Devalue your currency, or we'll be really annoyed. The joint Belgium-EU pavillion at Expo 2010 Shanghai.

Time to change tack with Beijing

Europe lacks the necessary political armour to defend itself against China’s ongoing monetary and commercial offensive. A number of experts argue that a change in its historically benevolent attitude to Beijing is now on the cards.

Published on 6 October 2010 at 14:53
Devalue your currency, or we'll be really annoyed. The joint Belgium-EU pavillion at Expo 2010 Shanghai.

Belgium is now a bridgehead for the China’s commercial offensive in Europe. Volvo Gand, the country’s main car assembly plant, was recently lost to the Chinese when Geely Automobile Holding took control of Volvo Cars. This Tuesday, the new boss, Geely’s Chairman Li Shufu, conducted his first visit of the factory in Gant. Huawei, China’s leading manufacturer of equipment for mobile phone networks, has signed supplier contracts with Proximus, Mobistar and Base. And Flanders is hoping to find a Chinese buyer to save the Opel plant in Antwerp.

Elsewhere in Europe, this weekend was marked by news that Greece has gratefully accepted a helping hand from Beijing, which will contribute funds to finance its enormous sovereign debt. But support from China, which was offered in person by Chinese Premier Wen Jiabao, will come at a cost: Beijing wants to make Greece the main point of entry for Chinese products destined for European markets.

The latest inroads made by the Chinese offensive are considerable cause for concern. Beijing has proved to be a very tough negotiator when its interests are at stake. On Monday at the Asia Europe Meeting in Brussels, Wen Jiabao refused to discuss a revaluation of China’s remimbi, which both Europe and America complain is maintained at an artificially low level in order to facilitate Chinese exports.

Results of dialogue have not been brilliant

Europe’s trade deficit with China has risen considerably over the past decade to the point where the value of Chinese imports now outweighs the value of European exports to China. Wen Jiabao even launched a counter attack on European protectionism, which does exist in the form of taxes on a number of Chinese products, like leather shoes and bicycles. However, in no way does it invalidate the fact that Europe remains one of the world’s most open markets.

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Should we be afraid of China? Are its badly paid workforce, its undervalued currency, and the social and fiscal dumping practiced by Chinese companies a threat to prosperity in the EU? In a word, are the current conditions for trade with China fair and square? Option, a Louvain based manufacturer that produces USB modems in China and Ireland is convinced the odds are stacked against European businesses.

“Our Chinese competitors who are subsidised by the state sell their products at abnormally low prices, explains Jan Poté, a spokesman for the company that has filed a complaint with the European Commission. “I am not saying that all Chinese companies benefit from unfair conditions, but there is no doubt that some of them do.”

China is still shielding its state services markets

The tale of woe recounted by this high-tech company will no doubt contribute to suspicions in Brussels. “Traditionally Europe has sought to promote dialogue with China. But the results have not been brilliant. In recent times relations have been marked by certain signs of strain. Europe may at last be coming to a realisation that it has been overly naive,” explains Antoine Sautenet, a researcher for the French Institute of International Relations (IFRI) in Paris.

The many bones of contention now include the relative openness of markets, the issue of direct investment and tenders for state services; and in all these areas fair exchange is the exception rather than the rule. “Chinese companies have no trouble participating in calls for tender announced in Europe. Last year, they succeeded in winning a deal to upgrade and construct motorways in Poland. At the same time, China is still shielding its state services markets.”

Then there is the issue of the draconian conditions that Beijing imposes on European companies that want to invest in China, especially its insistence on technology transfers. In the struggle to obtain fairer conditions “Europe is asking for a lot, but does not have much to offer in return. China does not need a trade agreement to gain access to the European market. However, Beijing does want Brussels to recognise China as a market economy — an issue that has divided opinion in Europe.

The organised weakness that prevails in Europe

Until it is labeled a market economy, the European Union will still have the option of imposing anti-dumping measures on Chinese products. In passing, it should be pointed out that authorities in Europe are much slower to exercise this option than their counterparts in the United States. However, the key point here is that China will automatically be recognised as a market economy in 2016, so from Beijing’s point of view, the need for a trade agreement is slowly diminishing as time goes on.”

The executive director of the Madariaga – College of Europe Foundation Pierre Defraigne is outspoken in his criticism of the lack of coordination between major European countries, which are competing to win deals on Chinese markets, and in particular on the market for state services. He takes the view that divisions in Europe continue to be the main threat: “China will soon be forced to change its strategy. Export driven growth will slowly be replaced development fueled by internal demand, in particular from local consumer markets, and the need for environmental investment. This will reduce the pressure exerted by China on our markets and provide European companies with significant export opportunities, but only if Europe invests in technological development, and in particular in technologies to improve energy efficiency, which are very much needed by China.

“However, the trouble is that Europe does not have a major programme for technological investment. The Lisbon strategy has turned out to be little more than hot air, and the 2020 Strategy is hardly any better. China is not the real problem. What we should be concerned about is the organised weakness that prevails in Europe.”

Translated from the French by Mark McGovern

Copyright Le Soir. All rights reserved info@copiepresse.be

Summit

Van Rompuy fails to shine at Asia Europe Meeting

"Thedeclaration issued at the conclusion of the Asia-Europe Meeting [ASEM] raises the issue of beefing up cooperation between the two parties to revive the economy, but it does a poor job of concealing persistent differences,” observes Le Soir, "on monetary policies, fighting global warming, human rights etc". "Europeans had to insist on having Herman Van Rompuy chair the summit,” adds the Brussels daily, “The Asians were clearly not keen on the idea. To them, it’s not about meetings between Asia and the EU, but between Asia and Europe, aimed at nurturing bilateral contacts between nations, not bloc-to-bloc.” Did Van Rompuy convince them in the end? wonders Le Soir. "At the meeting, he was always seen flanked by [Commission president] Barroso and Yves Leterme, prime minister of Belgium, the host country, which currently holds the EU’s rotating presidency. So they got three presidents for the price of one: not bad, but not very clear either.”

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