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"EU-China-Beziehungen in Post-Corona-Zeiten" - eine Online-Diskussionsreihe

Lupe

Aufgrund des Erfolgs der Ringvorlesung zum Thema EU-China-Beziehungen im vergangenen SS 20, haben wir beschlossen, eine weitere Serie zu einem möglichst relevanten China-Thema zu konzipieren: "EU-China-Beziehungen in Post-Corona-Zeiten". Die Veranstaltungen finden online (live via Zoom®) in englischer Sprache statt, wobei das Publikum anschließend die Möglichkeit hat, Fragen zu stellen. Eine kurze Zusammenfassung der Diskussionen wird nach den Veranstaltungen auf unserer Chinakompetenz-Webseite (www.chinakompetenz.berlin) veröffentlicht.

Dieses Mal organisierten wir Diskussionen zwischen zwei Expert*innen, da der Schwerpunkt auf den Spannungsfeldern in den EU-China-Beziehungen liegt. Gern möchten wir dazu auch die chinesische Perspektive hören.

Der Zeitplan für die Reihe ist wie folgt:

Decoupling and changes in geopolitics: Eberhard Sandschneider + FENG Zhongping (20 Nov. 2020, 10:00)

Decoupling and changes in geoeconomics: Doris Fischer + LI Yuan (4 Dec. 2020, 9:30)

Covid and innovation foci: Philipp Böing + HAN Zheng (18 Dec. 2020, 10:00)

Decoupling in information systems? Rebecca Arcesati + TAN Youzhi (8 Jan. 2021, 10:00)

A decline in Chinese investment into Europe? Margot Schüller + CAI Zhengxin (22 Jan. 2021, 10:00)

Trends in Chinese and European political elites: Nana de Graaff + ZHA Daojiong (5 Feb. 2021, 10:00)

Ihre Anmeldung zur Veranstaltungsreihe senden Sie bitte per E-Mail an: . Sie erhalten einen Zoom-Link, der es Ihnen ermöglicht, an den sechs Diskussionen teilzunehmen.

Wir freuen uns auf Sie!

Das Chinakompetenz-Team am CCST der TU Berlin

 

-English Version-

 

“EU-China Relations in Post-Corona Times” – an online discussion series

Due to the success of the EU-China lecture series (Ringvorlesung) in the previous semester, the China Center of Technische Universität Berlin has decided to organize a new “season” on the most relevant topic possible: “EU-China Relations in Post-Corona Times”. The events will happen online (live via Zoom), with the audience having the chance to ask questions afterwards. A short summary of the discussions will be posted later on our chinacompetence-website: www.chinakompetenz.berlin

This time, we are organizing a discussion between two experts on each topic. The focus is on the tension fields, therefore we had the idea to invite two speakers instead of one.

The schedule for the series is:

Decoupling and changes in geopolitics: Eberhard Sandschneider + Feng Zhongping (20 Nov. 2020, 10:00)

Decoupling and changes in geoeconomics: Doris Fischer + Li Yuan (4 Dec. 2020, 9:30)

Covid and innovation foci: Philipp Böing + Han Zheng (18 Dec. 2020, 10:00)

Decoupling in information systems? Rebecca Arcesati + TAN Youzhi (8 Jan. 2021, 10:00)

A decline in Chinese investment into Europe? Margot Schüller + CAI Zhengxin (22 Jan. 2021, 10:00)

Trends in Chinese and European political elites: Nana de Graaff + ZHA Daojiong (5 Feb. 2021, 10:00)

As registration for the event series, please send an email to . You will receive a Zoom link that will enable you to join the six discussions.

Looking forward to seeing you there!

The Chinakompetenz-Team of CCST at TU Berlin

 

 

Lupe

   

01.03.2021|EU-China and Green Global Governance

Lupe

EU-China Relations in Post-Corona Times, Discussion 6, 05.02.2021, "Decoupling and Changes in Politics"

Speakers: Prof. Zha Daojiong, Prof. Naná de Graaff

Host: Dr. Ágota Révész, CCST

Introduction:

The following protocol summarizes a Zoom lecture held on the 5th of Febraury 2021. The discussion was part of a seminar called “EU-China Relations in Post-Corona Times” which is one of many seminars offered in WS2020/21 by the China Center at the Technische Universität Berlin. Due to the current Corona situation, the seminar was held online via Zoom. Not only the participants of the seminar were invited to attend, the discussion was also open for the public as well. The main topic of the lecture with the title “Decoupling and changes in politics” was discussed by two invited guests, Prof. Naná de Graaff from VU Amsterdam, who was representing the EU side of view and Prof. Zha Daojiong from Peking University, who was attending live from Beijing, explaining China’s political system. Dr. Ágota Révész from the China Center, TU Berlin was the host of the seminar.

All attendees were allowed to ask questions in Q&A session and to actively participate. There were three main topics regarding definition of elites, political transparency in China, influences of the Covid-crisis as well as interests of political powers in China and EU during decoupling time discussed by our guests. In the Q&A session, participants raised questions about the lack of pluralistic views in policy making in China, the acceptance of another system for the EU as well as the possibility of open dialogues between EU and China.

Opening Statements:

Naná de Graaff:

The narrative and discourse on China and the Sino-EU relation has become too divisive and polemic, not only in the public but also in the academic square. Despite the historical, political, cultural differences as well as those in interests and values, there are three key challenges that political and economic elites have to cope with in the worlds’ three major poles of power, China, Europe and the US. 

Internally – that is domestically within their respective societies – they have to manage the balance in societal forces and their legitimacy as leaders, facing key challenges of discontent, populism and extremism. Brexit in Europe and a deeply divided and antagonized America are cases in point. 

Internationally – that is at the level of interstate and intercorporate (or inter-capitalist) relations - they have to manage global order and international relations balancing competitive and rivalling forces with shared interests. These relations have become more contentious and polarized recently -- aggravated by an extremely polarizing American president, an imploding US leadership and by the Covid-19 crisis. 

Externally – that is with regard to the global environment – they have to manage global conditions which are in dire shape, if not acute crisis: climate, global health, and rising inequality, to name a few, with the contradictory demands of capitalism for endless growth, profit and accumulation.  

Zha Daojiong:

In much of the mainstream rhetoric about international order, there is a tendency to frame China (and for that matter, any other entity of significance that’s not in the ‘family of civilized states’) as an outlier. But for any notion of international order to function as a galvanizing rather than separating guide for cooperation, one has to self-question implicit insistence on order being unilateral, linear, and dictatorial.

The severity of the Covid-19 pandemic does cause anxiety about (re)ordering of the aggregate welfare around the world. Linking progress in containment of the pathogen to attraction of political systems is misguided and unnecessarily pushes against cooperation based on medical expertise. Better to treat Covid control and public health in general as a global public good.

De-coupling has been a feature of US policy towards China in defense industries. Expansion of it to broader high-tech areas including biomedical industries runs counter to the notion of promotion of human rights, which ought to begin with improvement in health conditions of human beings. 


Discussion topics:

1. A. Who would you call „elites” (political and/or economic elites) in China and in Europe?

Naná de Graaff:
Naná de Graaff defines elites as the groups of people that hold positions of power to make, steer or influence decisions and discourses, frames, government rules, policies and so on. With that power they influence lives of a larger group in society.  There are different kinds of elites in different parts of the society, for example, economic, political, intellectual as well as cultural elites. There are also different kinds of elites at different levels, for example local, subnational, transnational elites from regional levels. Those are different groups of elites and elite networks. She believes, this also applies to the situation in China.

Zha Daojiong:
From Zha’s observation as a scholar, he thinks the whole notion of elites being in charge or influential is not obvious in China. In the eyes of many people, the communist party is the most influential group in China, but the reality is much more complex as people believe. Zha pointed it out that after Chairman Mao, who was unquestionable in leading the country, the political power was distributed to different political groups. Besides, due to the vast land and huge population, the power is also decentralized to different levels.
At the same time, facing different demands of groups, the party was and is in a constant negotiation process. The last fact is the interplay of professions in policy making. Zha takes his own experience as an example to explain how leaders from the party ask experienced people for advice in related areas.

B. We tend to know the major political figures in Europe, also in the US: they are in the media, we understand (or at least we think we understand) the differences among their positions. China, on the contrary, seems intransparent, there appears to be only the one leader and a huge political monolith supporting him. How to evaluate this “intransparency”?

Zha Daojiong:
Zha argues that the political “intransparency” in China can be explained through different perspectives. One of the concerns that Chinese politicians have is the possibility of the media’s misinterpretations of policies. There are competitions among the governmental officials and the adversary may take advantage of the misinterpretation to take down the other group who makes this policy. This also applies to the limitation of foreign media. Officials from the government and the party are instructed not to relate to the foreign press. China used to have spokesmen in the last century. Because of various reasons, the way of communication in politics has been changed. If people see political transparency as real-time communication, information disclosure as well as mass participation of citizens in policy making, then transparency in China is an issue.
On the other hand, people can also find a transparent part of the political process in China. The drafting of the economic development plan and digital taxation (in which Zha is also involved) are good examples. Besides, there are discussions and debates among a smaller group (the officials, representatives of different fields, deputy to the NPC ect.). Apart from political elites in western countries, the CPC and Chinese government don’t campaign for votes, thus the Chinese politicians have a preference of making policies efficiently instead of political communication with all citizens.

To conclude, this is a strange practice in China for many to understand, seeming intransparent while still allowing room for dissent. 
 

Naná de Graaff:
De Graaff agrees with Zha that there is room for dissent in China and sees space of transparency in its political practice. As a complement, she explains the idea of experimentation in the political approach: Chinese politicians make policies and review them through the practice. From this perspective, the “intransparency” can help to reduce noises.
However, the whole process is different from that in Europe or in the US. The discussions and dissent are going on more behind closed doors and within the doors of Chinese policies. When a policy is coming out, it is viewed as one voice which is “democratic centralism”. If people approach this from a western point of view, policy making in China seems intransparent. It’s a western biased opinion if people simply deny something because it’s different. Thus she questions the narrative of “intransparency” which comes from a different (/western) political system.
De Graaff also points out another reason for the perception of “instransparency”. In China, policies are not reported in the public domain as often as that in the EU. But if people take an effort to read the official notices or documents (many are translated into English), they will find out the purposes of the Chinese government. The Five-Year Plan is a representative example for that.

Zha Daojiong:
In response to de Graaff’s argument, Zha introduces a fundamental principle of the party: test-driven development (in Chinese: 摸着石头过河,cross the river by feeling for the stones). There is precisely one party in China, the CCP, which doesn’t have another party to blame for its failures. Thus Chinese politicians allow rooms for mistakes. There are debates within the political groups everyday and the policies they make should indicate that they know the ongoing situation in the society and they are taking action. One way or another, people’s demand will be heard and met.

