China and New Europe

Premier Wen Jiabao's latest visit to Europe demonstrated that Beijing has great hopes for its relationship with 'New Europe'. But this is risky for the European Union, as it undermines its ability to present a united front to China.

China’s premier Wen Jiabao latest visit to Europe was an important one. He visited Germany, China’s first trade partner in the EU, but his three other destinations were outside the euro zone: Poland, Sweden, and Iceland (whose financial woes have made it draw much closer to the EU). The pattern is typical of China’s zigzagging bilateral diplomacy, which leaves no stone unturned. But Wen has further designs, which were easily seen in the Warsaw leg of his trip. Only a few weeks ago Wen requested, and obtained, an Economic Forum that would in effect draw together businessmen and 16 heads of government, from Central and Eastern EU member states, as well as some from the Balkans.

This was in fact the second economic forum with China. Hungary organised one when Wen Jiabao visited with prime minister Viktor Orban in June 2011. Like the major Western European member states, the new member states have their rivalries, and so this will be called the Central Europe Economic Forum – without numbering.

The event shines a light on the disarray at the top of the European Union, and on the paralysis or splendid isolation of national diplomacies among the main capitals of Old Europe. A joint meeting with up to 15 European nations, some of which may not even have yet joined the European Union, and without any euro zone member looks very much like another sign of a divided Europe.

That’s not how Poland sees the issue. In the past, Warsaw has been a showcase for major American initiatives towards what some called the “New Europe”: in May 2011, Obama attended with 20 heads of state (including Germany and Italy) a Meeting of Presidents of Central European States in Warsaw. China has pulled off a coup by co-organising a meeting with a nearly identical format on economic issues. Poland – which hasn’t seen a visit from a Chinese prime minister in the last quarter of a century – nonetheless has a history of political relations with China in the 1950s, when it looked as if “polycentrism” might supersede the Soviet bloc leadership.

But having a separate summit with the United States, a traditional ally, and having one with China, the rising economic power, is different. The European Union is painfully trying to assemble in Brussels an economic strategy to deal with China and other major partners. The reciprocal opening of public markets and a new bilateral investment treaty are being contemplated by the Commission’s de Gucht and Barnier, in charge of trade and the internal market. These initiatives are already facing the hostility of several governments (United Kingdom, Sweden, Denmark) in the name of economic liberalism. Across the continent, a race is on to attract fast money from China – whether it consists of loans, green-field investment, take-overs or bidding for infrastructure projects. An economic summit with China by the European states which have most to gain from Chinese financing, and least to expect for their firms on the China market, will inevitably weaken the European Union’s negotiating hand with China. The very attendance of Commission leaders at the Warsaw meeting created a dilemma: if they didn’t come, they would let initiatives drift away from them. If they did come, they would endorse a trend towards a separate deal for Central and European member states.

This is another sign that the clock is ticking for Europe. The Commission, the European Council and EU president Van Rompuy have in fact adopted reciprocity as a guideline for economic relations with strategic partners – and this means China first. Not even China disputes the notion openly any more. A report co-authored by a unit of China’s State Council with the World Bank, China in 2030, in fact mentions the need for reciprocity in investment between China and developed economies – if China is to promote interdependence and expand its international footprint.

It is exactly at this moment that Europeans part way on China. The example came from Old Europe. The UK has visibly shifted its stance towards unabashed lobbying for London as an offshore renminbi market, and for Chinese investment into the country’s infrastructure. Germany is on overdrive to promote government relations with China, and Mrs Merkel seems to have forgotten the speech she made in October 2010 at the European Council on the issue of public markets with China: Germany seems to think it sums up Europe by itself. France’s love affair with “la réciprocité”, which earned it the scorn of the Economist, can’t hide altogether that major Chinese investment is taking place quietly: Areva, Total, GDF Suez, not to mention some local governments and a booming real estate business with China’s wealthy individuals. While Western Europeans have recently come out for intergovernmental action, bypassing the Commission, in effect their coordination on China has appeared minimal – at best, a behind the scenes move on some human rights cases. 

So it is fitting that Poland and New Europe should take the initiative with China. At least, heads of governments there don’t see it below themselves to meet as a group with their Chinese counterparts – who run the world’s second economy. Who knows, if they coordinate their move and prioritise what they want from China, they might even get a result.

Still, the Central Europe Economic Forum with China was fraught with risks. It further emphasised the centrifugal trend away from the euro zone. All the levers for a negotiation with China are with the European Union, and so there is a risk that Europeans descend into a free for all. Responsible Chinese officials understand perfectly this, but it is not part of their job description to unify Europe…

A version of this article first appeared in E!Sharp