Sunteți pe pagina 1din 20

ue

#1 0

15 January

China - EuropE ThE road ahEad

01 3

Is Iss

CHINA EUROPE 2013


Content
H.E. Mr. Wu Hailong 2012: An Important Year of Transition for 102 China-EU Relations page Cui Hongjian China-EU Relations: Looking for new Dynamic Forces page for the Future

03
Zhang Monan

13

Chen Jin

Thilo Hanemann

Politics, a way of life

page

04

The Limits of Chinas Consumer Revolution


Li Junru On the Global Influence of the 18th Congress of the Communist Party of China

page

09

The EU-China Investment Relationship: From a OneWay to a Two-Way page Street

14

Derek Vaughan

Zhong Jianhua

China and EU relations

page

05

page

10

Explaining Chinas Role in Africa


Franois Godement & Jonas Parello-Plesne

page

15

Davide Cucino

Chris Cheung

The Future of Foreign Investment

pages

06-07

Doing business in China

page

11

What will China 3.0 mean for Europe?


pages

16-17

Fraser Cameron

Clare Murphy

The EU and China Need Each Other

page

08

The front cover depicts a detail of the Emperors Dragon robe shown at the Victoria and Albert Museum in London, England. The magnificent robes worn by the emperors and empresses of the Qing Dynasty, the last ruling dynasty of China, were displayed for the first time in Europe at this exhibition showing the growing exchange not only in products but also culture of the two great economies. |EPA/FACUNDO ARRIZABALAGA

Terracotta army conquers the Bourse, tying Europe to China

pages

18-19

China EuropE 2013

2012: An Important Year of Transition for China-EU Relations


By H.E. Mr. Wu Hailong H.E. Mr. Wu Hailong, Chinese Ambassador to the EU

NEWEUROPE | January 2013

03

The stronger coordination between China and the EU on regional and international issues has helped expand the global significance of China-EU cooperation
ear 2012 is an important year of transition for China-EU relations. With a more mature and stable comprehensive strategic partnership, the two sides have enjoyed frequent high level exchanges, stronger practical cooperation, expanding cultural and people-to-people exchange, and increasing coordination and cooperation on international affairs. China-EU ties have been ushered into a key stage of comprehensive and in-depth growth. The frequent high-level exchanges and the fruitful results of the China-EU Summit have helped effectively identify the strategic direction of our bilateral ties. In 2012, the two sides have held the 14th and the 15th ChinaEU Summit, during which the two leaderships have reviewed the development of our comprehensive strategic partnership in the course of last ten years and have reinforced the agreement to strengthen dialogue, cooperation, mutual benefit and win-win progress. During his successful visit to the EU headquarters, Chinese Vice Premier Li Keqiang has opened a new chapter for China-EU urbanization cooperation. During the visit of State Councilor Liu Yandong, the two sides have launched the China-EU High Level People-to-People Dialogue. In addition, through the successful organization of the third High Level Strategic Dialogue and the third High Level Political Party Forum, the two sides have made great progress on policy coordination and exchange. Despite the difficulties, the two sides have extended the areas of cooperation and made headways in trade and investment. Due to the slowing-down global economic recovery mo-

L-R, Chinese Prime Minister Wen Jiabao and European Council President Herman Van Rompuy, pictured at a meeting part of the EU-China top, in Egmont Palace, in Brussels, organised by the Federation of Entreprises of Belgium (VBO - FEB).|BELGA PHOTO BENOIT DOPPAGNE

mentum and the outstanding difficulties of the European sovereign debt crisis, trade and investment between China and Europe have experienced a decline. In the first 11 months of 2012, two-way trade in goods has fallen by 4.1% year-on-year to 495.7 billion US dollars. Chinese export to the EU has declined by 7%. In the first 10 months, European investment in China decreased by 5%. The sovereign debt crisis has also resulted in the rising trade protectionist sentiments in Europe. The trade remedy measures adopted by the EU against the Chinese solar panel and other industries has already caused increasing frictions in our bilateral trade. Nevertheless, the interdependence, mutual benefit, and win-win cooperation remain the main trend in China-EU relations. Both sides continue to uphold strong wishes to maintain and strengthen practical cooperation in such areas as urbanization, new energy, scientific innovation, and high and new technologies. The major upgrade of people-to-people exchange has consolidated the popular basis for China-EU relations. In 2012, the two sides have successfully launched the High Level People-to-People Exchange Dialogue and celebrated the Year of Intercultural Dialogue. Guided by the principle of promoting cultural dialogue and idea exchange, China and the EU have organized nearly 300 projects covering 22 Chinese regions (including Hong Kong and Macau) and 27 EU member states on a wide range of subjects, including literature, art, philosophy, youth exchange, and tourism. Currently, nearly 250,000 Chinese students are making grades in Europe. The population of European students in China is also on the

rise, accounting for 10% of the total foreign students in China. With over 5 million visits made between the two peoples per year, the people-to-people exchange between China and Europe will continue to grow both in its breadth and depth. The stronger coordination between China and the EU on regional and international issues has helped expand the global significance of China-EU cooperation. In 2012, the two sides have established the regular defence consultation mechanism, held the first policy dialogue on Latin America, and maintained regular consultations on counterterrorism, non-proliferation, middle-east, the Korean Peninsula, the Iranian nuclear issue, and other regional hotspot issues and issues related to global security. With the strengthened consultation on climate change, the two sides have helped promote progress during the Doha Climate Change Conference. In addition, the two sides have continued to promote reform of the international financial and economic regime and the global governance through multilateral mechanisms. As the international situation experiences complex and profound changes, and as both China and Europe navigate through the key phase of economic adjustment and transformative innovation, it is high time that two sides strengthened cooperation and expanded common interest. China and Europe must rise to the challenges and make good use of opportunities. The report adopted by the 18th Congress of the Communist Party of China has mapped out an encouraging blueprint for Chinas future development, creating nu-

merous opportunities for both sides to deepen mutually beneficial cooperation. It is expected that urbanization, ecological progress, scientific innovation, regional development, and social security will become new highlight for growth, as the advanced technology and management expertise from Europe and the huge market potential from China will come together to create robust growth for the development of both sides. Year 2013 celebrates the tenth anniversary of the China-EU comprehensive strategic partnership. The two sides should make good plans for this important occasion so as to open a great chapter for the China-EU relations for the next decade. We must continue to commit ourselves to the strategic direction of our relations featuring mutual benefit and win-win growth, view each other as partners for development, approach the development of each other as an opportunity, expand shared interest, and strive to improve the quality and scale of cooperation across board. Moreover, we must work to constantly strengthen political mutual trust. We should respect each others choice for and model of development, appreciate and support the core interest of the other party, and refrain from provoking or playing up trade frictions. In the face of disputes, we should follow the principle of mutual respect, equality, mutual benefit, and win-win progress to work out solutions through dialogues. I strongly believe that with our concerted efforts, the China-EU relations will continue to stand the test of changes in the international environment in 2013 and move forward to achieve healthy, stable, and sustainable growth.

04

China EuropE 2013


January 2013 | NEWEUROPE

hen Jin is the deputy President of the Party Literature Research Office of the CPC Central Committee. He is also the vice-chairperson and research fellow with the China Institute of CPC Literature Research a member of the China Writers Association; and an adjunct professor at a number of universities, including Remin University of China and Wuhan University. He spent a large part of the Communist Party leadership Congress following the change over as he has done in the past. During a trip to Brussels at the end of 2012 he sat down with New Europes Managing Editor Alia Papageorgiou for an interview on China, Politics and the time he enjoyed studying the differences between Chinese and American politics at Harvard. The interview is found below. What does politics mean for you? Politics to me is what I do, it is also the career I have chosen for myself. How did you get into politics? I naturally call myself an intellectual or a scholar but through working political party literature I naturally became involved mostly with politics. How would you describe Mao Zedong to a European audience?

Politics, a way of life

EXCLUSIVE INTERVIEW : ChEN JIN

The Chinese people regarded Mao Zedong as a hero, if there was no Mao Zedong, China would have been in the dark for a much longer time. What do I mean by darkness? After 1840 our Chinas history openned up, we started to realise that the Chinese nation was living through a low ebb for almost all of China and understood that the Chines people had to find a way out and liberate themselves. Mao Zedong appeared at this moment. Just at the most pressing moment of hardship. Finally he founded the new China and the Chinese stood on their own two feet . This is the greatest contribution. He belongs to history and the past and also built the present and the future. I say that Mao Zedong belongs to the present as well though, looking at these past experiences as politics today is not very different; it faces the same issues

Chen Jin, deputy President, Party Literature Research Office of the CPC Central Committee.