C. What challenges do the elites have?

Naná de Graaff:
De Graaff sees populism as the most grave challenge on European elites. This process has been accelerated by Covid-19. There are dissent and different interests within the EU. The pandemic has increased inequality of the society and populists are taking the chance to strengthen their voice. The politicians are detached from the majority and don’t make decisions on behalf of the population. At the international level, she thinks European elites need to position themselves on the international stage and they need to balance their relationship with the US as well as with China. The damaged trust in the US and the more autonomous China have put Europe in a Dilemma. China is integrating into the liberal world order, but not exclusively on the terms and norms as decided by the western countries and US and European elites are struggling with this partially autonomous trajectory of China. At the same time, European elites need to redefine their stances with their US allies, especially during the Trump presidency.
For the Chinese elites, the crux for them is to balance legitimacy for the party, which is based on stability and growth of wealth as well as welfare of people, with party control. But the former is achieved through capitalist development and accumulation which require free markets, decentralization and certain degrees of freedom. This the contradicts the need for (central) party-state control and constitutes the key dilemma Chinese ruling elites are faced with.

Zha Daojiong:
Zha thinks the noticeable challenge for the Chinese elites is the notion of Chinese exceptionalism which is not recognised by the public. Chinese people used this word to describe the US, and now this exceptionalism, the kind of self reasoning and its way of governing, is a huge challenge for Chinese elites. China didn’t take part in building the world order a hundred years ago and after the WII, only a few Chinese have participated internationally which means Chinese elites have a huge vacuum of knowledge of  an international play. The exceptionalism combined with the vacuum of knowledge will hinder international dialogues and understanding. In the domestic part, Zha sees the problem that many people start to take the development of China and the increasing wealth of individuals for granted without learning from history and understanding the sacrifices, individual efforts as well as difficulties the country is facing.
In terms of Europe, Zha considers misunderstanding of Europeans towards Chinese as a pity. Europeans (and people from some other countries) have the assumption that everything in/from China is state-owned and naturally have distrust in mind towards information from China. Thus they might miss chances to truly open dialogues with Chinese professions and get to know China and Chinese people.

2. Europe is under lockdown, China is not. This has grave influence on political power in both countries. What influences on elites do you see?

Naná de Graaff:
de Graaff believes that the pandemic has accelerated China’s catch-up with Europe (and the US) which will also have a lasting effect.  At the same time, the trend of deglobalisation and the rise of protectionism were already present before the Covid-19 crisis. It will imply a partial return of industrial policy, a re-evaluation of the role of the state in the economy, re-evaluations of global value chains and production chains, and a further de-legitimation of neoliberal policies and ideology. Besides, the already massive global socio-economic inequality has increased hugely due to the Covid-19 crisis and the lockdowns, not only in economic sense, but also in healthcare, education and so on, not to mention the mountain of debts that many countries have due to the crisis. These are challenges that have to be dealt with by political elites in both China and Europe – and globally.


Zha Daojiong:
Zha argues that there are commonalities that countries share in regards to the influence of the pandemic. The experience of fighting against SARS in 2003 has helped the Chinese people to act and cooperate more efficiently this time. The experience of covid-19 might also help other countries next time. The major lesson which Chinese elites learn from the EU is to promote its universal coverage of health. One basic reason for the scramble in Wuhan at the beginning is the lack of this universal health coverage so that laborers from other regions working in Wuhan didn’t have equal access to the hospital as the locals did. Zha agrees with de Graaff’s worry that the macro economic challenge is a huge concern in the long term and changes of supply chain will happen, especially in the medical field. This change is not limited to protect people through keeping all the resources within its country, but also at an international level, for example, Zha will participate in discussions on how Chinese medical companies can offer medical equipment to Africa and thus decrease the infection risk from abroad.

3. What are the interests of political elites in China and Europe regarding the strategy of decoupling?

Zha Daojiong:
Zha thinks that decoupling can be very dangerous. There are certain people in China that actually promote decoupling, to drive out foreign forces. Different people talk about different things though, in the military sphere there was never a sense of coupling in the first place. Furthermore, Zha feels optimistic that China will be able to generate its own innovation industry, as the Chinese proved to have many good ideas about technology as well. 

Naná de Graaff:
De Graaff observes the interest on the part of European elites to on the one hand gain more autonomy and guard its own development, innovative capacity and competitive edge, but on the other hand to make sure that it does keep access to China and its vast market. With regards to the CAI, which was strategically signed before the Biden administration took over, Europe seems to also want to safeguard an independent relation to China as well as perhaps incentivize the American’s to a less confrontational approach.  Although a re-evaluation of the strength and weaknesses in global value chains and more diversification as well as re-shoring of production, De Graaff does not deem a true decoupling likely, because of the huge interdependence in global markets and production chains. European and Chinese elites are struggling with this in their own way and at the same time. In China, the newly formulated so-called Dual Circulation Strategy for instance aims at increasing domestic consumption and decreasing reliance on export driven growth while at the same time ensuring continued global trade and investment, access to international markets and attractiveness of the Chinese market. The US meanwhile is trying something similar, trying to protect its domestic industry better without getting rid of the liberal economy and its opportunities for growth and investment.

Q&A

  1. Question for Mr. Zha Daojiong: There is a report that said that the most important challenge facing the United States is the rise of authoritarian China under Xi. What is your idea of this article?

Zha Daojiong:
Zha admits that he hasn't read the article himself, but he has heard of it. In his opinion, the article is a very good exposure of racist superiority. He doesn’t think though, that the racist mindset of white supremacy represents larger parts of America. The solution proposal in that paper has been tried before, in the mid 1980s. He does not consider it an attraction, the ideas of the article are not that new. In his opinion it is dangerous, that the U.S. and China seemingly came to a conversation of the deaf. Both sides will need to counter these kinds of rhetoric and start listening to the other side.

  1. The advantage of the Chinese systems is that you can have long term plans, because in the Western world governments try to be reelected. But in the West we can include a lot of pluralist views. Will it be a problem for China that they cannot include these kinds of views?


Naná de Graaff:
From her perspective, this question is hard to answer, as she is a Westerner herself. It is a very important question though for the Chinese system, a challenge. De Graaff argues that the pressure will also probably increase. The system has become more repressive, there has been more censorship, there is not so much dissent in the public, but at some point the government will need to face this question.

Zha Daojiong:
Zha firstly refers to the long-term character of Chinese politics. Even though you may have a general goal, usually a five year plan will start by drafting ideas for the next two years ahead and then spend the next two years to get more into it. In terms of inclusiveness, thus far, it has worked that the economy is expanding, but Zha adds, that there was much space for the Chinese economy to grow into. Now the pie is getting bigger and bigger and you have large chunks for everyone. But the problem is, what happens, if the pie doesn't grow that much?

  1. Regarding the narrative of the West towards China: Can the EU maybe not accept that the emergence of another working system is also coming to good results? Do we not want to accept that other systems are possible?
  2. Zha Daojiong:In this context, Zha argues for more dialogue. He thinks that one tends to forget what makes China so powerful. If you just look at the numbers, you miss half of the picture. But when you look at specific policy areas, industrialization and so on, China came to this stage because it did include Western ideas. Zha explains, that about 75 percent of the ministers received education abroad. Many people would see this as a threat, that they are indoctrinated. The leadership system is different, that is for sure. Then Zha concludes that the final judgement regards the same kind of things, economy and growth.

Naná de Graaff:De Graaff agrees, that Europeans and Americans have become used to being the center of the world. If there are real problems in other kinds of systems, these countries should solve those problems by themselves, without Western intervention. For a long time therefore, Europeans have not been learning, but they have been teaching. De Graaff argues for a better understanding of China, she takes it as a good signal that this kind of realization is starting to sink in.

 

 

 

 

 

Opening statements for Discussion 6: "Trends in Chinese and European political elites"

Nana de Graaff

In the bigger picture I see three key challenges that political and economic elites have to cope with in the worlds’ three major poles of power, China, Europe and the US. 

Internally – that is domestically within their respective societies – they have to manage the balance in societal forces and their legitimacy as leaders, facing key challenges of discontent, populism and extremism. Brexit in Europe and a deeply divided and antagonized America are cases in point. 

Internationally – that is at the level of interstate and intercorporate (or inter-capitalist) relations - they have to manage global order and international relations balancing competitive and rivalling forces with shared interests. These relations have become more contentious and polarized recently -- aggravated by an extremely polarizing American president, an imploding US leadership and by the Covid-19 crisis. 

Externally – that is with regard to the global environment -  they have to manage global conditions which are in dire shape, if not acute crisis: climate, global health, and rising inequality, to name a few, with the contradictory demands of capitalism for endless growth, profit and accumulation.  

 

Zha Daojiong

In much of the mainstream rhetoric about international order, there is tendency to frame China (and for that matter, any other entity of significance that’s not in the ‘family of civilized states’) as an outlier. But for any notion of international order to function as an galvanizing rather than separating guide for cooperation, one has to self-question implicit insistence on order being unilateral, linear, and dictatorial.

The severity of the Covid-19 pandemic does cause anxiety about (re)ordering of the aggregate welfare around the world. Linking progress in containment of the pathogen to attraction of political systems is misguided and unnecessarily pushes against cooperation based on medical expertise. Better to treat Covid control and public health in general as a global public good. 

De-coupling has been a feature of US policy towards China in defense industries. Expansion of it to broader high-tech areas including biomedical industries runs counter to the notion of promotion of human rights, which ought to begin with improvement in health conditions of human beings. 

 

 

Summary: EU-China Relations in Post-Corona Times, Discussion 5, 22.01.2021,"The EU-China Comprehensive Agreement on Investment: Implications for Chinese Investors in Europe and European Investors in China"

Host: Ágota Révész, CCST

Speakers:

Cai (Charlie) Zhengxin (Managing Director and COO of Preh Group and Vice-President of Chinese Chamber of Commerce in Germany)

Margot Schüller (Associate Senior Research Fellow at German Institute for Global and Area Studies (GIGA))

 

INTRODUCTION AND EXECUTIVE SUMMARY

The emergence of China as a new technological power and a multi-industry competitor has changed European perceptions of the country. The European Commission sees an increasing need for more balanced and reciprocal relations within the bilateral economic relationship, including better market access for companies from Europe who are investing in China. Finalized on 30 December 2020, just before Germany relinquished the EU Presidency, the Comprehensive Agreement on Investment (CAI) was signed in principle after seven years of negotiation. For the 22 January 2021 discussion series, two speakers were invited to discuss the implications of this new agreement for Chinese investment in Europe and how the CAI principles might develop over the coming years.

