20 February 2019
President Xi Jinping
President Xi Jinping

China-EU honeymoon to continue

President Xi Jinping’s just-concluded visit to Europe shows that the honeymoon between China and the European Union is not over yet.

Politically, Xi gained the understanding, if not support, of European leaders over China’s stance on Japan. The two Asian neighbors have been embroiled in a spat over history and territory. In his speech in Germany, which has been firmly dissociating itself from the Nazi legacy since the end of World War II, Xi recalled Japan’s wartime atrocities and stressed that China needed to strengthen its defences against aggression.

In meetings with EU leaders, Xi said China and the EU could be twin growth engines of the world economy, highlighting the rapport and importance of the relations, a point also recognized by EU leaders.

On the economic front, big deals including China’s purchase of 70 Airbus planes underscored the vast potential of the Chinese market, while Xi’s visit to a Volvo Cars plant in Belgium showed increasing Chinese investment in Europe. (China’s Geely bought Volvo Cars years ago.)

China and the EU vowed to speed up discussions for a bilateral investment treaty as part efforts to improve ties systematically and jointly cobble a set of global economic rules. More than that, they floated the idea of starting feasibility studies on a free trade deal “as soon as possible”. Clearly, both sides were confident that their ties had advanced to a level that a free trade deal could be included in the agenda.

This round of good relations between China and the EU has lasted quite long.

The urgent need to cooperate amid the vortex of the global financial crisis helped the two sides completely walk out of the shadows caused by such issues as the disruption of the Olympic torch relay and several European leaders’ meetings with the Dalai Lama in 2008.

Sino-EU ties reached a peak when several Chinese leaders, including then president Hu Jintao, then premier Wen Jiabao and former vice-premier Li Keqiang, visited Europe in the last quarter of 2011, when a debt crisis threatened to unravel the region’s monetary union.

During those trips, the Chinese leaders pledged to buy debts of troubled European countries including Spain, Greece and Portugal, even as big business deals were signed.

If the closeness between China and Europe at that time was mainly to overcome economic difficulties, Xi’s recent visit showed that the two sides were keen to maintain the momentum of improving ties even when the worst was over.

Traditional differences on issues — such as market economy status, intellectual property rights, human rights and the EU’s arms export ban — were not mentioned or placed low on the leaders’ agenda during Xi’s visit.

The largest difference between the two, as could be gleaned from statements and news reports after the visit, may lie in trade disputes. But the trade frictions look well under control, with both Xi and the EU leaders pledging to reduce trade remedy measures. The settlement of a dispute over solar products last year also showed that the two sides were willing to use compromise, instead of going to a tribunal, to resolve spats.

Strategically, China has many reasons to work closer with the EU, compared with the United States.

The EU has fewer differences with China. Unlike Washington, Brussels has no intention to play a major role in the Asia-Pacific, not to mention the fact that the EU does not have military presence around China.

A number of common grounds on issues such as reforming a US-dominated international financial system also push China and the EU closer to each other.

On the economic front, higher complementarities between the two mean that the EU may be more tolerant toward the massive trade deficit with China and valuation of the Chinese currency. Closer interaction during the financial crisis, underpinned by rising Chinese investment in the EU, has prompted the EU to see China more equally and pragmatically. Therefore, the two will be more restrained whenever differences emerge.

But bilateral ties will face tests when the EU completely walks out of its debt crisis. The need to win votes and deeply rooted differences in political and economic systems may prompt some European politicians to turn tough on China. Human rights issues are likely to become more prominent when Europe’s reliance on China for an economic recovery subsides.

And once it feels its core interests are trespassed, China may fight back, resulting in tensions.

– Contact the writer at [email protected]



The writer is an economic commentator. He writes mostly on business issues in Greater China.

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