You have been present at past leadership changes in your countrys political system, what difference do you see today? A fundamental thing happened when China put an end to lifelong tenure for its leaders. Actually before Deng Xiaopings change of leadership ritual, Mao Zedong had passed away whilst still being the leader. Den Xiaoping said that there must be a tenure and put

an end to lifelong leadership Leadership. This change in 1989 was fundemental. The leadership change from Deng to Hu Jintao succeeded and that established the change of leadership, by this 18th congress the process has now become institutionalised, there are established practices, standard procedures Another procedure in the change of leadership this time was that it was more transparent more spectacualr, the whole world could see it, it was more open and transparent than

in the past There has been major progress in making Chinas political changes, journalists were covering from many angles, it wash quick and had some great reporting. China has been anticipating this change and in all this time it has been respecting the public opinion. There is a difference between Chinese leadership and elections, in elections, before the campaigns people know little about the candidates and there can be many surprises. In the Chinese system leaders must start at a very low level and make their way up the ladder So the candidates in China would have experienced many tests, they have been governors of regions or have been in ministries before. What makes a great leader? I think that excellent leaders and statesmen show commonalities. They have excellent communication skills, they handle crises well, they take into consideration the greater picture; as for what makes a great leader in the CPC a leader must have a high sense of responsibility and a mission towards the Chinese people. Do you have the time to study and compare other political systems? I am very honored to tell you that I spent two months studying the American political system at Harvard University. My conclusions are that there is no political system that only has strengths and no weaknesses, no political system that stays static. Based on the economy and the development of the country and staying in line with its customs and traditions. Are you positive about the developments of Chinese literature? Well we have the first Chinese author to win a Nobel Prize for literature so this is very encouraging for China.

The 18 Leadership Change Conference of the Chinese Communist Party November, 2012

China EuropE 2013

China and EU relations


By Derek Vaughan MEP Derek Vaughan is a Member of the European Parliament for the Labour Party in Wales

NEWEUROPE | January 2013

05

It is now time to focus on a more sustainable EU-China relationship


here is cautious optimism surrounding the new government in China; the prospect of potential social, health and legal reform and a more transparent political structure has been viewed as a welcome change in attitude. As President in waiting, Xi Jinping launched a potentially powerful campaign against the corruption and inefficiency that plagues Chinese politics and public life. Since Novembers election, Chinas new political leaders have travelled across the country implementing regulations for stricter controls for Party officials. As an example of the intended restraint on the extravagant working arrangements once enjoyed by the Partys leaders, these visits were understated

French Minister of the Economy Pierre Moscovici (front L) speaks with Chinese Vice Premier Li Keqiang (front R) during their meeting at the Zhongnanhai leaderships compound in Beijing on January 8, 2013. Moscovici started his a two day visit to China on January 7, 2013. |AFP PHOTO /
POOL / WANG ZHAO

and austere; no luxury accommodation, motorcades or extravagant banquets. Beyond Chinas domestic concerns, the new leadership will need to manage relations with the rest of Asia, the United States and Europe. The EU is Chinas biggest trading partner, destination for up 20% of the countrys total exports. With the Eurozone continuing its road to recovery, Beijing will be looking to expand on this and integrate further into the global economy while at the same time protecting the country from the continuing crisis. In the past year or so efforts of European leaders to strengthen EU-Asia relations has increased the awareness of European-Asian trade and investment and there is a growing

understanding that overcoming global economic and social challenges requires enhanced cooperation. It is estimated that the next decade will see China attempting to double its 2010 GDP per capita and this provides a huge opportunity for EU-China trade, investment and social partnerships. With this in mind, it is now time to focus on a more sustainable EU-China relationship in order to move beyond the Eurozone crisis and tackle the challenges of bringing sustained growth to the worlds economies. The importance of developing trade and investment links for the EU with China is demonstrated in my own country of Wales. A Memorandum of Understanding between

the Chongqing Municipal Government and the Welsh Government, agreeing to collaboration and co-operation in a number of areas, was signed in 2006. Since then, cooperation on various issues has been enhanced, including a focus on creating joint international educational opportunities for students in both countries. This framework for close cooperation demonstrates the increasing significance of developing the ambitious economic and social expansion of both Chongqing and Wales. I very much hope that relations between the EU and China continue to grow but it remains to be seen how Chinas new leadership will address the countrys domestic challenges and tackle the testing global economic situation.

A container port in Shanghai, China on 18 May 2011. The European Union president called this week for fair trade practices between China and Europe, warning that Europe could turn to protectionism if current trends continue. The EU is Chinas largest export market, while European firms have been hammered by low-cost Chinese exports, European multinationals have complained of regulatory barriers hindering their ability to compete freely in China. EPA/Qilai Shen

06

China EuropE 2013


January 2013 | NEWEUROPE Davide Cucino, President of the European Union Chamber of Commerce in China

By Davide Cucino

uropean industry, in general, is doing well in China. Our profits and revenues in most industry sectors continue to grow and are reaching levels comparable to other regions in the world. The strategic importance of China for our companies is increasing and our investments have brought major benefits to the Chinese economy and Chinese society. These are important points to make, but this success story all too often gets lost regulatory complaints and, increasingly frequently, in trade disputes because there still remains a dormant potential to massively grow the scope of this mutual benefit. The reason for this is because European industry is regarded as exactly that: as European; as foreign. European companies accepted investment constraints trusting that further opening up and reform would remove the initial barriers. But this now is overdue and it is time to address the structural inequalities that foreign investors face. In order to tap into the further potential that companies of EU origin could contribute, including to Chinas economic rebalancing, our companies should be treated as Chinese companies as they are Chinese companies. The European Union doesnt have a term for categorising investment as foreign. If a Chinese or other non-EU company legally invests in Europe, the resultant legal entity is considered European. China has a fundamentally anachronistic view of foreign investment. Rather than commencing from the premise that foreign investment and healthy competition in an open marketplace brings positive impacts in and of itself, China places conditionality on the opening of markets to foreign investment. This is reflected in the piecemeal opening of markets and control of foreign investment in the Foreign Investment Industrial Guidance Catalogue. The Catalogue delineates a sharp distinction between domestically-invested and foreign-invested industry and prescribes conditions for the acceptance of foreign investment only where it is perceived to serve clear industrial policies. The fundamental issue in China today is economic rebalancing. European business has long contended that increased competition in

The Future of

Busy scenes outside the Century silk store in Beijing. | AFP PHOTO / WANG ZHAO

Chinas degree of openness to foreign business will therefore increasingly have implications for the interests of Chinese business on a global stage.

the marketplace is the elemental requirement for China to continue its impressive growth by moving up the value chain and more efficiently and productively utilising capital and resources. For a marketplace with the size and growth potential of China, competition should not be viewed with apprehension but as something to be actively encouraged. In recognising further reform and opening up as the driving force of the 12th Five-Year Plan, the Chinese government has seemingly recognised the need for economic reforms to substantively reduce state involvement in the business environment and to give much greater play to market principles. Amidst what is now widely recognised as both a cyclical and structural downturn, we see that the voices for speedy reform are being raised more loudly and more urgently. While it is now widely accepted that there needs to be decreased state control of the business environment and greater play given to private industry, there still seems to be a remaining section of the government that aims to tie access to the Chinese marketplace with considerations of economic nationalism and protection for Chinese domestic industry. Continuing to restrict access for European and other foreign-invested firms would inhibit the full realisation of the various and sizeable contributions that increased European investment would give to Chinas economy, business and society not to mention the highly detrimental impact that continued inequity would cause in the form of increased trade frictions that are already starting to rear their ugly head. Never has the idiom of when one sneezes everyone catches a cold been truer than it is in todays globalised economy. No doubt the severe downturn in Europe has sharpened this perception of interdependency for China. It holds true for the trade relationship and increasingly so for

the investment relationship and is reflected by Chinas determination to speed up the negotiation of investment treaties with its major partners, including efforts now for a bilateral EU-China investment agreement. Chinas process of rebalancing will bring the economies of the EU and China closer together. This will bring synergies, but will also put China and the EU into greater competition together on the global stage. Amidst the downturn, Europe remains staunchly and resiliently open. But as a democratic society, European policy-making is basically forged by public opinion. With China increasingly being recognised as an economic competitor, asymmetries in the levels of market openness between the two partners become more apparent and perceptions of unfairness become more marked amongst Europes citizens. Europe absolutely believes in the benefits of an open investment environment and actively encourages Chinese investment, but remaining open will become an increasingly hard sell to European constituencies if asymmetries persist. This is why we see trade tensions rising and why it is imperative that all parties maintain an eye to the long term. Open markets must be viewed as twoway streets. It is no-ones interest for this pressure to lead to a closing of markets. Chinas degree of openness to foreign business will therefore increasingly have implications for the interests of Chinese business on a global stage, especially as Chinese firms are stepping up their overseas investments. Chinese policymakers are aware of this and will need to increasingly factor in the impact of trade frictions into their internal economic policy-making to ensure that Chinese firms can enjoy the benefits of access to large marketplaces around the world. But I would argue the major reason why China should further open its internal marketplace not only to private domestic firms, but also foreign-