 

OPENING STATEMENTS

Both guests handed in their opening statements in advance of the lecture. They are stated in the following paragraphs:

Opening Statement from Cai Zhengxin

With reference to his many years of professional experience and activity, Cai advocated the benefits of bilateral Foreign Direct Investment (FDI) in the context of FDI between China and the EU and he assessed the new agreement as a good and important tool for strengthening economic relations:

‘The globalization has already brought benefits to a lot of industries worldwide. The bilateral relations between China and Germany are a good example [of] how a cooperation can develop into a comprehensive and strategic partnership. Therefore, it is important that the people with entrepreneurship on both sides focus on growing this partnership and business to create opportunities seeking mutual success.’

Opening Statement from Margot Schüller

Schüller pointed to the general importance of FDI for global trade:

‘FDI has become as important as international trade for driving global economic development. It has the potential to contribute to economic growth, employment and innovation in host countries. An open and transparent regulatory framework as well as a welcoming business environment in host countries help attracting FDI.’

DISCUSSION TOPICS

1)      China’s motivation to negotiate the investment treaty

After seven years of negotiation, the CAI was concluded during the final days of Germany’s EU Presidency. Yet the agreement has been highly debated in the EU: as the member states’ investment environment has already been largely open to all foreign companies, the new agreement now aims at a more balanced, reciprocal investment environment. Against this background, the first question raised was:

What was the motivation of the Chinese government to negotiate an EU-China investment treaty after all?

Cai Zhengxin:

According to Cai, the agreement was reached at the right time. He used the example of the automotive industry to illustrate the already intensive existing relationship between China and Germany, emphasizing the dependence on the Chinese sales market for German companies and, on the other hand, the advantages for China through transfer of technology and management skills.

China, according to Cai, has realized in recent years that more transparency and opening of the markets bring important advantages for both trading partners.

Margot Schüller:

Schüller sees the agreement as a necessary step for China. The new treaty is an extension of existing bilateral agreements between China and individual EU member states and will contribute to the creation of a more level playing field. The treaty focuses primarily on better access to the Chinese market for companies from Europe and on the removal of remaining investment barriers. One of the advantages of the CAI, and a motivation for China to conclude the agreement, is the reduction of transaction costs by having to deal with only a single EU-China investment agreement instead of more than 20 separate ones with individual EU member states.

Schüller also stressed that there was some time pressure to conclude the agreement on the side of the German Presidency of the Council of the EU, which expired at the end of December 2020. After seven years of negotiation and without a clear China strategy on the side of the United States president-elect, Joe Biden, it would have been wrong to wait for the development of a joint US-EU China approach. The Chinese government, too, was eager to conclude an agreement given the announcement by nominee for US foreign minister Antony Blinken that he will take a hardline stance on China if appointed.  

2)      Future development of investment between the EU and China

Given the decline of Chinese Investment in the EU in the recent years, the second question addressed the expectation for further development of investment following the new agreement:

What are the reasons for the decline in Chinese investment into Europe? What will we see now with the new investment agreement? Will there be an increase in Chinese investment into Europe?

Margot Schüller

Schüller pointed out that a precise forecast is difficult to give, as the treaty negotiations will only be finalized by the end of 2021 and agreement needs to be confirmed by the EU Parliament as well.

According to Schüller, the conclusion of the agreement in principle is an important signal that the EU is showing both interest and ambition in building an independent relationship with China, not least because of its different interests vis-à-vis the latter.

Schüller expects nevertheless an increase in investment, though mainly on the part of EU companies, which she predicts will invest more in China because of the country’s relaxation of investment barriers.

Cai Zhengxin
Cai agreed with Schüller's assessment that the level of Chinese investment is unlikely to change much in the near future.

Cai cited China’s economic development since the financial crisis, and especially since 2016, as the reason for the decline in Chinese investment outside its own borders. Cai identified three factors as essential: (1) a maturation of Chinese investors, which invested a lot in the wake of the financial crisis, but have become more mature and strategic with their investments as they mature, (2) the Chinese government’s increasing regulation of investment contribution to greater selectivity in investment, and (3) a changing investment context within the EU, including increasing scrutiny of Chinese investments (as a result of high-profile cases such as Kuka, there is a new attention in EU to guarding sensitive and critical infrastructures and technologies, and thus an increasing hurdle to Chinese investors looking for FDI opportunities).

Margot Schüller

Schüller emphasized that, especially in the German context, there was a strong reaction to the goals of the ‘Made in China 2025’ programme, as this policy directive was perceived as contributing to stronger competition for, and even a possible attack on, key national industries. The EU’s stricter regulations and reviews of Chinese investment was, therefore, a direct response to Made in China 2025.

3)      Incentives for Chinese Companies

Building on the unfolding discussion, a question about the incentives for Chinese companies to invest in Europe was posed:

Does the new investment treaty provide special incentives for Chinese companies to come to Europe?

Cai Zhengxin

Cai first noted the difference between high trade volume and comparatively low Chinese investment (for Germany China contributes only 2% of FDI and thus behind Japan or other European countries)—pointing out the importance of remembering that trade and investment are distinct, if related. Thus, there is still a lot of potential in the expansion of Chinese investment in the EU. While China used to be more protectionist and, as a younger economy, was initially cautious, it has now realized that more investment is necessary and helpful. However, greater transparency and more similarly balanced business conditions for both partners will be important for continued growth and economic advantages.

Margot Schüller

Schüller provided details about the agreement in relation to the following key subject matter: while the EU market is generally open to foreign investment, some restrictions will be preserved in sensitive sectors, including energy infrastructure, agriculture, fisheries, mining or public services.

4)      Areas of European investments in China

The next question was about European investments, and their possible development, following the new agreement:

Looking at EU investments into China, in what areas can we expect a real opening?

Margot Schüller

Schüller discussed investment ambitions and opportunities primarily in the manufacturing sector, citing here the automotive industry and e-mobility in particular. She also expects opportunities for EU investment in the service sector. Despite special regulations in the respective industries, this would be an enormous development.

Other aspects discussed were the new rules concerning state-owned enterprises, greater transparency regarding subsidies and issues of sustainable development and labour rights. China has made a commitment to ratify and implement the core conventions of the International Labour Organization (ILO). However, this is not yet a completed process; the agreement states that within two years there will be a need for further negotiations about investment-protection issues.

Cai Zhengxin:

Regarding EU investments, Cai saw the agreement as a development towards more openness, transparency, and market access for the EU. Cai referred in particular to the rule in the agreement which dictates that EU companies no longer have to enter into joint ventures in China. Additionally, whereas entry into the Chinese market often used to be accompanied by a binding technology transfer, this is no longer the case, an example of how the conditions for European investors have changed considerably.

Cai also saw major changes regarding state-owned enterprise. Areas that were previously considered sensitive in China, such as insurance, the energy industry, and the medical system, are now open for investment, as well.

Margot Schüller
Schüller underlined that the agreement offered equal access for companies to standard-setting bodies in both China and the EU, referring for example to technical committees in the semiconductor industry.

5)      Impact of the decoupling process on Chinese investment in the EU

The last question put investment in the context of increasing decoupling between the US and China, that in both technological and economic contexts:

To what extent will the decoupling process have an impact on Chinese investment in Europe? 

Margot Schüller

Schüller pointed to the decoupling of the EU and US, which has had an impact on the former. She expects that the new Biden administration will continue to follow an American First policy, and thus be preoccupied with domestic politics. The EU could not wait for eventual steps to be taken by the US with regard to its China policy. The conclusion of the CAI in principle signals that Europe pursues its own China policy. Schüller recalled that the US had also previously negotiated its own Phase One Agreement with China without taking the EU into account therein.

Schüller expects that for the Biden administration the question of technological competition will be most important. With regard to technology issues, many observers would favour an alliance between the US and the EU, which is why the investment agreement has also come under criticism. Nevertheless, Schüller sees the agreement as the right step in the current context.

Cai Zhengxin

With regard to the US-EU relationship, Cai perceived that the Trump era has made clear that the US is not a stable partner. That said, the US remains an important factor, and will continue to be taken into account, even if the EU and China pursue a more independent policy in relation to one another.

OPEN DISCUSSION QUESTIONS & ANSWERS

1)      A first question, directed to Margot Schüller, was about a possible incompatibility of the investment agreement with Germany’s new Indo-Pacific Guideline, which foresees deepening the relationship with other Asian countries as well:

On one hand Germany wants to increase investment in China, but, on other hand, the German government published guideline to diversify investment in Asia, so that Germany will pay more attention to other Asian countries. To me it looks like a paradox.

Schüller reacted to this question by stating it is a normal strategy to diversify bilateral economic relations, also in order to reduce risks. Cai agreed.

2) A second remark addressed a possible inequality that may exist, as China seems to make more concessions than the EU in the new agreement:

We see a lot of concessions by China and not on EU in the CAIis this true?

Schüller noted that the agreement aims at creating a new symmetry. Previously, the EU was open to investment from China, but European investors in China faced significant barriers. What is most important, according to Schüller, is that the CAI will bring about a more level playing field.

Cai placed the question in a long-term perspective and pointed out China’s changing role and position. While China, as a younger global player, previously had to take many protectionist measures in the global arena, as its economy grows and matures conditions and concessions will correspondingly adapt.

3) Another question referred to accusations that China had previously failed to comply with agreements, and the speakers were asked how they assessed the risk of Europe opening up to investment in sensitive industries and technologies:

The EU has been criticized for being too trusting, because China made treaties before but did not always carry through with their agreements. What is the EUs opinion now, when opening more sensitive areas?

Schüller rejected accusations of China’s non-compliance with agreements, and said that, since joining the World Trade Organization in 2001, the country has complied with almost all rules. Individual problems would remain given the size and complexity of China’s economy, but mutual trust is important – especially as the EU seeks a stronger relationship with China as a partner.

Cai supported this assessment of China’s WTO membership to date. Reservations about China due to unbalanced investment conditions and especially government subsidies depend on through whose perspective we are looking, he said. Historically and comparatively, China has not acted any differently than Japan in the past, or Brazil or Malaysia at present, with regard to joint venture conditions and protection of local industries. CAI is an improvement and a step in the right direction towards a level playing field.

4) The next question focused on Chinese domestic policy and President Xi's intention to strengthen local (state-owned) industries. In this context, a question about potential incompatibility between the agreement and domestic economic policy was asked:

If we look at domestic policy in China, we see Xi Jingping wanting to strengthen China in different waysexternally and internallyis this not incompatible?

To answer the question, Cai elaborated on two aspects. First, he referred to current problems caused by the present tariff policy between the US and China. From the economic and business point of view, decoupling is counterproductive, and the Chinese government, according to Cai, therefore intends to strengthen bilateral relations, make them more transparent and open, in order to advance its own economy.

