Chinese President Xi Jinping, second left, is seen with European Commission head Jean-Claude Juncker, left, France's Emmanuel Macron and Germany's Angela Merkel in Paris on March 26. The annual EU-China summit is set to be held in Brussels. Photo: Thibault Camus / AFP

When Chinese and European Union (EU) leaders sit down together in Brussels on Tuesday for their 21st annual bilateral summit, relations between these powerful Eastern and Western giants will, indeed, have come of age.

Since 1998, there have been some major shifts in the two parties’ views of each other, as well as in the balance of power between the developed world economies of the EU and the rapidly developing economy of China.

This shift is likely to be marked at the summit, too, by the fact that this time, EU leaders are not only concerned by long-standing issues over European firms’ access to Chinese markets, but also by growing Chinese power and influence in Europe.

These concerns were underscored by last month’s Italian sign-up to China’s Belt and Road Initiative (BRI) – the first time one of the EU’s ‘Big 4’ members (France, Germany and the potentially soon-to-leave UK being the others) had done so.

They will also likely feed into a subsequent summit later this week, in the Croatian port of Dubrovnik, which will see Chinese leaders meet representatives from 16 central and east European countries, without the presence of the Western European EU member states.

“Official EU policy documents from Brussels now describe China as a ‘systemic challenge’,” says Professor Steve Tsang, director of the China Institute at SOAS, University of London. “In other words, the EU is beginning to realize just how serious an issue China is for them.”

Balance of trade

Until recently, that issue has been seen largely in monetary and financial terms.

The EU is China’s largest overseas trading partner, while China is the EU’s second largest, after the US.

Nowadays, that status translates into combined trade between the EU and China of over 1 billion euros a day, according to the European Commission.

China, however, exports far more to the EU than the EU exports to China. In 2017, the EU’s trade deficit with the People’s Republic was 20.8 billion euros, with this growing to 21.4 billion in 2018, according to Eurostat.

Containers to be shipped abroad at the Port of Lianyungang in East China's Jiangsu province. Photo: AFP
Officials in Europe say China has failed to open its doors to trade the way they have. The EU wants results to cut the rising two-way trade deficit. Here, containers are seen at Lianyungang port in East China’s Jiangsu province. Photo: AFP

EU officials have naturally grown increasingly concerned by this in recent years.

“The general view in a lot of the EU,” says Dr Duncan Freeman, a research fellow at the EU-China Research Centre at the College of Europe in Brussels, “is that European companies and member states haven’t benefitted from economic relations with China as much as China benefits from the relative openness of Europe.”

Lack of transparency, protectionism

Criticisms of Beijing’s trade policies include a lack of transparency and protectionism when it comes to Chinese industries and business sectors.

“No critical national infrastructure in China is open to EU companies,” says Tsang, “and high-tech EU companies have to surrender their intellectual property (IP) rights to a Chinese firm if they want to go in there. While Huawei, for example, is in the running for 5G mobile network infrastructure in Europe, no EU company could even bid for such a thing in China.”

Beijing has recently passed a new foreign investment bill, which aims to ease market access – but it also fails to address such key concerns as the surrender of IP rights and technology transfers.

This week’s summit is thus likely to see European Council President Donald Tusk and European Commission President Jean-Claude Juncker press Chinese Premier Li Keqiang and Foreign Minister Wang Yi on furthering and easing market access.

Indeed, a joint communique written by the EU and due to be issued at the summit – if China approves – sets a deadline of the next summit in April 2020 for “the swift removal” of a range of agreed “priority market access barriers and requirements” that their operators face.

At the same time, while “China will likely say that it is willing to carry out reform and increase market access and respect IP rights,” says Dr Yu Jie, China research fellow with think tank Chatham House’s Asia-Pacific Programme, “some will come back saying, China has been saying this for years, and nothing happened, so how can we trust them now?”

Belt and Road

Meanwhile, China is continuing to make major inroads into the European market in any case, via its global Belt and Road Initiative (BRI).

This first made landfall in Europe in EU-member Greece, when the state-owned China Ocean Shipping Company (Cosco) secured a 35-year lease on container terminals at the port of Piraeus, back in 2008. It then became majority owner and primary operator in 2016.

And since 2008, the port has boomed – by 2018, it had become the second largest in the Mediterranean.

Then, in March this year, Italy signed up to the BRI. Its port at Trieste, some 1,500km north of Piraeus and on the Adriatic, also signed an agreement with China Communications Construction Company (CCCC) to develop the port’s infrastructure.

An aerial view of the port and commercial harbor in the northeastern Italian city of Trieste on the Adriatic Sea. This shot was taken in Oct 2017. Photo: AFP / Alberto Pizzoli
The port and harbor in the northeastern Italian city of Trieste on the Adriatic Sea. Italy has agreed to make the port part of the BRI scheme. Photo: AFP / Alberto Pizzoli

Trieste was historically the southern maritime gateway to Central and Eastern Europe, with 11 EU countries from this region, along with five non-EU states, also forming the 16+1 grouping, back in 2012. The ‘plus 1’ is China and the group is due to meet in nearby Croatia straight after the EU-China summit.

Splitting the EU?

“This grouping has come in for a lot of criticism in Brussels, where it is treated with much suspicion,” says Dr Freeman.

This is due to concerns that the group might act as a way for China to work around EU policy, working directly with Eastern European states that may have disagreements with Brussels – and thus splitting EU unity.

Italy’s sign-up to BRI met with similar criticism in Brussels, which would prefer China to approach the EU overall, rather than via individual member-states.

Addressing these concerns, Wang Chao, China’s vice minister of foreign affairs, told a press conference in Beijing ahead of the summit on April 2, that “China has no intention, nor do we have the ability, to divide Europe,” and that the 16+1 grouping was only “based on equal and mutually beneficial cooperation.”

Yet suspicions clearly remain in Brussels that Chinese influence may be used by states that have fallen out with the EU leadership, in particular – such as Hungary and Poland – to counter-balance pressure to toe the collective European line.

Rules versus results

At the same time, last September, the EU launched its own rival to the BRI, the European Connectivity strategy.

This looks to open markets between Europe and Asia, targeting regulatory frameworks, as well as transport links, energy, human and digital networks across the same geography as the BRI.

“The EU will likely ask China if it is willing to link its BRI to this,” says Dr Yu Jie, “but I don’t see how this will work, as the EU Connectivity strategy is stressed about rules, but China is only stressed about results.”

This difference may also arise when the EU raises the rules over another thorny issue – human rights, with the plight of the Uighurs in Xinjiang a likely focus.

However, “When it comes to Beijing’s position on that,” says Professor Tsang, “I wouldn’t hold my breath for any positive result.”

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