invested firms, is for the direct benefits that increased foreign investment in China will bring. The European Chamber is encouraged by recent policies such as revisions to the 36 Clauses for the Non-State Owned Economy to allow private investment into sectors where little competition is allowed. Such moves would not amount to less government monitoring of the business environment, but a liberalisation of central government control. De-centralisation and increased competition would yield a greater flexibility in the business environment to respond to Chinas growing consumer and industrial needs. This would not only assist economic rebalancing, it would also help to unleash the underexploited entrepreneurial potential of Chinas private industry. However, we are concerned at indications we have received in discussion with relevant government authorities that such pronouncements to encourage private investment are unconnected with foreign investment. I would argue that such halfway measures would only produce halfway results. At the European Chamber we believe that corporate cooperation is best developed in a truly competitive environment. Cooperation at its heart lies in the organic functioning of a competitive marketplace and the interplay and benefits that come from allowing the best companies to compete on equal footings and to choose when and how to partner together. Policy should focus more on encouraging voluntary technology transactions instead of forced technology transfers. In Europe we see an increasing and organic tendency in many sectors towards the development of mature partnerships between competitors entered into in mutual trust and on the premise of the long-term benefits of specialisation. This leads to a natural flow of technology, both across national borders and industries and it leads to the formation of joint ventures where

China EuropE 2013

the respective strengths of the partners produce a whole that is more than the sum of its parts. When China laid out the list of strategic emerging sectors to be promoted, European business in China initially viewed the plan with great enthusiasm. European business is traditionally strong and is the global leader in many of the technology driven sectors identified in the strategic emerging industries, such as energy-efficient and green technologies, new energy technologies, next generation IT and high-end equipment and transportation manufacturing. However, it has become increasingly apparent that the plan to promote these strategic emerging industries is part of Chinas industrial policy strategy intended to develop national champions that can compete on the global stage with large multinational corporations through protected markets, subsidies, misguided indigenous innovation policies and other favourable treatment. Access to the Chinese market for foreign-invested enterprises in these strategic emerging industry sectors and in other traditionally administrative monopoly sectors is massively curtailed. Much of the access exists in areas of the supply chain where China has not developed the technologies or expertise, or is only possible in the form of minority equity stake joint ventures with domestic Chinese firms that are often conditional on a transfer of technology by the European partner. In a recent publication the European Chamber produced on how patent-related policies and practices in China are hampering innovation, we referred to these examples of forced technology transfer requirements as raw deals. In the same study, we noted that evidence shows that European cutting-edge innovation-intensive operations do not generally agree to these raw deals and that these policies actually serve to deter enterprises from contributing valuable technological knowledge in Chinese operations. This unintended consequence is the opposite of what China wants as it aims to carry out industrial upgrading and stimulate innovation. Those sectors in which we are least able to fully participate the strategic emerging industries and the traditionally administrative monopoly sectors are exactly those sectors where we would be able to most fully contribute. As China

Foreign Investment

NEWEUROPE | January 2013

07

A woman working in a textile factory that exports clothing materials to the US and Europe in Jiujiang, east Chinas Jiangxi province. | AFP

China must create the conditions that ensure that the drivers of innovation, productivity and efficiency prevail

further develops and urbanises, it will be necessary to find ever more sophisticated, sustainable and efficient ways to meet its growing needs and consumption demands. Europe has already gone through much of the same industrialisation and urbanisation processes that China must go through today. We made mistakes, we learnt lessons and we have developed some tools. European industry is bringing this experience and many of these tools to China and we are working together with Chinese industry, academia and the government to develop new solutions to meet Chinas needs. European firms do bring real benefit for Chinas economic and societal development. Our companies are competitive because they are innovative, efficient and produce high-quality products and services. In addition to the jobs creation and capital expenditure that our investments have brought, we have also passed on skills, training, management and technical know-how to Chinese workers. We have built a reputation for high-quality, advanced and environmentally sustainable solutions and we have made many important contributions to Chinas development, including through enacting best practices in ecological protection and labour conditions. There are also many examples of long-term symbiotic partnerships between Chinese and European companies that are built on mutual trust and mutual interest that encourage voluntary technology transactions, joint research and development and where both partners contribute skills and expertise and both parties benefit. But there could be many more examples. As most Chinese policy-makers are acknowledging the need for increased participation and competition in the economy, we hope that the trepidations of some do not cause the government to stop short of comprehensively following through on reform by not including foreign industry.

Even when it doesnt lead to corporate cooperation and partnerships, healthy competition should be recognised as a good in and of itself. Competition is the driving force for excellence and innovation. Competition on an equal footing forces all companies to develop the best and most needed products and services at the lowest price obtainable. Not only is this good for the consumer and for meeting societal needs, it compels excellence and induces innovation. Such competition has acted as the greatest spur for the development of Chinas own domestic industry. As Chinese firms increasingly aim to compete in mature global marketplaces where Chinese firms will not benefit from favourable treatment, they will need to be ready. Only by having a truly competitive marketplace at home can enough Chinese companies develop the skills to compete with the best abroad. History has proven that it is ultimately only by competing with the best that you can become the best. The stakes are high. This is not just about promoting foreign direct investment or reducing trade frictions. It is not just about stimulating innovation or ensuring that the best products and solutions are available in China. It is not even just about providing the tools to meet the myriad societal needs that China is facing. This is central to the key question of the time regarding economic rebalancing and the ability of China to overcome the middle income trap and spur a prolonged period of growth. On the eve of a generational leadership transition, China holds a historic opportunity to raise its economy to a new level. Chinas state-led investment development model has supported growth over the last 30 years, but it is by design unequal and no longer sustainable. The last decade of stalled and piecemeal reform during prevailing advantageous economic conditions maintained strong growth but failed to create

the supporting institutional framework required to sustain Chinas development. China possesses the necessary ingredients, including the technology and physical infrastructure bases, as well as the human capital to make this shift. However, reforms to substantively reduce state involvement in the business environment and to give full play to market principles are needed. The 12th Five-Year Plan recognised this need for change, but meaningful implementation has been lacking. With signs of over-investment and poor productivity returns already perceptible and with the demographic dividend coming to an end, these changes are now urgently required not only for China, but also for global economic growth. At its core, China must create the conditions that ensure that the drivers of innovation, productivity and efficiency prevail. Rebalancing the economic growth model requires equal access for all companies, whether private or state-owned or whether Chinese or foreign-invested, not only to markets, but also to public procurement, technology innovation, treatment under the law and to finance and subsidies. In order to stimulate healthy competition and to comprehensively realise the benefits that European and all foreign industry could bring, both singularly and in partnership with domestic industry, China must re-evaluate its mindset towards foreign investment. We as European industry want to be here and we want to contribute to bolster the marketplace and to meet Chinas needs. In order to do so, China must allow European and all foreign companies the same access and the same operating conditions as Chinese firms, including in the strategic emerging industries and in all those industries that China plans to open to private investment. We want to achieve the same ends. Wed like to be regarded as Chinese.

08

China EuropE 2013


January 2013 | NEWEUROPE

The EU and China Need Each Other


By Fraser Cameron Fraser Cameron is director of the EU-Asia Centre

Renewed growth is the key as it will mean more jobs and investment in Europe and China.
A monumental sculpture besides an office building in the Central Business District of Beijing, China. As much of the world faces continuing economic turmoil the more resilient Chinese economy with its huge foreign exchange reserves is seen as a bright spot. |EPA/ADRIAN BRADSHAW

n the early stages of the European debt crisis there were some voices in Beijing deriding the EU for failing to put its house in order. Others even talked of an irreversible EU decline which would benefit China. These voices have long since gone to be replaced by a sober assessment that Chinas future is very much bound up with developments in Europe, and the US. The sovereign debt crisis and the accompanying austerity measures in many European countries has led to a sharp decline in Chineseexports to Europe which has had immediate economic and social ramifications for China. Workers have been laid off or working reduced hours as demand in Europe and America

dropped. European investment in China has also been reduced. Both sides now realise that they need each other. The Chinese government has maintained its substantial holdings of euros and acted judiciously to support the euro. It has begun to invest more in Europe. But renewed growth is the key as it will mean more jobs and investment in Europe and China. There are, however, many hurdles to overcome if the full potential of the relationship is to be realised. China needs to move from export and investment-driven growth to domestic consumption. This requires not only higher wages but also sustained efforts to control inflation.