For Cai, Xi's statement about strengthening state-owned companies should be understood primarily as a political statement in the sense of the CP. Xi himself put this statement into perspective, saying that promoting state-owned companies does not have to mean neglecting the private sector. The private sector will continue to gain importance as a future trend.

Schüller addressed the aspect of state-owned enterprises. The Chinese government focuses on innovation; state-owned companies are not the drivers thereof, as it is rather the dynamic private sector that established impulses for innovation. Official statements by the government that state-owned enterprises represent the backbone of the economy do not correspond to reality. In the meantime, the private sector – or at least a mix of private and state-owned enterprises – account for the most significant part of the economy.

5) A follow-up question was asked about the compatibility and connection between CAI and the dual circulation strategy on China's side, as well as, on the EU's side, the effort for more strategic autonomy:

In the future, how will things like the CAI look within the dual-circulation strategy? Does it work within it or go against with it? The same is with EU and strategic autonomy, and making EU block in technology and adoption policies [more independent]? So how does CAI support these objectives of the EU and of China?

For Cai, the dual circulation strategy represents a traditional strategy of balance, in which the risk of a highly export-oriented economy is reduced. Cai did not see strengthening the domestic market as an important pillar of economic development as contradictory to the investment agreement.

In a parallel manner, Schüller also said that for Europe striving for more sovereignty in the area of technologies did not mean denying strong cooperation. However, strong dependencies on China or the US are no solution.

6) The next question dealt with Chinese investment in the EU and asked about future areas of attraction for Chinese investment:

Going forward, will there be changes in which sectors seem particularly attractive [for Chinese investment]?

Cai recognized the problem that attractive areas for Chinese investors are often those which Europe does not want outside investment: they are areas which are difficult to access due to security concerns, such as microchip manufacturing.

Regarding less sensitive technologies, Cai continues to see no strong increase in Chinese investment in the short- to medium-term.

Schüller anticipated an increase in investment in the long term. According to her, most companies – including Chinese ones – undertake cross-border investment to be closer to the local market. She also pointed out that overseas investment in research and development (R&D) will be beneficial for companies. For Chinese investors, there are many opportunities to invest in European R&D, for example in the battery industry or in the field of digitization – areas in which Europe needs to catch up and could benefit from outside investment.

7) With regard to the aspect of security concerns, the question was raised to what extent national security concerns represent an objective criterion:

Is the criterion of national security an objective one, does it mean it cannot be manipulated?

Schüller emphasized that security is an essential criterion, and sensitive sectors need to be firmly defined. The cataloguing of sensitive sectors could, however, change over time for political reasons.

Cai, on the other hand, identified the selection of what is sensitive and what not as a political tool which could contrast with economic motivations.

8) A last contribution from the audience asked questions regarding several aspects:

How secure is it that the investment agreement will be finalized and signed by all member states? Is it a formality? Will parliament try to slip in human rights discussion in there?

To what extent do you think that CAI benefits bigger European states, namely Germany and France, and how will smaller EU countries benefit?

What is the effect of COVID-19 on the future development of Chinese and European investment?

Cai confirmed the negative and critical influence of the pandemic on the general economic situation. Especially in the microchip industry, he pointed out, one could see the devastating consequences and especially negative forecasts of the industries themselves.

With regard to internal votes in the EU, Cai considered Germany and France to be the countries with the greatest influence, including for the approval of CAI in parliament, suggesting that CAI might now have to wait until the French have the EU Presidency for the deal to take effect. However, Cai also sees advantages for smaller states through the agreement and mentioned Portugal as a proactive example.

Schüller considered it normal that the countries with the highest investment levels will also gain most from the agreement. Schüller saw conflicts of interest within the EU primarily in the fact that smaller Eastern European countries are critical of requirements and standardization for investments. However, according to Schüller, these countries would also benefit from increased opening through the agreement.

With regard to the vote in the EU Parliament, however, Schüller anticipates strong opposition to the CAI from those members of the parliament critical of China’s human rights performance.

Opening statements for Discussion 5: "Trends in Chinese investments in Europe"

Margot Schüller

Foreign direct investment (FDI) has become as important as international trade for driving the global economic development. It has the potential to contribute to economic growth, employment and innovation in host countries. An open and transparent regulatory framework as well as a welcoming business environment in host countries helps attracting FDI.

 

CAI Zhengxin

The globalization has already brought benefits to a lot of industries worldwide. The bilateral relations between China and Germany are a good example, how a cooperation can develop into a comprehensive and strategic partnership. Therefore, it is important that the people with entrepreneurship on both sides focus on growing this partnership and business to create opportunities seeking mutual success.

Summary: EU-China Relations in Post-Corona Times, Discussion 4, 08.01.2021, "Decoupling in information systems?"

Notes taken by: Maike Ella Hansen and Felix Malte Hoppe

Speakers: Rebecca Arcesati, Tan Youzhi

Host: Dr. Ágota Révész, CCST

 

Opening Statement Arcesati:

5G is going to revolutionize information systems, deepening their penetration into our increasingly connected economies and societies and making it more difficult, yet all the more important to secure these systems. Information and data are front and center in 21st century economic and geopolitical competition, therefore the security and resilience of the underlying infrastructure is very important. China has long recognized this, pouring considerable resources into cyber and information security. The debate about the security of European 5G networks, particularly the role of Chinese equipment suppliers in their rollout, shows how democracies too now recognize the need to more carefully balance openness and control in the digital realm, including by taking appropriate measures to protect their information systems. Far from being driven exclusively by the ongoing technological decoupling between the United States and China, the EU’s approach to 5G reflects growing appreciation of the interplay between technology and security, as well as a broader shift in Europe-China relations.

Opening Statement TAN:

Cyberspace is often regarded as an emerging vast territory which contains infinite development possibilities. Besides the sole superpower United States, European countries and China are also the most active actors in this new arena. In the information age, making full use of cyber technologies to enhance bilateral cooperation and multilateral security is in line with the direction of social development. On the contrary, seeking the so-called technological decoupling by highly politicizing anything is neither wise nor feasible, and will ultimately be detrimental to global cyberspace governance. It is both necessary and possible for European countries and China to jointly promote in-depth cooperation on the basis of cyber technologies represented by 5G on the premise of coordinating each other’s interests and concerns. This is particularly important in the context of fighting against the COVID-19 pandemic in an increasingly globalized world.

Discussion topics

Question 1: We used to live in a world of Pax Americana, i.e. in a world under the economic and military dominance of the United States. This has recently been challenged by China. As information technology is viewed as one of the foundations of dominance, we now find ourselves in a world where the technology discourse – see 5G – is heavily politicized and securitized. Is this securitization of information technology inevitable? Where does it lead us?

Arcesati: Ms. Arcesati divides her argument into two sections. First, she cites an article by Joseph Nye and Robert Keohane from 1998[1] that defines three types of information: personal, commercial and strategic. Nowadays, Arcesati says, these categories are becoming more and more blurred and virtually all information has potential strategic value, so states inevitably view information technology and information systems through a securitized lense. Information can be influenced, censored, controlled, manipulated or weaponized to further geopolitical and strategic interests, for example through hacks of databases or Facebook accounts (cites Russia´s interference in the 2016 US election and China´s hack of the U.S. Office of Personnel). Data-driven technologies like AI have the potential to dramatically increase states´ capabilities to interpret and analyze large datasets, and make disinformation campaign more sophisticated.

The Trump administration launched a campaign to be less dependent on China-based ICT supply chains. Part of this effort was driven by a relatively recent fear that China´s advancement in emerging technologies, like 5G and AI, could undermine America´s economic and military dominance. However, Arcesati notes, some of the underlying security concerns about Chinese technology and its presence in America´s critical infrastructure date back to the Obama administration.

Additionally, Arcesati argues that China (especially since Xi Jinping came to power) views information security in terms of national and political security. The Great Firewall has been in place for a long time and concerns about reliance on American hardware and software and how that could make China a target of espionage have a long history. But in recent years China has doubled down on its heavily securitized approach to information technology. It passed a sweeping Cybersecurity Law, intensified efforts to develop „secure and controllable” technology (including information technology) by nurturing indigenous innovation, and taken steps to protect and localize important and personal data. So the more the U.S. tries to slow China down, the more China will invest in its domestic system.

However, information technology supply chains are globalized, making zero-sum competition dangerous. Arcesati fears that disrupting information supply chains could as a consequence have a negative effect on innovation. Trustworthiness is important, but cannot be the only criterion when it comes to assessing security risks in information systems. In this context, she cites the EU´s 5G Toolbox as a good model because it does not rely on country-specific measures, but on objective measures that apply to all equipment suppliers. Arcesati concludes her argument by saying that this is a complex problem that requires holistic responses, addressing both technical and political risks.

Tan: Mr. Tan suggests in its argument that information technology is both military and civilian – it is essential for us to understand the securitization of information knowledge. After all, many politicians invoke the protection of information knowledge to please their voters. The Trump Administration, in particular, has played this card frequently. Tan therefore hopes for a change after the upcoming U.S. presidential transition. With the start of the Biden Administration, the U.S. may change course, and other countries may also reconsider their position on securitization of information knowledge. 

Question 2: It seems decoupling is well under way, and what seemed to be a globalized world is not getting fragmented. China is coming up with its own standards, with its domestic internet and banking system, it is also massively rearranging the supply chains. There is also the issue of “digital geopolitics”, i.e. gaining influence through information technology, like in Africa and South-East Asia. Are we witnessing a breakup of global digital ecosystems? How could we avoid it – if it should be avoided at all?

Arcesati: Are we witnessing a breakup of the global digital ecosystem? Arcesati thinks so, because both China and the US are taking extremely consequential actions to decouple their digital ecosystems. The difference is that China was never smoothly integrated with the rest of the world in the first place, at least if we look at the Internet and the digital economy. China has operated its own standards and imposed market access restrictions for a very long time, think about the great firewall and bans of foreign apps, something it now criticizes the US and India for doing. So the Internet was already decoupled to some degree.

Arcesati argues that the importance of ICT and digital technologies in China´s foreign policy has never been greater. China is now becoming more active in digital geopolitics by expanding digital infrastructure building. While Chinese projects can promote much needed connectivity in many parts of the world, the Digital Silk Road is also a tool through which Beijing seeks greater control over digital key informationcorridors and data traffic. So China is an important new player in digital geopolitics.

