-role-says-huawei.html, Developing Telecoms, https://www.developingtelecoms.com/telecom-business/Categories/vendor-news/8623-polish-investment-depends-on-5g-role-says-huawei.html

While Poland’s government has not yet confirmed whether it will place restrictions on the use of Huawei’s equipment in 5G network rollouts, several reports have indicated that a blanket ban is highly improbable. Nonetheless, it is one of the European markets that the US is pressuring to avoid using Huawei products. In January this year, Huawei’s Polish unit sacked an employee who had been arrested on spying charges together with a Polish security official. In February, Huawei proposed building a cybersecurity centre in Poland, partly as a means of alleviating security concerns in the country.

Telecom Paper, August 30, 2019, https://www.telecompaper.com/news/poland-us-plan-5g-cooperation-agreement-report–1306343, Poland, US plan 5G cooperation agreement – report

Poland and the US are working on a cooperation agreement in the 5G technology field, reports the Financial Times. The eventual agreement is related to attempts of the US administration to prevent the use of equipment from Chinese suppliers such as Huawei, due to security concerns. According to sources of the Financial Times, the eventual agreement is based on the so-called Prague Proposals – the package of rules in the field of the 5G technology and cyber-security presented during the international conference in Prague earlier this May. The document includes a statement that it is necessary to take into account the influence of third-party states on providers of 5G solutions. According to the report, the draft text of the agreement has already been completed, but doesn’t name any companies. The agreement is planned to be signed during the visit of the US President to Warsaw.

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