The housing bubble has put many properties in the big cities out of reach for all but the rich. The EU has to reduce public expenditureand improve competitiveness. This has been an aim for several years but only now do the politicians seem ready to take the necessary painful decisions. A Europe that has less than ten percent of the worlds population and spends more than fifty percent of global social welfare cannot continue. Each side will also have to tackle the perennial problems that give rise to various forms of protectionism. The EU resorts too often to anti-dumping measures. China faile to do enough to protect intellectual property.

We are still some way from what Herman van Rompuy calls a level playing field. The imminent opening of negotiations for a bilateral investment treaty should give both sides the opportunity to deal with some of their outstanding trade and investment disoutes. There is huge potential for further investment in both directions. China is responsible for barely one percent of FDI in the EU, a staggeringly low figure given the size of its reserves. The new leadership in China will have domestic stability as its top priority. But when it looks round the world for powerful friends with whom it can do business, the EU will be top of the list.

Illustration picture shows the Dexia tower in Brussels during a meeting of the Dexia board of directors. In the last four years the economic crisis has left the heart of Europe more than battered in terms of restructuring and debt. Chinese debt buys have always been a comfort spot | BELGA/ BRUNO FAHY

China EuropE 2013


NEWEUROPE | January 2013

09

A Chinese factory machine operator works at a textile manufacturing factory in Beijing, China. EPA/HOW HWEE YOUNG

The Limits of Chinas Consumer Revolution


By Zhang Monan Zhang Monan is a fellow of the China Information Center and of the China Foundation for International Studies, and a researcher at the China Macroeconomic Research Platform. SHANGHAI Chinas economy is at a crossroads. As 2013 begins, foreign and domestic observers alike are asking which path the countrys economic development should take in the next decade. How can China ensure stable and sustainable growth in the face of significant internal and external challenges, including slowing medium- and long-term growth, rising labor costs, and growing inflationary pressure? After the global economic crisis weakened external demand, which sustained Chinas unprecedented economic growth for three decades, the authorities agreed that internal demand, especially domestic consumption, must become the countrys new growth engine. At the Chinese Communist Partys congress in November, Chinas leaders declared their intention to double per capita income by 2020, unleashing 64 trillion renminbi ($10.2 trillion) of purchasing power. Indeed, with roughly 130 million middleclass consumers, Chinas domestic market holds significant potential. The Boston Consulting Group estimates that, with an average annual GDP growth rate of 7% in China and 2% in the United States, Chinese domestic consumption will rise to half of Americas by 2015, and 80% in 2020 (assuming that the renminbi appreciates at an average rate of 3% against the US dollar over the next few years). Moreover, the current-account surplus plummeted from more than 10% of GDP in 2007 to 2.8% in 2011, reflecting Chinas decreasing reliance on exports to drive economic growth. In 2010, Chinas imports ranked second in the world, and are expected to grow at an average annual rate of 27% in 2011-2015, outpacing export growth by five percentage points. As a result, the total value of imports is expected to exceed $10 trillion in only two years, providing lucrative investment opportunities and broader markets to foreign investors. This potential is not lost on multinational companies. A survey conducted in May 2012 by Chinas State Council Development Research Center asked 394 Chinese and foreign companies about their future strategic orientation in China. The respondents most often viewed China not only as a market opportunity, a research-and-development base, and an export base, but also as a high-end manufacturing base, a regional-headquarters site, and a service base. The results also reflected Chinas declining attractiveness as a base for product assembly, low-cost manufacturing, and parts production. In fact, while the US and other developed countries have sought to bring manufacturing home (reshoring), they have been establishing innovation facilities in China. Multinational companies have created nearly 1,000 R&D centers in China, including 194 in 2010 alone, enabling them to develop products for the local market. More than 1,400 foreign-funded R&D institutions are currently operating in China, and data from Chinas Ministry of Commerce indicate that 480 of the worlds top 500 companies have established local subsidiaries. But China cannot rely on consumption as its only growth engine. History has shown that a one-dimensional development model cannot ensure sustainable competitiveness, just as no single market can sustain global demand. Given this, China must continue to develop its manufacturing sector. China is the worlds top manufacturing country by output. But, while it accounts for 19.8% of total global manufacturing, it receives less than 3% of the worlds manufacturing R&D investment. As a result, Chinas innovative capacity remains relatively low, with its high-tech and knowledge-intensive industries unable to compete globally. On average, Chinas industrial enterprises are relatively small, and, although its industrial labor productivity (real manufacturing value added per employee) has improved over the last decade, it remains much lower than that of developed countries just 4.4% of Americas and Japans productivity, and 5.6% of Germanys. And the pauperization phenomenon in which companies must adjust their commercial strategies to cope with an impoverished consumer base is increasingly affecting traditional industries, further undermining Chinas capacity for sustainable development. Moreover, the quality of Chinese-manufactured products continues to lag behind that of developed countries manufactured goods. Whereas one unit of intermediate input in developed countries typically generates one unit or more of added value, in China the ratio is only 0.56. As Chinas demographic dividend disappears, its low-end labor market is shrinking, driving up its once rock-bottom labor costs and diminishing its rate of return on capital. Over the next decade, as Chinese workers demand higher salaries, basic benefits, and improved working conditions, the country may well lose the comparative advantage that has driven its manufacturing boom. While manufacturing wages remain significantly lower in China than in the US, the rapidly narrowing gap is already fueling American reshoring. Given that Chinese wages are rising at an annual rate of 15-20%, productivity-adjusted wage rates in low-cost US states are expected to exceed those in some coastal regions of China by only 40% in 2015. Add to that reduced energy costs in the US, owing to the countrys shale-gas revolution, as well as the global supply chains complexity, and Chinas cost advantages will soon be negligible. Meanwhile, other emerging economies including Vietnam, India, Mexico, and Eastern European countries are vying for Chinas position as the worlds factory. These lowercost alternatives are fast becoming developedcountry investors preferred destinations. Although the enormous potential of Chinas consumer market can provide a new impetus for economic growth, the countrys economic transformation cannot succeed unless it upgrades its manufacturing sector. Chinas leaders must begin by increasing investment in science and technology, focusing their efforts on parlaying key technological breakthroughs into higher-value-added production. Only by combining growing Chinese consumption with enhanced Chinese manufacturing will the country be able to develop a new comparative advantage, which is the key to sustainable growth over the next decade. Copyright: Project Syndicate, 2013. www.project-syndicate.org

China is the worlds top manufacturing country by output. But, while it accounts for 19.8% of total global manufacturing, it receives less than 3% of the worlds manufacturing R&D investment.

10

China EuropE 2013


January 2013 | NEWEUROPE

A man looks at the name list of candidates of a district peoples congress election in Gui Village, Huangcun Town of Daxing district in Beijing, China on 04 November 2011. Elections for new delegates to the National Peoples Representatives Congress at the district, county and township levels are due to take place on 08 November. |EPA/HOW HWEE YOUNG

On the Global Influence of the 18th Congress of the Communist Party of China
By Li Junru Li Junru is member of the Standing Committee of the Chinese Peoples Political Consultative Conference (CPPCC) and Former Vice President of the Central Party School of the CPC.

We continue to regard peace and development as the trend of our times. We will continue to hold high the banner of peace, development, cooperation, and winwin, and call for peaceful resolution of international disputes and hotspot issues.