Arcesati believes that we are witnessing the formation of various digital blocs, and that the consequences are not necessarily what we may expect. She does not believe that we are facing „splinternet“ and that connectivity is at risk. In her eyes, the problem lies more in the increasing fragmentation according to regulatory requirements and governance models in different jurisdictions. If these differ too much, it makes it difficult to cooperate across borders, she said. To prevent this, countries with similar ideas for cyberspace should increase coordination according to their interests and values, especially to protect fundamental rights in the digital space. She sees the central conflict here between democratic and authoritarian states and their competing visions for the Internet.[2]

Tan: On this point, Tan has a different opinion than Arcesati – he does not think we are facing a digital collapse. He states that the prevailing opinion among some of his Chinese colleagues is that the 21st century will be the Chinese century, as China is already playing a leading role in the information age. However, he thinks it is still the American age, as American influences are omnipresent. Second, while China is providing infrastructure on a large scale in continents such as Africa and South America, it is not displacing Western measures, but filling gaps that the West has failed to provide. For example, China’s Covid-19 vaccine is available in many countries that have not had access to European or U.S. vaccines. In his eyes, China is not contributing to decoupling but China itself is being decoupled by other countries. In other words, it is not the global system that is breaking down, but the tendency toward anti-globalization that is being globalized.

Arcesati: Arcesati replies that it is one thing to promote connectivity, which also contributes to positive development on the part of China, but she thinks that strategic interests also play a role and that the Digital Silk Road in particular also serves to promote Chinese interests. Bringing connectivity to developing countries is not a selfless act of China or Western countries, but is always backed by geoeconomic and geopolitical intentions. Of course, there is competition between different sides, so securitization and politicization will be inevitable. To Tan’s statement that China is being decoupled by others, she counters that with its policies aimed at having controllable and secure information technology, China itself is promoting decoupling through vague regulations, which leads to concerns among foreign companies and creates the impression that China wants to actively decouple. This creates mistrust among European companies, especially since the European market itself has always been very open, including to Chinese ICT companies.

Question 3: Let’s take a look at the EU-China relations now, which have also changed considerably during the past few years. How would you summarize the major changes? Is it true that the EU is facing a choice between the USA and China? What are the lessons Covid-19 has taught the EU and China in the area of information systems?

Arcesati: Arcesati argues that there has been a paradigm shift in EU-China relations between 2015 and 2019: When EU and China signed a key cooperation agreement on 5G in 2015, China was still regarded as a partner and a market. The main interest on the European side was to gain access in a level playing field in the ICT-sector. Europe still saw economics, security and geopolitics in separate baskets. Unlike in China, economic and technological security as concepts were rarely discussed. But as China was undergoing profound political changes under Xi Jinping, strengthening the party-state´s grip over the economy and society and expanding its global influence, policymakers were forced to rethink traditional assumptions. In a landmark communication in May 2019, the European Commission described China as a partner and “an economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance.”

Arcesati’s argumentation is that like Chinese acquisitions of European technology, which triggered the creation of a foreign investment screening mechanism, the 5G debate was a test for European China policy. It created a kind of dilemma for Europe when it comes to China because short-term economic and business gains have to be balanced against other considerations like national security and political values.

Arcesati concludes by saying that the COVID-19 pandemic provided new momentum for Europe´s quest forstrategic autonomy and digital sovereignty to make sure the region doesn´t need to make a choice between the US and China. It is no coincidence that Europe´s recovery plan has digitalization at its core, including 5G and 6G. At the same time, tough choices are inevitable. Arcesati notes that the European Commission signaled very clearly that it wants to cooperate with the Biden administration on digital and technology governance, including digital supply chains and data security. There are many divisions, but Arcesati believes that Europe has much more in common with the US than it does with China in the tech space.

Tan: Tan, in contrast, questions the substance of the EU´s China dilemma and points to the outstanding role of Europe when it comes to knowledge, competence, and cutting-edge technologies, and concludes that there is no need for the EU to make this decision. Furthermore, „different bed, same dream“ – that is to say, the EU and China share similar objectives like technological sovereignty and strategic autonomy despite different cultural backgrounds and differing values, Tan says. According to Mr. Tan, the most reasonable way consists of in-depth cooperation of the EU and China on the premise of coordinating each other’s interests and concerns.

[1] Nye, J. S.; Keohane, R. O. (1998): Power and Independence in the Information Age. 77 Foreign Aff. 81

[2] For further information read the article by James Lewis, which Arcesati recommends: https://www.csis.org/analysis/sovereignty-and-evolution-internet-ideology

 

Questions of the audience:

Question 1: If EU states decide to admit Huawei to their 5G tenders: What would be measures to lower political and strategic informational risks for them?

Arcesati: There are specific measures listed in the EU Toolbox for 5G Security which member states released with the assistance of the European cybersecurity agency and the European Commission to do just that, Arcesati says. She points out that “the European approach is not to focus on company bans”, which is meant as a reference to the procedure of the Trump administration when it comes to Chinese 5G technology and the approach of building “clean networks”. Adding, “When it comes to such an issue like the security of information systems, you cannot just take such a simplified view”.

Arcesati continues that one of the centerpieces of the 5G toolbox and the European 5G security approach is to diversify the suppliers: “that is one way to make sure that you can include some equipment by one supplier but it doesn’t dominate your network” and, to maintain constant security reviews.

Tan: Tan agrees with Arcesati that diversification regarding the manufacturing companies presents a key point of security and emphasizes the role of the European Network and Information Security Agency, but he also points out that Huawei should be integrated into a European 5G network to work jointly on the remaining problem of privacy protection.

Question 2: Ms Arcesati’s references to “Russian meddling” and “Chinese hacking” sound like echoes of US rhetoric by implying “they” meddle but “we” are honest victims. This is not what Snowden’s revelations suggest, and ignores the stakes US politics and even individual politicians have in IT businesses. Can Huawei also be a counterbalance to western dominance and control of the internet, instead of only a threat?

Arcesati: Arcesati agrees that the Snowden revelations were indeed a wake-up call for Europe that not only Russia and China but also the United States collect data on foreign citizens. Since then, there has been all the more concern in Europe about data privacy, and there is a divide between the U.S. and European approaches to data protection. Following the Schrems ruling, personal data sharing between Europe and the United States is in a limbo until a solution has been found, Arcesati said. She sees this as the main point of contention between Europe and the United States in the digital sphere.

Regarding Huawei as a counterbalance, Arcesati says that Beijing probably sees it that way. The Chinese government certainly sees the prospect of being able to play a larger role in the global digital infrastructure. However, she stresses that both the U.S. and China have their own strategic interests. As Chinese 5G equipment suppliers are closely linked to the Communist Party, she sees concerns that strategic intentions could be linked to economic ventures regarding digital infrastructure. Measures to protect the security of information systems from high-risk vendors are thus justified, as this is an area where highly sensitive data is involved.

Tan: Tan takes a different perspective on this issue. He points out that the U.S. has a big technical lead over the rest of the world. For example, only after the former CIA employee and subcontractor Snowden’s disclosure did the Chinese authorities confirmed that their networks had been hacked. Notwithstanding its own role in surveillance of foreign citizens, a U.S. security agency released a video demonstrating how Chinese hackers attack U.S. cyber companies. According to Tan, this is political spin – the „so-called evidence“ is meant to make people think Huawei is a threat.

Question 3: A question regarding the third way for the EU: How can the EU achieve this goal (strengthening its capacity in IT technology and digitalization)? As far as I know, Germany’s R&D expenditure in digitalisation is much less than that in China or the USA. Is it on board that the EU countries unite to develop IT technology? What are the EU’s advantages in developing ICT over the US and China?

Arcesati: This is a crucial point for the EU, Arcesati said, and indeed since the pandemic, the EU has increasingly prioritized a digital transition so that the European economy can keep pace in the fourth industrial revolution. Brussels wants to build a thriving data market and promote European core technologies. Central to this is cooperation between the individual member states. This has already led to projects focusing on strategic technologies such as batteries and microelectronics, helping Europe to become less dependent on the Chinese and US technology. She is optimistic about Europe’s potential, as just a few years ago it was falsely claimed that Europe’s chances of playing a role in building 5G had passed, whenin fact Nokia and Ericsson are among the leading global players.

Tan: According to Tan, the EU has its own advantages, and in particular he highlights the two large companies Nokia and Ericsson, which are at the cutting edge of technology. In communication with China, he sees it as particularly important that the EU should negotiate with China as a single voice, and not each state on its own, as this could prove to be a disadvantage.

In his personal experience, the digital culture in the EU is quite different from the one in China and America. It can be positive for a more sustainable development, but it can also hinder ICT development.

Question 4: The decoupling of every aspect of global economy, society and politics is a fact, not a prospect under the present Cold War 2 circumstances. It is so in the IT and internet world as well. Europe is part of the Western section of that decoupling. We are now on an american based global IT platform, and not on a chinese based one. That shows everything. The real strategic question is how the two decoupled sections of the world will communicate and interconnect with each other. To play a significant role in that may be the only role of some strategic importance for Europe and the only chance to overcome Europe’s historic mistake of ignoring the new world revolution of IT. Isn’t that true?

Arcesati: From Arcesati´s point of view, decoupling is indeed a reality caused by both sides, because the US likewise China have taken consequential actions to decouple and to disentangle their technological and information technology ecosystems, which has ramifications for the global supply chains of European companies.

But Arcesati does not believe that interconnectedness itself is at risk. She stresses further the importance of interoperability as a way to ensure that decoupling will not affect international communication systems. Although a vast majority of companies aren’t concerned of interoperability per se at this stage, decoupling can negatively affect the market because it raises costs for business, which means that less money is available for R&D, for example.

According to Ms. Arcesati, Europe needs to realize the strategic importance of the information systems and the IT-revolution, which is something Europe was come to terms with. But looking at the 5G security process or the new European cybersecurity strategy released in December 2020, Arcesati is nevertheless optimistic that Europe can catch up in this regard.

Tan: Mr. Tan agrees with Ms. Arcesati on this point and emphasizes the future importance of better coordinated cooperation.

Question 5: The decoupling or geopolitical in the digital area is actually two-way instead of one way. China has also banned Google, Facebook, etc. China’s great firewall is much more powerful than any country. The fragmentation of this digital world is probably inevitable. Russia is the first country to have the idea of “Cyber Sovereignty”, then China has advocated this idea very actively. Now the EU is also talking about “Digital Sovereignty”. This is really ironic, because the spirit of the internet is free and open, but the border is being built everywhere.

Tan: On this point Mr. Tan formulates his answer briefly and concisely: “decoupling temporarily, coupling eventually.”

Arcesati: Arcesati emphasizes that decoupling is a “two-way street” because both sides – as mentioned earlier – have taken actions and decoupled their technological systems to some extent.

