Since the inauguration of president Trump, China took the spotlight when it came to global business and politics. The European Union, for example, has had weekly meetings with the Chinese delegation concerning various topics like energy, geographic indication of production, the indication of the origins of a product, and of course the famous Belt and Road Initiative (BRI), a bundle of infrastructural projects to form a new silk road between Europe and Asia, which is considered the pith of the matter of Xi’s international policy. The Chinese government has been a strategic partner to Europe for quite some time, but since the increase in protectionism by the US, also a rival system.
Quite recently, Chinese President Xi Jinping visited Italy and Monaco to talk about the BRI and also held a mini-summit in Paris with Macron, Merkel, and the chairman of the European Commission, Juncker. These visits resulted in Italy signing on for the Belt and Road Initiative, with China assuming Germany and France are soon to come on board as well. China stated that every country can join the building of the new silk road, but only on China’s terms, which would, among other things, mean that conflicts would be settled in Chinese courts. Certain critics think that if the EU would concur with the BRI, it will give China too strong of a competitive advantage. In reality, the new silk road project is not doing that great since most projects take a long time to get off the ground. The fact that the project take long to start, combined with the friction China has with Europe and the US, might result in serious economic problems for China in the future and is the main reason why foreign investors have partly stopped investing extra capital in China.
Because of all the new developments, the German thinktank Merics noticed the Chinese investments in Europe decreased to a mere 17.3 billion dollars –40% less than in 2017 and 50% less than in 2016. The cause of the decrease in investments is the boosted protectionism from the European Union, which stems from the suspicion European countries have towards the motives of China. This suspicion partly started with the “16+1” Summit, where 16 central and eastern European countries met with China to discuss certain economic and political topics, which of course pulled power away from the EU and towards China.
Other reasons for the investment cutbacks in Europe are the fact that Beijing has decided to reduce the high debt Chinese companies by increasing legislation against investments abroad. The slight stagnation in the Chinese economy might also be a reason for the fewer acquisitions of European companies.
Recent changes in the EU policies are the restriction for competitive countries outside the union to buy an interest in European projects, and since March the EU has passed a piece of legislation which makes the screening of imported goods possible for safety measures, but most of all for strategic control. The most prominent reason for the legislation was the fact that the EU lacks an overall picture of the amount of control China has in Europe. The EU also increased their demands towards China concerning certain promises they made in 2013, and about China’s contribution in global climate goals.
The EU wants China to honor the agreement made in 2013, which should give both parties equal access to each other’s markets, yet this hasn’t been the case thus far. Europe has set a deadline for 2020. They expect China to cut back on greenhouse gasses, even faster than they agreed to in Paris. They also want China to help reform the WTO, by cutting back on subsidies. Chances are slim that China will achieve the goals set by the EU, yet the demands were meant more as a show of strength from the EU anyway.
For China, it is of great importance that the trade war with the US is stopped as soon as possible. This way Europe will see that China does possess a certain amiability, which will probably make the EU roll back some of the recent sanctions. That being said, chances of Trump coming to terms with China are still nonexistent.
Written by Sebastian Cornielje