he 18th Congress of the Communist Party of China has been viewed as an international political event. But what will that congress bring to the world? First, the Congress has reaffirmed that the China will continue to promote steady and rapid growth, thereby creating more investment and growth opportunities for countries around the world. Since the outbreak of the international financial crisis, the world economy has suffered major setbacks, the result of which has also produced heavy impact on the Chinese economy. The reversed transmission of the pressure has resulted in the profound structural adjustment and in the shift of the growth model of the Chinese economy. In the first 9 months of this year, the Chinese GDP has grown at a less-than-average rate of 7.7%, yet has created higher-than-expected 10.24 million new jobs in urban areas, demonstrating that the structural adjustment of the economy has already begun producing results. Against such a backdrop, during the 18th Party Congress, a target was put forward that China would double its GDP and the income of rural and urban population by 2020 based on the 2010 level. This means that by 2020, China would need to double its GDP to over 80 trillion RMB yuan, urban per capita disposable income to 40,000 yuan, and rural per capita net income to 12,000 yuan from their respective levels of 40 trillion, 19,109 and 5,919 in 2010. Such an objective sends out a positive signal because it will help uplift Chinas overall national strength, boost domestic demand, and contribute to world economic development and progress. China will remain committed to the shared growth and do a better job in bringing the benefits to neighboring and other develo-

ping countries. Second, the Party Congress has reaffirmed that China will remain committed to the opening up strategy of mutual benefit and winwin, and will pursue in-depth cooperation to promote robust, sustainable, and balanced world economic growth. More than ever, todays world economy is challenged by uncertainties and destabilizing factors as we have observed during the US sub-prime mortgage crisis and the European sovereign debt crisis. The difficulties we face have pushed up protectionist sentiments and led to growing number of economic and trade disputes. Such predisposition to be captured by immediate interests not only undercuts efforts to resolve problems, but also generates new difficulties and crises. Bearing in mind the larger interest of the international community, delegates to the Party Congress have made clear declaration that China will strengthen macroeconomic policy coordination with major economies and will seek proper resolution of trade disputes through consultation. They have emphasized that China upholds balanced rights and obligations and will actively participate in global economic governance, promote trade and investment facilitation, and oppose protectionism of all forms. I strongly believe that such an approach and policies will contribute significantly to the resolution of the international financial crisis and to stronger global governance. Third, the Party Congress confirmed that China will continue to follow unswervingly the path of peaceful development, uphold an independent foreign policy of peace, and safeguard world peace and development. The world in which we live continues to face challenges of terrorism, hegemonism,

power politics, new interventionism, and regional unrest. Issues of cyber security, energy security, and food security have become increasingly pronounced. Because of the high-profile refocus of the United States to the Asia-Pacific, certain countries have been encouraged to provoke incidents one after another, adding pressure to Chinas development. Under such circumstances, members of the Party Congress have reaffirmed the principled position to safeguard national sovereignty, security, and development interest. Under no circumstances will China yield to foreign pressure. We continue to regard peace and development as the trend of our times. We will continue to hold high the banner of peace, development, cooperation, and win-win, and call for peaceful resolution of international disputes and hotspot issues. We oppose the willful resort to force or the threat to use force, oppose the overthrow of legitimate governments, and oppose terrorism, hegemonism, and power politics of all manifestations. China will remain committed to the principle of nonintervention in other countries domestic politics, and will never seek hegemony or engage in expansion. In the years ahead, we will function as a responsible major power, adopt a more active approach in participating in international affairs, and work together with people from around the world to tackle with global challenges. I am full of confidence that these important policies and commitment will have much to contribute to the international community. The author of this article is a member of the Standing Committee of the Chinese Peoples Political Consultative Conference (CPPCC) and Former Vice President of the Central Party School of the CPC.

China EuropE 2013


Interview with Mr Chris Cheung Director of the EU SME Centre in China
NEWEUROPE | January 2013

11

The Chinese market is not growing as fast now as it was in the past. Is it still a prospective market? Are there enough opportunities for exporters? Chinas National Bureau of Statistics recently published data that shows Chinas GDP grew 7.8% in 2012, a number higher than the 7.5% target set by the Chinese government earlier last year. The forecast for 2013 is still largely positive (the World Bank now predicts 8.4%), especially compared to the much lower growth predicted in the EU. At the same time, exports from the EU to China rose to 73bn in the first six months of 2012, up over 10% on 2011. Machinery and vehicle exports increased by nearly 9% in the first half of 2012, compared with 2011, and exports of chemicals from the EU to China went up by 14%. Which segments of the Chinese market currently offer the most opportunities for European exporters? Each Member State has one or several industries of expertise. Due to this diversity, the European Union is very well represented in its export to China in a very large number of industries. In the food & beverage industry, but also industrial products: machinery and transport equipment, miscellaneous manufactured goods and chemicals which account for 10.9% of exports. Considerable efforts are being made in developing the seven strategic emerging industries (SEIs) in China, following the 12th Five-Year Plan, which are biotechnology, new energy, high-end equipment manufacturing, energy conservation and environmental protection, clean-energy vehicles, new materials, and next-generation IT, and will offer further opportunities for European exporters.

Doing business in China


We strongly advise first-timers to visit the local market and go to relevant trade fairs to get a feel for the level of quality and competition.
Many companies are interested in China because of the size of its population, 1.35 billion, which represents an attractive customer base, and the growing opportunities in areas outside of its first tier cities. Large-scale development of Chinas 2nd and 3rd tier cities and increased connectivity between cities adds to an already impressive customer base and enticing labour pool for many companies. Where do you see the biggest challenges and obstacles when entering the Chinese market? How can a European SME be successful in China? The Chinese market is not an impossible one but it requires asking the right questions. Many companies are trying to do business from a distance, but in China this is difficult; you have to be there. You have to have regular contact with your partners and build trust. Take the time to really get to know your partners. There are some common success factors that we have seen EU SMEs demonstrate. Firstly, they have to have the know-how, the expertise, or that special product which makes them stand out in the market. Next they will have to develop strong relationships, with their customers, with their suppliers, and with their distributors. What would be the first thing you would recommend to a company which has decided to start exporting to China? We would recommend that any company looking to export to China takes the time to really understand the market and find reliable partners. Firstly to identify the market: you have to decide which region or city to go to. Then you need legal advice to see whether there are any limitations in accessing the market. Then, in many cases, the next thing you have to do is find a reliable Chinese partner if you are exporting, you have to find a distributor. We strongly advise first-timers to visit the local market and go to relevant trade fairs to get a feel for the level of quality and competition. A good start would be to consult experienced support organisations, such as your local chamber of commerce or trade association. The EU SME Centre can help in all of these areas, providing European SMEs with

Mr Chris Cheung, Director of the EU SME Centre in China

Are there any industries which are particularly promising especially for small and medium-sized companies from the EU? There are opportunities for EU SMEs across the board. The EU SME Centre has carried out research into many markets including: green tech, ICT, food and beverages, automotive, machinery, textiles and apparel and healthcare, and we have found that there are good opportunities for EU SMEs in all of these sectors. Many innovative, environmentally friendly and high-quality goods and services by EU SMEs offer solutions to the economic, social and industrial challenges and opportunities that China is facing. (http://www.eusmecentre.org.cn/content/ documentation?doc_type=report). What most attracts European companies to the Chinese market? What positive factors for doing business are there in the Chinese market? The attractiveness of being present on the largest market in the world in terms of consumers, opportunities for growth, competitiveness and innovation is great.

information and advice on how to access the market, and should be one of the first points of call for any SME starting out in China. Our website, www.eusmecentre.org.cn, has a wealth of information to already give a good overview of how to get started, and I welcome SMEs to consult it on a regular basis. If you were to list three main arguments why a European SME should address your organisation for help, what would they be? 1. Expertise. The EU SME Centre has in-house experts that each have more than 10 years experience working with China in their field of expertise, covering the areas of business development, legal, export standards and training & HR. Therefore SMEs that come to us for market information and advice can

be assured that they will get the most accurate and up-to-date information to make informed business decisions. 2. Practical, jargon-free. There is a lot of information out there about the Chinese market, but this is not always easily accessible. Regulations and import processes in particular can be confusing. The Centre makes this information readily available and in easy-tofollow guides, pointing out the key facts relevant for SMEs. 3. Trustworthy. Backed by a consortium of chambers of commerce and funded by the European Union, the EU SME Centre has a strong network of partners. We cater to SMEs across the EU27 and as such we provide independent, unbiased information and confidential advice.

About the EU SME Centre

The EU SME Centre is a project funded by the European Union and backed by a consortium of chambers of commerce including the China-Britain Business Council, the German, French, Italian, Benelux and Spanish chambers of commerce in China, the European Chamber of Commerce in China and EUROCHAMBRES in Brussels. It also acts as a platform facilitating coordination amongst Member State and European public and private sector service providers to SMEs. SMEs looking for business advice in relation to the Chinese market can register for free online at www.eusmecentre.org.cn to gain access to the services provided by the Centre.