When it comes to ICT Arcesati considers that China has already chosen a quite securitized approach to information systems, because for China national security plays an important role and the Chinese cybersecurity law clearly shows that it is not just about networks and markets but also about national security. For Arcesati, national security is the main reason why some foreign websites are banned in China, because essentially they are seen as a national security threat.

According to Arcesati the Great Firewall in a way initiated decoupling quite some time ago which caused consequences for foreign companies. Now, countries like India and the US are taking a more securitized approach themselves, perhaps emulating aspects of the Chinese approach.

Opening statements for Discussion 4: "Decoupling in information systems?"

Rebecca Arcesati

5G is going to revolutionize information systems, deepening their penetration into our increasingly connected economies and societies and making it more difficult, yet all the more important to secure these systems. Information and data are front and center in 21st century economic and geopolitical competition, therefore the security and resilience of the underlying infrastructure is very important. China has long recognized this, pouring considerable resources into cyber and information security. The debate about the security of European 5G networks, particularly the role of Chinese equipment suppliers in their rollout, shows how democracies too now recognize the need to more carefully balance openness and control in the digital realm, including by taking appropriate measures to protect their information systems. Far from being driven exclusively by the ongoing technological decoupling between the United States and China, the EU’s approach to 5G reflects growing appreciation of the interplay between technology and security, as well as a broader shift in Europe-China relations.

 

TAN Youzhi

Cyberspace is often regarded as an emerging vast territory which contains infinite development possibilities. Besides the sole superpower United States, European countries and China are also the most active actors in this new arena. In the information age, making full use of cyber technologies to enhance bilateral cooperation and multilateral security is in line with the direction of social development. On the contrary, seeking the so-called technological decoupling by highly politicizing anything is neither wise nor feasible, and will ultimately be detrimental to global cyberspace governance. It is both necessary and possible for European countries and China to jointly promote in-depth cooperation on the basis of cyber technologies represented by 5G on the premise of coordinating each other’s interests and concerns. This is particularly important in the context of fighting against the COVID-19 pandemic in an increasingly globalized world.

Summary: EU-China Relations in Post-Corona Times, Discussion 3, 18.12.2020, "Covid and innovation foci"

Notes taken by:
Lorenz Kahle and Maximilian Uebach

Speakers: HAN Zheng, Philipp Böing

Host: Dr. Ágota Révész, CCST

Introduction and executive summary:

This protocol summarizes the Zoom lecture from the 20th of December 2020. The discussion was part of the seminar “EU-China Relations in Post-Corona Times” at the TU Berlin. The discussion was open for the public. The discussion was titled “Covid and innovation foci“. Dr. Ágota Révész from the China Institute of the TU Berlin hosted the discussion and led through three main topics which are summarized in the following. The last 15 minutes were reserved for questions from the audience, which are also stated in this protocol. The two guests were Dr. Philipp Böing who is Senior Researcher at the ZEW – Leibniz Centre for European Economic Research in Mannheim and Prof. Dr. Han Zheng who is the Goetzpartners Chair Professor of Innovation and Entrepreneurship at the Sino-German School for Postgraduate Studies (CDHK) at the Tongji University in Shanghai.

The first topic was based on the ongoing restructuring process of China’s economy, namely the shift from a manufacturing-driven towards an innovation-driven growth. The guests discussed the driving forces and challenges of China’s goals. The second topic was about the consequences of the US-China rivalry and especially its impact on the area of research. The experts discussed how these processes might rearrange the global innovation landscape and the possibilities of a decoupling. The third topic covered the influence of the ongoing Covid-19 crisis. Furthermore, Dr. Böing and Prof. Dr. Han Zheng shared their opinion about how important the EU is in the Chinese planning and what options of action the EU got with regards to its relation to China.

Opening Statement Böing:

China’s policy agenda strives for greater, innovation-driven growth, and world leadership in science and technology by 2050. This ambitious target is supported by government policies that not only provide incentives for more research activities, but also lay out a mission-driven direction for innovation. Both China’s research and development (R&D) expenditures, important inputs for innovation, and patent applications, a widely used measure for innovation output, have increased substantially since the turn of the century. Nonetheless, it remains unclear how far previous market reforms and the government’s attempts to correct market failures and guide technological advances, e.g. through subsidies, have led to such increases. Instead of addressing funding deficiencies in the Chinese innovation system, R&D subsidies may instead crowd-out private investments in R&D, or allocate resources towards less productive activities. Likewise, patent subsidies may not support financially constrained firms in the protection of intellectual property, but rather lead to disproportionate and excessive filings of low-quality patents. If China fails to generate innovation that matters for output and productivity growth, both global leadership in science and technology and higher levels of income might move beyond reach.

Opening Statement HAN:

Technological self-reliance is at the heart of China’s upcoming economic plans. To achieve this goal, the Chinese government aims to strengthen its R&D capacity and boost international collaboration. However, decoupling in major international relationships, slowing GDP growth, increasing corporate and government debt ratios, as well as little focus on basic research in the past stand in the way of realizing the ambitious goal.

Discussion topics:

  1. First topic: This far we had discussions about geopolitical and geoeconomic trends, and now this discussion is connecting to the latter. China has been completely refocusing its economy from manufacturing-driven towards innovation-driven growth – this is what we can already see in „Made In China 2025”, but there is also a „Medium- and Long-Term Program for Science and Technology Development 2021 – 2035”, and of course the goal for 2049. What are the driving forces behind this full-scale restructuring? What could thwart the projected goals? Argument Böing: The drivers of growth have been changing over the last decades. Human capital, labor, productivity growth, investment in fixed assets. We’ve seen productivity growth through the privatization of companies as a strong driver of economic growth until the mid-2000’s. Since the financial crisis in 2008 the investments in fixed assets by the Chinese government emerged as the main driver and has been ever since. By now the relative productivity of China levels around one third of the US’ and productivity growth rate is somewhere around 1% which is not sufficient to catch up with leading economies. Therefore, China wants and needs to change its growth structure again into a more productivity-oriented one instead of relying on non-sustainable investments to stimulate the economy. The main leverage is seen in innovations in order to accelerate productivity. This is not new, since it was already focused in previous agendas of the government, but will take a central spot in the upcoming five-year plan again.There has been a change from a manufacturing orientated towards a more service-orientated economy. In fact services have reached a high contribution to the GDP growth, but this development counteracts the approach of productivity enhancement, since service economy is typically less conducive to productivity growth.Argument Han:China is currently at the crossroads to upgrade its economic model even more towards the drivers innovation and service, because the increase of GDP and productivity is not really possible anymore with the old model. Also, this gets obvious if you compare China to other developed economies, where we can see a much higher proportion of service in GDP. Therefore there is a quite clear path for China in this field. When we talk about productivity growth due to innovation, there are two types that need to be considered.On the one hand we see the shop floor level productivity of the individual worker, where for instance Germany has a much higher value due to two things. Firstly, better education, which leads to higher productivity and more relative value output. Secondly, the degree of automation. China is already focusing on enhancing the degree of automation, which can be seen by the fact that China is the biggest sales and production market for automation and robotics. Anyways China is currently still lagging behind internationally when you take the “robots per 100.000 workers” ratio into account. The disadvantage of automation, which is the release of labor force, is also a crucial factor to consider for the government.The other type of productivity growth through innovation is the google type of company, meaning companies that employ tens of thousands of workers but reach market capitalizations of small nations. This is another type of productivity enhancement through technology, IT and knowhow.China wants to do both at the same time. Supporting the big tech companies to generate more jobs and have a high tax income. The latter can substantially contribute to finding solutions to other problems. For instance to the redundancy of more workers in the factories due to automation.This systematic upgrade is being done within a much shorter time span than in other developed countries and with a much bigger population, which makes it a tremendous task and generates problems in multiple fields.Second topic: The US-China technological rivalry has severely affected the area of research. We are sitting (virtually) in a technical university, where research is a vital question. We are also witnessing that it is getting politicized and securitized, established co-operations are breaking up. How will these processes rearrange the global innovation landscape? What are the options of the EU here? (What are the implications of these processes for a European university?) How dependent is China on other countries when it comes to innovation. Is it even possible to decouple? Should they? Argument Han:Decoupling is not the intention and interest of China. It is rather forced to decouple due to the political collisions with democratic state systems and the value driven debate with the West. If China had the choice it would never want to decouple because they learned a lot over the past three decades and took a lot of advantage in boosting its economy. It has never been a question for China to adopt the western value system. If the western countries do not want to cooperate as before China is forced to learn and lead itself. In some technological fields China is able to be independent and even world leading at some point. However, in a lot of fields, for instance in the semiconductor industry, China is far away from being self-sufficient.Argument Böing: Semiconductors are the most telling example. The US made strong use of interventions to disrupt value chains where China realized, that it needs to get to a certain degree of self-sufficiency, but the gap to the world leading companies is really big. China is now trying to support a lot of innovative companies through policies. Many of those newly setup semiconductors companies already closed down in the meantime, some of the larger ones are successful to a certain extent.That brings up the question how far the Chinese government is really able to bring up the capabilities of innovation by the existing policies. The perception in Europe and America is that the bigger part of China’s catching up process is really driven by governmental support. It needs to be discussed whether the technological success is really resulting from the government or actually created by market forces. Our own studies showed that Chinese innovation policies were rather ineffective before 2006. After 2006 the policy design became more conducive and effective, but still there has been a lot of money inefficiently allocated for R&D activities.Compliance and monitoring has been substantially improved in recent years and led to a more efficient use of liquidity. The potential deficit is now again in the policy design. One of the main indicators is that the government has a very strong mission-driven focus, meaning that it selectively supports technologies. The alternative would be that you don’t make a preselection of technological fields, but provide funding regardless of the idea and trust the market. If the government chooses the right field this is great, but the selection might also be wrong which leads to a massive waste of money.It shouldn’t be taken for granted that certain policy types always lead to the expected results. Third topic: We are living in a time of crisis and innovation is badly needed not just in the health sector but in several other areas as well. What directions do you see in innovation policies and/or funding after (in EU still during) Covid-19? How might the pandemic influence EU-China relations in the field of innovation in the future? To what extent is the EU in the Chinese planning and what choices has the EU got at this point? Argument Han:If we look at the current EU-China relations we can see that the collaboration at the university level has been affected, but many of them, for instance the BMBF program, is still ongoing. The academic field is probably less sensitive to the current developments.In terms of innovation there might be the trend that the EU needs to figure out: which areas and domains are strategically more sensitive compared to others in order to set new foci. For instance consumption products can further be exchanged and developed in cooperation, whereas military and surveillance applications will not be a field of common interest. Once it can be differentiated there will also be a lot of certainty as a basis for engagement with each other. Right now we are in a phase of much uncertainty and it will take a while to get to the new normal. The scientific world will need to differentiate these areas and the problem will be solved when the technical decoupling proceeds. Most likely we will not get to a full decoupling but in sensitive fields both sides need to see where they are and what they want to do individually. 