ADVERTISEMENT

China EuropE 2013

China-EU Relations: Looking for new Dynamic Forces for the Future

NEWEUROPE | January 2013

13

President of the European Council Herman van Rompuy (L) shakes hands with Chinese President Hu Jintao in the Great Hall of the People in Beijing, China, May 16, 2011. Van Rompuy is on an official four-day trip to China, and will hold talks with President Hu and Premier Wen Jiabao. |EPA/DAVID GRAY / POOL

By Cui Hongjian Cui Hongjian, Director of European Studies, China Institute of International Studies

The current China-EU relations is still lacking of high degree of political trust and broad basis of public opinion, a remarkable illustration of it is although the Chinese government has repeatedly shown itself to adhere to the principle of peaceful development and win-win cooperation with Europe, suspicions such as China is an adversary or partner, a threat or an opportunity to Europe is still lingering in the European mind today.

hen entering its second 10 years of the comprehensive strategic partnership, China-EU relations are at a critical node. Indeed, under the joint efforts of both sides, the cooperation between EU and China achieved so lot in the past 10 years: the bilateral trade just exceeded $ 100 billion in 2003 and will exceed $ 500 billion this year even suffered much by the debt crisis, a fivefold increase in last 10 years. A full range of exchange system with three pillars- strategic and political dialogue, highlevel economic & trade forum and people to people contact mechanism - was established, making the coordination in various areas of domestic and foreign policy between China and EU become reality. There is no such an extensive and in-depth relationship between any of the major actors like China-EU relations in the todays world. We have reasons to share with politicians ambition of developing the China-EU relations into a model of international cooperation in the 21st century. But obviously, the rapid changes in the international situation are far beyond our expectations and we are not yet ready for them. In 2012, the third year of Europe suffered the debt crisis, two remarkable things needed to be concerned in the China-EU economic and trade relations: first, EU lost its position as the largest export destination for Chinese goods since 2007. Second, according to a PwCs report, for the first time, the number of Chinese investments in Europe exceeded the number of European investment in China in the first quarter. If above two changes are considered as a starting point of a long trend, then the

economic equation of China and EU coexistence is starting to change, both sides must change their way of thinking in developing economic ties: for China, it has to accelerate economic structure adjustment and intensify efforts to achieve a innovative growth at the expense of the loss of market share in Europe. And for Europe, it has to be ready to live along with more Chinese investment and M & A while it feels intense competition from China more and more. In another word, the current changes are depicting the future of China-EU economic linkage: bilateral cooperation will be driven not only by a highly complementary trade relationship as in previous decades, but by the benign and managed competition in the industry with each other in next decades. Establishment of a closer economic and monetary union requires a political solution to put the case, which is the logic demonstrated by current changes taking place within the European Union. Similarly, a high degree of mutual political trust between China and EU provides the direction and framework for a closer and more balanced China-EU relation. Chinas ruling party has just completed its transfer of leadership, and showed its confidence of achieving a win-win cooperation with the international community and building a new type of relations between major powers especially with developed countries including EU. Meanwhile, Europe is experiencing a key period of reaching consensuses between the EU institutions and member states, between member states and between governments and society by power restructuring. President Mr. Barroso expressed the EUs ambition to establish a

Federation of national states by more integration. As two of critical forces to promote a multi-polar world, China and EUs ambitions is good for the international community, but it must be noted that the confidence or ambition is easily interpreted as assertiveness or even aggressiveness when they lack of political trust. The current China-EU relations is still lack of high degree of political trust and broad basis of public opinion, a remarkable illustration of it is although the Chinese government has repeatedly shown itself to adhere to the principle of peaceful development and win-win cooperation with Europe, suspicions such as China is an adversary or partner, a threat or an opportunity to Europe is still lingering in the European mind today,. This is not so much a no confidence to China as it is the Europeans are too obsessed with their own historical myth. Certainly, before embarking on the road of integration, European history filled with stories of seeking hegemony and power politics. Fortunately, this European experience obtained through twists and turns has been understood and learnt by China as an important part of the experience of the human history. However, Europe also should understand that the history is not the self-commence of logic and a simple repetition of the old story. On the basis of learning from each others development experience equally, to reduce the cultural prejudices and communicate on the peoples hearts gradually should become another driving force to promote the future development of China-EU relations, because it is destined to be a mission that the two great civilizations should shoulder up.

14

China EuropE 2013


January 2013 | NEWEUROPE

By Thilo Hanemann

The EU-China Investment Relationship: From a One-Way to a Two-Way Street


Thilo Hanemann, Rhodium Group

The emergence of China as direct investor is a great opportunity for Europe


ver the past decade China has become one of Europes most important economic partners. In 2011 bilateral trade flows totaled 430 billion, four times higher than just ten years ago. In addition to growing exports, European firms have also expanded their physical presence in China. The stock of foreign direct investment (FDI) by European firms in China amounted to more than 100 billion in 2011. Investment flows into the other direction, from China to Europe, were negligible in the past. However, the past patterns of one-way investment flows are changing as investment from China has grown rapidly in recent years, taking EU-China economic relations to the next level. For one, China has increased its holdings of European securities, including small equity shares in listed European companies and sovereign debt issued by European governments. Growing portfolio investment into Europe has come on the back of Chinas enormous foreign exchange reserves, which state-controlled agencies need to re-invest abroad, mostly in government debt or lower-risk equities. Efforts to diversify Chinas reserve holdings away from the US dollar into other major currencies like the euro or the Japanese yen should have increased the holdings of European assets, but there are no reliable statistics available on the extent of

A woman looks down on a container port in Shanghai. | EPA/QilAi ShEn

those purchases. The second major trend is a structural increase of outward FDI by Chinese firms in the European Union. There are similar data problems with capturing FDI from China, as official statistics have a huge time lag and often fail to capture flows through offshore financial centers. However, there are alternative data sources that allow a real-time assessment of those flows. According to Rhodium Group estimates, annual Chinese OFDI flows to Europe grew from less than 1 billion per year from 2004 to 2008 to 1.9 billion in 2009 and 2.7 billion 2010. In 2011, flows tripled again to 7.6 billion, a surge not captured in official statistics. In 2012, Chinese firms invested another 7.8 billion in the 27 countries of the European Union, driven by large-scale acquisitions in utilities (Energias de Portugal), consumer products (Weetabix), industrial machinery (Putzmeister) and infrastructure (Heathrow Airport). This surge in Chinese investment is mostly driven by commercial motives, not a grand government strategy. Chinas growth model is changing rapidly, and for an increasing number

of Chinese firms continued growth and prosperity is becoming inexorably tied to overseas investment in developed economies. Investments in Europe help firms to conquer new markets, move up the value chain, remain competitive in the domestic market and gain regulatory experience. Looking ahead, the ongoing structural adjustments in China will likely sustain future growth of outward FDI. Chinas global OFDI can be expected to grow by 750 billion to 1.5 trillion by 2020 and developed economies will receive a substantial share of this investment. Given the urgent need for investment in many European economies and the drop in global FDI flows to Europe in recent years, the emergence of China as direct investor is a great opportunity for Europe. Chinese investment can help to create jobs, increase competition, maximize consumer welfare and allow European companies a better access to the fast-growing Chinese market. At the same time there are legitimate concerns related to investment from China, rooted in the exceptional size and velocity of Chinas growth, its residual non-market elements, and the revival of interest in state capitalism and nationalism as alternatives to Western consumer-centric models. Securing the right policy response is crucial at this point in time to maximize the benefits from these new capital flows while addressing legitimate concerns related to the special character of Chinas state and economy. Most importantly, Europe must not risk losing its hard-earned reputation for openness by tuning up protectionist rhetoric or imposing additional barriers to capital inflows. Rising investment from China has already bred anxiety in Europe, demonstrated for example by the reactions to Tianjin Xinmaos announced takeover of Dutch cable maker Draka in 2010. Europe must avoid such kneejerk reactions, as they will damage the perception of Europe as an investment destination in China. Fixing Europes

structural problems and assisting firms with investment promotion frameworks are other elements of a successful model for sustaining the inflow of investment from China. At the same time, Europe must address several concerns about the economic and national security implications of Chinese investment. Europeans will only continue to embrace foreign investment if they know a thorough, EU-wide process to address valid concerns is in place. Brussels must ensure that policies are in place to protect EU economic interests via legislative frameworks such as competition policy reviews, labor regulations and transparency requirements. Europe also needs a common concept and supranational framework for screening foreign investment for security threats. The current fragmented approach fails to address pan-European national security risks and at the same time offers room for protectionist abuse. Its new FDI policy competencies under the Lisbon Treaty also allow Brussels to pursue its goals on the bilateral level, for example through an investment treaty with China that improves the access for European firms to the Chinese market. Chinas emergence as a global investor also opens a window of opportunity for the European Union to explore new multilateral approaches to global investment governance. As China and other emerging economies move from outright investment controls toward more sophisticated regimes -- including national security and competition reviews -- the problem of regime balkanization is becoming global. New efforts to converge international norms in these areas will be needed to prevent tensions. Never before in history were the interests of the European Union, the United States and China the three largest economies on the planet -- so closely aligned when it comes to safeguarding an open, fair and mutually beneficial global investment environment.

China EuropE 2013


NEWEUROPE | January 2013

Explaining Chinas Role in Africa


We need to adjust to Africa and not always expect Africa to adjust to us. Zhong Jianhua, the Chinese special envoy to Africa, is a seasoned diplomat, if only by his ability to explain each obstacle as an opportunity. Ambassador Zhong is Beijings man in a complicated region. Whenever tensions flare up, he is dispatched to assess the consequences for China and to advise the Chinese leaders on how to respond. Even though many challenges lie ahead, he is encouraged by a new generation of smart leaders and stronger regional organizations. There seems to be less confidence in the prospect for cooperation with Europe on African affairs. The envoy stresses that this would first require Europe to take a deep look at its own Africa policy. If Europe wants to contribute, it needs to change its attitude and treat its African partner as equals.

15

By Zhong Jianhua Ambassador Zhong Jianhua

Ambassador, A few years ago, the Arab spring sparked great disquiet in China. In several countries, urban youngsters challenged political elites. Has this affected Chinas policy towards the region? Not really. The Arab Spring has not spread so much as many people expected and the situation in the affected countries differed a lot. In countries like Tunisia the transition was quite smooth, so China to adjust its policy. Neither do I think that the tensions between urban youngsters and government apply to all other African countries. Besides domestic factors, we also have to consider the international context. Egypt, for example, is in a very critical and sensitive geopolitical position. That is why the United States continues to pay so much attention to it. With so many players doing things in this country, the situation is really complicated and we have to be careful. Africa has been booming, but is it going to last? First of all, we have to be careful with growth figures. They do not always reflect reality on the ground. Figures can be spectacular, but development might not always follow. You have African countries with a booming raw material sector that do well, but some also do not manage to convert their natural resources into development. There are also countries that have no resources at all and still move forward. Most unfortunate is this group of countries that does not have anything to export and also has poor economic management. The challenge is thus not only in the presence of resources, the management of those resources is even more important. Generally, I think Africa needs to focus on its farming and expand the scale of its agriculture. This could create a lot of opportunities. A lot depends on how much African countries can learn from the rest of the world. Often, they have been given bad advice.

Management and politics is thus key. But can we confident in the political stability of the region. It is not easy to manage a country. Four hundred years ago, African countries started to develop some political models, but that process was suddenly stopped by colonization. Besides history, African leaders face ethnic complexities. Leaders are often not accepted by a part of the society just because of their ethnicity. The relation between African societies and politics is also different. Large parts of the African people are not connected to politics. This makes it difficult for African leaders to understand their people. African politics is very far away from African life. Most African societies are constitutionally not strong yet. Elections in Africa are not the same as in Europe and often cause uncertainty. Leadership continues to be a large challenge, but we need to put this into perspective. Even if the situation is not optimal today, it is still much better than a while ago. It will probably take another generation of two to move towards more stable politics, but African leaders are learning fast. I still see a lot of progress. Corruption is still a key concern. Yes, but we have to be careful in examining what it is all about. First and foremost, African corruption is part of an international problem. The fist corruption case that I followed as Ambassador in South Africa involved President Jacob Zuma. I discovered a lot of things, such as the interest of French defence companies. So, the record of the West is not very good. It is always vocal about corruption, but protects its own companies. So how sincere are those Western states, if their firms start to corrupt African leaders and their own interests come first? Practice differs too much from principles. Second, we have to recognize that the African civil society is not the same as in developed countries. African civilian organizations were expected to be a copy of those in the West and that explains why they are not so successful in their societies. We still have to be very patient, but corruption will not last. Western Africa is high on the agenda today. How do you see the situation? We follow the situation in Mali closely. I recently went to the

A file picture dated 25 May 2005 shows Mrs. Wu (C) from China in her shop at the Plateau district, downtown Dakar, the Senegalese capital. |EPA/PIERRE HOLTZ

country to talk to the president, the premier and other politicians. We have to work with the international community and to support ECOWAS. But, I have to admit, that Mali is not yet at the top of our agenda. The risk of a spillover of insecurity is real and terrorism might eventually even have consequences for Europe. But force cannot be a solution. I discussed this issue with Nkosazana Dlamini Zuma, the Chairperson of the African Union. She agreed that the root cause is development. Even if there are fanatics, they can only be successful if they gain the support of the unprivileged. We need a comprehensive method. We cannot continue to ignore underdevelopment. I think Nigeria is a reason to be optimistic about the region. The country is still suffering, but it is on a right track. How about East Africa? In East Africa, the situation remains complicated. Take Kenya. Although it is still not certain that we will avoid the kind of instability that we saw in the last election, the country has made progress. We must be very careful about elections. If in the West a politician fails, he can still have a normal life. If you loose in an election in a country like Kenya it is a different story. The game of compromise is not enough developed yet. Young democracies such as Kenya pay a high price for the political learning process. Somalia of course also remains sensitive in this part of Africa. The task here is really to win the hearts and minds of the people. We need to convince them that living under terrorists is not the way to solve their problems. Destitution makes people desperate. Central Africa and South Africa also seem to be in dire streets? It would be terrible if there would be a repetition of the tragedy of the nineties in the DR Congo. The international community should learn from the past. In

South Africa, I dont think that President Jacob Zuma. I had many personal contacts with him. I think he can complete the transformation, but it might take another ten years. The ANC is going through a period of adjustment and there is a huge problem in redistributing the wealth in the country. Yet, there are many bright politicians. What are the main interests that China pursues in Africa? It all starts with the awareness that we need Africa to help us grow. We create opportunities for Africa to develop, but Africa also creates opportunities for us. We share our future. As diplomats, a key concern is of course also the security of our citizens and companies. This is very sensitive in China. It is about image and the credibility of our country. So it is key to do a good job here and it requires us to work closely with African countries. Chinas policy has changed quite a bit. We do need to make adjustment from time to time. It remains a challenge for us Chinese diplomats to get enough attention for Africa. We now pay much more attention to people-topeople exchanges and mutual understanding. We also attach more importance to peace and security, which was a request from our African governments. Besides, we pay more attention to regulating our companies and to make sure that they behave. What does Africa mean for the Sino-European relations? I think Europe should first treat Africa as an equal partner, not as its backyard. It should stop emphasising that it contributed to Africa, and recognize what Africa contributed to Europe. This attitude prevents you to build trust in Africa. It really requires a mentality change. In the triangular relationship, our confidence in cooperation with Europe depends on the confidence of that Africa has in Europe. Jonathan Holslag, 14 November 2012.

16

China EuropE 2013


January 2013 | NEWEUROPE

By Franois Godement and Jonas Parello-Plesner

What will China

hina has a deeper understanding of what is going on in Europe than vice versa not just because the European Union has a more transparent political system but also because Europe is currently so inward-looking. With this in mind, this collection was intended to expose Europeans to debates that are taking place in China and that affect Europe. In the past, Europeans thought China needed to learn from us; now that China is the worlds second-largest power, we need to understand it and the implications for us of the debates taking place there just as we do with the United States. Unlike the US, with which China has a two-way debate, Europe does not figure prominently as a political partner in Chinese debates as the absence of Europe in the three essays in this collection on foreign policy illustrates. Rather, the EU is seen as an experiment based on soft power, norms, and economic interests, which has some capacity for negotiation on trade issues but little else. Some Chinese officials may in some cases regret that the EU does not have more cohesion and clear decision-making in some cases, but mostly they are happy with having 27 bilateral relationships in which China nearly always has the upper hand. The only real threat from Europe is the spectre of its own failure which would diminish the size of Chinas largest export market. For Europe, however, the stakes in the relationship with China are high. On many issues trade and investment, financial regulation, public debt, energy security, climate and

Shoppers walk down the main shopping strip of Nanjing Road in Shanghai. China. EPA/Qilai Shen

One of the legacies of the Hu Wen decade is Weibo. Microblogs were almost nonexistent in 2002 but are now used by more than 300 million Chinese the largest linguistically homogeneous public sphere involving peerto-peer communication and larger than anything that Voltaire or Habermas could dream of.