    Argument Böing: 

    Yes, probably there will be a stronger monitoring of commercial activities and there will be areas where reconsideration has to be done and intervention by certain regulatory authorities is needed. Moreover we see that in other fields there are already tendencies and actions towards more monitoring and pointing out the red line. For instance FDI in the EU has been a big topic where some red lines have been crossed. This trend will go on and especially dual use products and key interests of the domestic economies will be the target of new policies.

    On top of that we see situations and stronger thoughts where competition by Chinese firms are a threat to fair competition, for instance due to subsidies. The EU has to implement mechanisms to counteract such processes where the market economy is undergone by actors from third countries and will come up with such policies.

    In the medium to long term we may see less technology and knowhow flowing to China from European commercial companies who see China as a consumer market. Probably we will also see less M&A activities by Chinese firms in Europe, at least where it is strategically relevant for the European economy.

    Additionally we need to understand that in terms of a business cycle perspective, in the short term China is in a much more vital position as it pushed harder through the pandemic. In the near future, this might lead to a high market penetration by potent Chinese buyers in an even more extensive manner than in recent years.

    Additional question:

    How do you distinguish between sensitive and less sensitive innovation? How do you make these decisions?

    Answer Han: 

    This will most likely come from the EU and China will anticipate. Control, surveillance and military will definitely be among them and then there is the question of what is related to that. There will be core topics and periphery topics. Companies who are already working in the core topics can foresee that there will be dual standards, others in the periphery cannot yet be sure, which is a threat to them.

    Answer Böing:

    The West is increasingly seeing China as a partner and competitor and will be even more careful to export sensitive technologies. We can see this already addressed in the US and it could go into a similar direction in Europe. On the other hand there has been very recent news about progress in the FDI agreement between EU and China, which might be a chance to focus more on the commercial area related to less restricted technologies.

    Question of the audience:

    1. To Dr. Han Zheng: You mentioned the possibility of two different innovation approaches – one for China and one for the rest of the world – how could this look like?

    Han

    This is already happening because certain Chinese companies already realize that regulations or censorship topics are totally different. Companies like TikTok already introduced two different versions of its app, an international one and a Chinese one. That might be a blueprint for other companies and products. It is not only happening in the consumer market, but also in the industrial sector. The differences depending on how sensitive the respective topic is.

     

    1. To Dr. Han Zheng: With regards to the question of independence and decoupling, in which sectors can China currently realize self-reliance?

    Han

    China is already able to be self-reliant in some sectors. However, there are still some sectors where it is more difficult for China to become independent, like the semiconductor sector. Also, in some commodity areas China is yet not able to produce the volume needed, e.g., in the high-grade steel production.

     

    1. To both speakers: How do you assess the newly introduced dual circulation concept with regards to innovation stimulation?

    Böing

    Dual circulation is a reaction to the increasingly uncertain global environment. With that huge consumer base in China, consumption might be sufficient to a certain extent. However, value chains need to become more autonomous. Fully autonomous value chains might not even be possible. Conversely, the Chinese government also pointed out that it may be conducive to enhance alliances with foreign companies in the value chains, so that China has a trigger point in the case of a conflict and to be able to interrupt supply to foreign countries. It seems like these economic activities are kind of taken hostage in a perceived scenario of confrontation. From a purely economic point of view that does not make much sense. There are huge opportunity costs if certain products would need to be developed twice. In the past there were good reasons why many manufacturing processes were outsourced to China because of the low wages. That was highly conducive for both sides, China and the rest of the world.

    Han

    Dual circulation is the political answer to the decoupling trend. On the other hand, it is not an absolutely new idea. After the financial crisis 2008 China announced to focus more on domestic markets. So dual circulation has always been there. The announcement is more of a political statement to show the Chinese population that the government has an answer to the ongoing decoupling trend. Altogether, we cannot expect fundamental changes.

     

    1. To Dr. Han Zheng: Does this in turn mean that the West (or rest of the world) also needs versions for their market and a different one for the Chinese market? (that question is a follow up question to question number one regarding different product versions for different markets)

    Han

    This is definitely happening even right now, because China has set different standards for companies entering the Chinese market. Furthermore, we can expect that trend to increase in the future.

     

    1. To Dr. Böing: Related to the corona pandemic: if the innovations from the USA or Europe would not efficiently benefit people outside the western world, how should we measure the value of innovations which are advanced in technology but its application is in fact discriminated against? For example the vaccine from Moderna and Pfizer. 

    Böing

    This vaccine is a very special scenario, thus it is not very representative for all innovations. Many countries are lining up to get the vaccines from the US or the EU. And there is also funding to distribute the vaccine to poorer countries. We have also seen the German company Biontech in an alliance with a Chinese company for distribution and also research. Also from this angle there is rather cooperation than discrimination.

     

    1. To both speakers: Would you venture a cost-benefit analysis of decoupling? It could drive greater innovation (like TikTok for different markets, or the weapons industries) or could limit innovation as each region has to separately innovate (like printing or gunpowder or porcelain so many centuries ago)? 

    Han

    The advantage of having innovation for the entire world is that one company can create the maximum economy of scale. On the other hand, the world market is big enough for more than one company to develop similar products. From the perspective of antitrust it is even better to have various solutions or products instead of only one like in the case of Google or Amazon. Another example is Baidu in China. Baidu has not made huge innovations because there is almost no competition. Decoupling might help to create different kinds of companies that are specialized in each territory. However, it will reduce the overall global competitiveness among these companies. Thus, the global pace of innovations will be reduced by a certain degree.

     

    Böing

    The perspective towards perceived competition of Chinese firms in Europe can also be considered. European firms often complain about unfair Chinese competition. This argument can only be made as long as there is potential Chinese government support that would actually distract open competition and therefore not be in line with the regulations in Europe. However, there is a misconception that protection for the European firms would be good eventually. Because that might lead to less government backing in Chinese firms but that itself might even be good in terms of competitiveness for them which will eventually lead to stronger competitors for European firms. Actually, that would not be bad, because competition is in general a very good thing, as long it is not distorted. Probably the decoupling would lead to bubbles in which there is more slack and less competition.

     

    1. To Han Zheng: What is China doing to reduce the “semiconductor bottleneck”? Isn’t it a huge threat for the US / US companies (chipmakers like Intel, AMD, Nvidia)?

    Han

    The semiconductor bottleneck is at the very high-end area. In the low-end sector China is already self-reliant (e.g. chips for simple toys). The problem here is that the high-end semiconductor market is very complex. Each part of the value chain is a little ecosystem on its own. There are some areas where China is already good at, like in software development for chip design, however it is only a small part of the value chain. Furthermore, it is not a problem that China can tackle with money. Those world leading chipmakers emerged over decades and are simply not for sale. In order to find a substitute in China, you need decades of investments in talents and infrastructure. The whole high-end semiconductor challenge is ill-structured, however Chinese policy is much better for well-structured problems.

     

    1. To both speakers: If you look into the future, lets say 20 years from now, would you see a decoupled innovation landscape or rather a globalized one? 

    Han

    It is like in the phone world. There are various systems like the IOS system, Linux or the Android system. 20 years from now we will maybe have another Chinese system which is rather closed. Simultaneously, there will be others e.g. the Linux system which are more open and where everybody can contribute to it. Thus, there might be a European, an American and a Chinese system, each with different characteristics and degrees of openness.

    Böing 

    Dr. Böing agreed with Dr. Han Zheng’s answer. However, he highlighted that he is a strong supporter of a free and integrated system where all information can flow freely and all people have free choice in their consumption behavior and where less money is spent on strategic and geopolitical issues but more on environmental issues.

Opening statements for Discussion 3 „Covid and innovation foci“

Philipp Böing

China’s policy agenda strives for greater, innovation-driven growth, and world leadership in science and technology by 2050. This ambitious target is supported by government policies that not only provide incentives for more research activities, but also lay out a mission-driven direction for innovation. Both China’s research and development (R&D) expenditures, important inputs for innovation, and patent applications, a widely used measure for innovation output, have increased substantially since the turn of the century. Nonetheless, it remains unclear how far previous market reforms and the government’s attempts to correct market failures and guide technological advances, e.g. through subsidies, have led to such increases. Instead of addressing funding deficiencies in the Chinese innovation system, R&D subsidies may instead crowd-out private investments in R&D, or allocate resources towards less productive activities. Likewise, patent subsidies may not support financially constrained firms in the protection of intellectual property, but rather lead to disproportionate and excessive filings of low-quality patents. If China fails to generate innovation that matters for output and productivity growth, both global leadership in science and technology and higher levels of income might move beyond reach.

 

HAN Zheng

Technological self-reliance is at the heart of China’s upcoming economic plans. To achieve this goal, the Chinese government aims to strengthen its R&D capacity and boost international collaboration. However, decoupling in major international relationships, slowing GDP growth, increasing corporate and government debt ratios, as well as little focus on basic research in the past stand in the way of realizing the ambitious goal.

Summary: EU-China Relations in Post-Corona Times, Discussion 2, 04.12.2020, "Decoupling and changes in geoeconomics"

Speakers: Doris Fischer and Li Yuan

Doris Fischer: Institute for Cultural Studies of East and South Asia; Chair of China Business and Economics, University of Würzburg

LI Yuan: Institute of International Studies and School of Northeast Asia Studies, Shandong University

Host: Dr. Ágota Révész, CCST

Introduction:

This protocol is a summary of a Zoom discussion on the 4th of December 2020 as part of the seminar “EU-China Relations in Post-Corona Times” by Dr. Ágota Révész which is offered in the winter semester 2020/21 at the Center for Cultural Studies on Science and Technology in China at the Technische Universität Berlin. The format of the discussion is due to Corona restrictions and furthermore involves the possibility to invite discussants from different regions and time zones of the world. The discussants are Dr. Doris Fischer and Dr. Li Yuan. Dr. Fischer is professor at the Institute for Cultural Studies of East and South Asia and the chair of China Business and Economics at the University of Würzburg. Dr. Li Yuan is the Vice Dean of the Institute for International Studies, and Professor of the School of Northeast Asia Studies at the Shandong University. For 75 minutes they discussed the topic of decoupling and changes in geoeconomics in a Sino-European context.

The seminar was open to everyone and included all students attending the seminar by Dr. Révész. At any time there was the possibility for students to ask questions which were answered at the end in the Q&A section.