environmental issues, the Middle East, and Africa it now encounters a powerful China. The fact that Europes diminishing hard power is of little relevance to the East Asian strategic theatre does not obviate the need for Europe to understand what is going on there and to use diplomacy to pursue its interests and promote its values. With that in mind, here are the five conclusions we think Europeans should draw from this collection of essays. The Weibo generation is rising One of the legacies of the HuWen decade is Weibo. Microblogs were almost nonexistent in 2002 but are now used by more than 300 million Chinese the largest linguistically homogeneous public sphere involving peer-topeer communication and larger than anything that Voltaire or Habermas could dream of. As a result, the party-state can no longer prevent people from expressing themselves: hundreds of millions of internet and social-media users throughout China creating a huge echo chamber. This translates into an incredibly effervescent marketplace of ideas that emerge under the surface of hollow, pre-cooked speeches As Michael Anti points out in his essay in this collection, the emergence of this public sphere doesnt automatically mean political liberalisation. Internet public opinion is a constant battlefield that the party knows how to occupy with new means beyond the state-controlled media. In fact, Wei-governance is a new buzzword in China. Cai Qi, a local communist

grandee in Zheijiang, boasts more than a million followers and laid out the governments strategy as controlling Weibo while using it and facilitating control by using it. But it does mean that public debate and civil society is an increasingly independent variable in dealing with China. European should therefore: Do Weiplomacy Weibo has opened up a new space for foreigners to interact more directly with Chinese and is thus a new tool of diplomacy as well. Already, European Council President Herman Van Rompuy has more followers on Weibo than on Twitter. The EU should use digital diplomacy to go beyond the gatekeepers in Beijing and stale state-driven dialogues such as the EUChina human-rights dialogue. It should try to directly inform Chinese citizens about the human-rights dialogues that European governments and the EU hold with the Chinese government so they can have their say on the issue as well. This may create an opportunity to engage with China on the issue of values, even though Chinas censors will likely respond with their electronic scissors. Engage with civil society NGOs are mushrooming in China, particularly in the grey areas of non-legal but tolerated civil-society activities. Even the Chinese central government needs these social entrepreneurs in order to change the situation on the environment and social issues and to ex-

pose the abuse of power by local government. In this respect, Guangdong leads the way, as Xiao Bin describes in his essay in this collection. This priority also links with the need to incentivise reform forces. Chinas economy reaches into the EU China has inadvertently built up $4.5 trillion of foreign-currency reserves (including private capital) and is at risk of losing at least some of it. Yu Yongding aptly calls this an asset crisis. Trade interdependence and crosscapital ties are Chinas best insurance policy. It involves fundamental changes such as an acceptance of at least fuzzy reciprocity, for example increasing the foreign and European stakes in the China market beyond factories and commercial sales and internationalising Chinese firms. We are already in a new world in which a Chinese foreign ministry spokesperson calls for a level playing field for Huawei . China is no longer a faraway country that produces cheap goods. The next phase of Chinas going out is targeting developed markets such as Europe, which is important to China as a way of moving up the value chain, investing in high and green technology, and buying established brand names and business know-how and supply chains. The euro crisis has already created opportunities for Chinese companies to directly invest in the EU and acquire European companies. One report predicts that Chinese outbound in-

China EuropE 2013

3.0 mean for Europe?


For Europe, however, the stakes in the relationship with China are high. On many issues trade and investment, financial regulation, public debt, energy security, climate and environmental issues, the Middle East, and Africa it now encounters a powerful China.
vestment is likely to rise to $1 trillion by 2020, with the greater part directed towards the EU and the US. Develop a global China policy The EU needs a global China policy based on the notion of reciprocal engagement that aims to get China constructively engaged in international affairs or, to put it more defensively, keeps the international order China proof . As a signatory to the Law of the Sea, the EU should bring a legal and multilateral perspective to the territorial disputes in which China is involved. The EU has clear interest in open sea lanes as well as the peaceful, legally grounded resolution of these disputes.

NEWEUROPE | January 2013

17

An attendee uses the Huawei Ascend Mate phablet at the 2013 International CES at the Las Vegas Convention Center on January 9, 2013 in Las Vegas, Nevada. The tech world has been taken by storm with the new devices. David Becker/Getty Images/AFP

Co-operate with China on risk management With Chinese citizens increasingly at risk when civil conflicts spin out of control, China could be won over to lend stronger support for multilateral interventions if, that is, its own interests are at stake (there are not a lot of Chinese workers in Syria). This might not exactly make China a responsible stakeholder, but the massive rescue operation in Libya revealed how China has unwittingly launched its own version of the responsibility to protect doctrine, at least with respect to its own citizens and workers abroad. The EU should co-operate with China not on the basis of grand and abstract principles of good governance but on concrete cases in which there is convergence between Chinese and Western interests.

This in turn could also gradually change Chinas long-term calculations. Conclusion For Europe, the Chinese question is a multifaceted one, ranging from Africa to proliferation to international governance. In order to improve its negotiation capacity, Europe must not just develop a greater understanding but also sign up to and act upon a more cohesive approach. Europeans should support the EUs competences where they already exist for example, in trade, investment, and the environment. And they should reinforce them, with

a clarification as to their goals, in areas where they have recently appeared for example, in common foreign policy and security. National shortcuts are very tempting, but they will weaken Europes hand as a whole, and will never enjoy from China the sort of recognition that a continent of 500 million people could bring. Europe has more power than it allows itself to think, but only if it chooses to use it in an effective way. More Europe is the key to developing a more cohesive approach, just as it is the solution to the euro crisis. Getting China 3.0 right remains the largest strategic policy litmus test for the EU.

An abridged version of a concluding paper that appears in the European Council of Foreign Relations publication China 3.0 an e-Book, pdf, with many writers Chinese thinkers and others contributing.

18

China EuropE 2013


January 2013 | NEWEUROPE

The Son & Lumire (sound and light) show at the exhibit tells the story of the first Emperor of China and each member of the army.

Replicas of the terracotta army stand as they were discovered during the 1970s. A diorama backdrop gives the viewer an idea of the enormity of the archaeological site in Chinas Shaanxi province.

By Clare Murphy

Terracotta army conquers the


Clare Murphy Missouri School of Journalism

This gives you a chance to actually see the detailing and faces of the figures and appreciate them. Its a much more intimate look at the artifacts

ome 8,000 replicated warriors, horses and chariots of the first Emperor of China have overtaken the Brussels Bourse Stock Exchange. The presence of the traveling terracotta army exhibition brings visitors up-close and personal with Chinese history, connecting Europe and China through culture. I think from this perspective, it gives you a different view of China other than a country that mass-produces products or technology, said exhibition producer Mario Iacampo. This shows you that it is a very rich and old culture, and in a lot of ways, it is the beginning of Chinese culture. We dont know them in that way. The terracotta army is the last great archaeological discovery of the 20th century since the unearthing of the Tutankhamun tomb. The army was buried as part of Emperor Qin Shi Huangs mausoleum, which encompasses an area of more than 56 kilometers. Built during the Emperors lifetime between 246 and 210 BC, the massive necropolis and the terracotta figures inside took 36 years and roughly 700,000 workers to create. The result of which consists of 8,000 largerthan-life clay characters that each uniquely differ from one another in size, uniform, headdress, position and facial expression. The exhibit at the Bourse is a recreation of this massive tomb, which is located in Chinas Shaanxi province. In essence what the exhibit shows is what people discovered at the dig in 1970s, Iacampo said. When the farmer in 1974 was digging a water-well and came across

one statue, two statues then three statues and then what we know today as the entire terracotta army. There are more than 150 terracotta reconstructions that travel as part of the exhibit. Each of the life-size statues, horses and chariots are accurate to the scale of the original pieces. The exhibit also features a diorama surrounding a replica of the pit in which the army was found, giving an idea of the en-

ormous size of the site. There, visitors can watch the Son and Lumire (sound and light) show which tells the story of the first Emperor of China and his army. A documentary recounting the history of the archaeological discovery is shown as well. Its incredible, really, said Nils Dettling, a visitor to the exhibit. Ive been to the archaeological site and exhibit in China. Its massive. But this gives you a chance to actually see the detailing and faces of the figures

Emperor Qin Shi Huang is famous for conquering and unifying the five provinces of China, and wanted his army to travel with him into the afterlife. Each replica is unique in dress, facial expression, armory and position, which reflect their status in the army.

China EuropE 2013


NEWEUROPE | January 2013

19

Emperor Qin Shi Huang is famous for conquering and unifying the five provinces of China, and wanted his army to travel with him into the afterlife. Each replica is unique in dress, facial expression, armory and position, which reflect their status in the army.

The generals of the terracotta army are characterized by, decorated armor, facial hair, (usually a mustache and side burns) and a pheasant-shaped hat as a symbol of courage. He stands with his hands folded in front of him, as if he were leaning on a sword.

and appreciate them. Its a much more intimate look at the artifacts. Brussels, as the capital of Europe, is a key location for this exhibit. The highly political climate can bog down relationships amongst people of different cultural backgrounds. Yet exhibits like this help foster commonalities centered on an appreciation for history and art. I think its very important to show these kind of objects because not everyone can tra-

Bourse, tying Europe to China


vel. Iacampo said. The idea of doing reproductions, as time goes on, becomes a more and more important element because the original objects are getting older and more fragile. With the advance of technology and recreation technology, I think this is the future. The exhibition has traveled to 14 other European cities in Austria, Czech Republic, Germany and Hungary. It will remain in Brussels through February 17, 2013.
ADVERTISEMENT

When individuals attempted to steal from the necropolis, they were limited to what they could successfully carry out. Heads, hands and weapons were often removed from the figures torsos and taken.

ADVERTISEMENT

S-ar putea să vă placă și