The discussion was structured around three main topics which involved the EU’s options in the Sino-American tensions, the impact of the RCEP and Xi Jinping’s Dual Circulation strategy. Both discussants agreed on the importance of the relationship between the EU and China, which needs to be strengthened instead of weakened. Economic interdependence, traditional cooperation and private businesses actually make decoupling impossible to happen. Still, both acknowledged a change in EU-China relations. The speakers touched upon the new presidency in America, the growing importance of Asia as a region and media coverage and images of China in the West.

Disagreements — among smaller details of discussion — mainly surrounded a) the dual circulation plan, and b) the question of China’s large-scale strategy and whether it can be seen through the lens of ‘divide et impera’.

Concerning the former, Doris Fischer put forward the opinion that the dual circulation model may signify the intensification of a previous economic strategy, with China already in the past having emphasized the needs to strengthen domestic markets, consumption, and circulation. Li Yuan, conversely, argued for a more qualitatively different change that the dual circulation strategy brings about by integrating domestic markets and international circulation with a novel emphasis.

The concept of ‘divide et impera’ — undoubtedly a far-reaching assumption in the context of geopolitics — was received and judged differently by both speakers in the context of Chinese foreign strategy. Where Doris Fischer emphasized that the lack of transparency within the Chinese government as well as bilateral agreements between China and singular EU member states might make it appear as though there was a larger Chinese aim to divide, Li referenced policy papers and more to make the argument that any such aim is overstated, since a) not all decisions can be negotiated through Brussels and b) China would favor a strong and united Europe, to ensure strong trade relations and geopolitical cooperation.

Further details on all of the points raised can be taken from the bullet-point notes below.

Opening Statement Fischer:

Fischer argues against decoupling by emphasizing the long tradition of Sino-European economic cooperation. However, she also mentions that the situation is not static and does show tendencies towards regionalization and general changes in attitudes. The EU continues to point out the imbalance in access to the Chinese market by European firms compared to Chinese firms’ access to the European market and is partly supporting the American critique of China. Still, the EU is in no way supporting the US-China trade war strategy, but has issues with the ways in which China favors domestic Chinese firms and strengthens its own economy through SOEs, subsidies and the set-up of the economic system in general. The Covid-19 crisis has revealed global dependencies on Chinese supply chains. It has also demonstrated that the Chinese government is not hesitant to use this dependency for leverage. Fischer raises the topics of the growing economic importance of South East Asia in general (e.g. RCEP) as well as Xi Jingping’s introduction of ‘dual circulation’ and the next 5-year-plan as future developments that will trigger new developments. In sum, she sees a continuous shift of global economic gravity to Asia alongside regionalization. The EU’s awareness of this will result in policy adaptions.

Opening Statement LI:

Simply put, Li argues that decoupling will not happen, and in fact should not happen. This is due to the simple reasoning that – as numbers earlier this year have shown – the EU and China are each other’s most important trade and investment partners. Decoupling would mean economic disadvantages for both sides because of the relative transaction costs, and it still being more cost efficient to produce and sell in China. Thus, it would result in economic disadvantages to pursue a strategy of decoupling. China, it remains to be stressed, is the biggest market in the world. Li also hints at the first bilateral trade agreement between the EU and China that is still being negotiated which could lead to an even stronger economic connection between the two players. EU-China cooperation could, furthermore, have the potential to address significant global challenges, such as climate change or specific economic demands resulting from the pandemic. Finally, Li argues – there have been changes, especially the slightly negative shift in the EU’s strategic approach towards China.

Discussion Topics:

  1. Both of you argue against decoupling, and of course, the processes of globalization, especially in economics, cannot be simply reversed. But we already have a US-China trade war, and it seems that tendencies towards regionalization are getting stronger. What are the options for the EU in this situation? Which one is the most plausible? 

Fischer:

Firstly, Fischer stresses the importance the US administration has in this question. She points out the potential of change in the US-strategy with the transition to a Biden who has signaled openness on negotiations of global issues, as opposed to the maximum pressure, bilateral approach that Trump pursued. However, critique on China is still likely to remain, and already implemented measures are unlikely to be revoked. Thus, the situation as it is will be the starting point of further negotiations with China. Concerning the EU-positions, there seems to be a dichotomy: one side that leans toward a non-negotiable commitment in transatlantic relations, emphasizing choosing between either US or China as partners. While the other side stresses a more realistic approach which includes navigating and working out common positions with both players balancing political pressures. Indeed, Fischer claims, that absolute positioning is what the EU has been avoiding for several years (see, for instance, the 2019 EU policy paper calling China a ‘systemic rival’ and a ‘strategic partner’ at the same time).

Li:

Li agrees that the US has a big influence on global economy and regionalization, but equally considers the EU to have its own important role and leverage within this situation. He raises some points in relation to Trump, underlining that regionalization cannot be treated as a reasonable substitution of global cooperation and that the rise of populism does not necessarily equate regionalism (e.g. Brexit). Biden, in turn, opens new opportunities for multilateralism and global cooperation. He believes, the EU plays an important role to push in the direction of globalization for the future.

  1. How will the newly signed RCEP (Regional Comprehensive Economic Partnership, signed on 15th Nov., i.e. three weeks ago – 15 countries, 2.2 billion people) affect the above processes? How will it rearrange the global economic landscape? 

Fischer:

Fischer begins by stating that the RCEP is important, yet exaggerated in its impact in media and beyond. This is because the narrative does not consider that there have been strong economic ties between the member countries for a longer time already. Furthermore, the RCEP was initiated and pushed for mainly by the ASEAN countries — not China per se. The RCEP signals cooperation, even though on a global level Covid-19 has pushed in the other direction — deglobalization. While the agreement can be seen as a step forward in easing relations in the region, some controversial issues were left out of the agreement and are likely to play a role in the future, from human rights to environmental standards. Generally, European firms see the RCEP as positive, because for them it also eases cooperation and market access. Fischer ends by raising a question: ‘Will China be able to impose its own standards — of business, production, and more — within the region, and then consequently spread it to the world?’. While this remains a question for the future, she already relativized the question by admitting that imposing standards is a very normal and not necessarily imperial business procedure.

Li:

Li follows the claim that the RCEP was initiated by ASEAN states. He adds the symbolical resurgence of multilateralism, creating a common Asian ground. In this regard the RCEP serves also as an agreement among the biggest and strongest countries of Asia: China, Japan and Korea, which had no common agreement before. Now the RCEP can be seen as an indirect trade agreement set up among them. Li is asking how well the agreement can be implemented and how effectively?

Similarly to Fischer, he raises the question of standards, yet adds that the RCEP could be seen as the basis for future agreements with ‘higher standards’. The EU should play a positive role in supporting regional integration in East Asia, but not hinder the integration process by allying with some countries against some others in the region.

Fischer:

Fischer responds that the question of alliance ought to be separated, perhaps moving away from the economic frame and toward the political frame. Indeed, the EU already has established good economic relations with China, Japan and Korea, but links could be further strengthened for political interests. With the EU always being pushed to take sides in the ensuing bilateral trade war between US and China, the awareness and importance for finding long-term cooperation partners in this region rises. On an economic level, the RCEP will be a good chance to distribute trade across the region and thus creating more safety for supply chains, production, and more. 

  1. Covid-19 seems to have led to an awareness of the weaknesses of global supply chains, and contributed to the idea of „decoupling”. It is also reflected in Xi Jinping’s new policy of „dual circulation”. How could „dual circulation” influence Chinese and European economy in the coming 5-10 years? What could/should a European response to that be?

Li:

Li begins by saying that the dual circulation is a new development pattern within the 14th 5-year-plan and thus highly important, providing new visions and ideas for development. Chinese domestic markets will be expanding further, but will also push for a more balanced, sustainable and innovative growth. Additionally, China’s middle class will be expanding twofold (from 400 million to 800 million), making China the biggest consumer market in the world. With it comes a rise in standards: not only living standards but also environmental standards. Using dual circulation to build new development paths, international circulation will stay just as or even more important, but is aimed to be linked more effectively with domestic circulation. In the past, China focused too much on domestic forces and policies, and is now considering the impact of the domestic policies on an international level. The international market shall be used to further strengthen China’s domestic markets.

Fischer:

Contrary to Li, Fischer claims that the dual circulation approach isn’t exactly a new concept.. Improving the quality of domestic markets has indeed been a strategic target in China for quite a while. On the whole, domestic consumption as a method of growth is no new idea. If anything, this acknowledgement has increased, resulting in a certain change in the degree of the importance of this idea. As a background, she raises the point that the importance of national market for China’s development can be seen as a reaction to perceived risks and challenges of the global economic development. However, again, the idea that China should move up in the value chain especially in technological production has been around for longer. Arguably, a core aspect of the dual circulation strategy is to become less dependent on technologies from Europe and the US.

Li:

Li disagrees by putting forward that, in the past, China depended too much on export, especially exporting to the US and the EU markets, but in the future, domestic consumption will play a more important role. Nonetheless China is dedicated to remain open, and “dual circulation” will create a bigger market for countries around the world to share the opportunities in China. Moreover, China will develop its domestic market, while considering the international implications. In the past, China focused too much on domestic forces but now considers the global impacts of its domestic policies. Dual Circulation thus must be seen as a reciprocal system, not having only one focus.

Could you elaborate on the connection of corona crisis and dual circulation?

Fischer:

Fischer sees relatively little connections between the Covid-19 crisis and dual circulation plans, as she sees it as a long-term development. Dual circulation, first and foremost, provides an encouraging narrative for the 5-year-plan — something crucial also without taking Covid-19 into account. Much more so, the US-China trade war can be seen as a main driver in China’s economic strategy. Exports have been declining for several years now, if anything, corona emphasized this slightly.

Li:

Li mainly agrees, saying that the US-China trade war influences the idea of self-dependence. In the plan, domestic innovation and technology play an important role. Naturally, Covid-19 further deepens and accelerates trends that affect the economy: populism, complications in international relations, and so on. Exports cannot grow as fast as in the past, but the domestic economy provides more opportunity for economic growth.

Fischer:

Fischer adds, on a personal note, that watching most countries (especially East Asian — Taiwan, and Australia etc.) deal with Covid-19 better than Germany has been very disappointing. A continuous shift of power towards Asia Pacific is most likely accelerated by failure of the US and Europe to manage the crisis

Questions of the audience:

  1. Q1: Could you name one or two things that we as EU can learn from China, and vice versa?Fischer: She starts by mentioning that there are various things to learn but as a matter of fact the most important for learning is the following question: What can you learn and what do you want to learn? One thing that China perfected and that Europe could learn in general is the process of policy learning. China engages significantly in this idea of examining other countries’ strengths in policies and implementing them domestically. The EU fails – as for instance seen in the Covid-19 pandemic – to acknowledge other countries’ strengths and adopt them. China on the other hand could learn to put more emphasis on involving more stakeholders including the voice of the people in the policy process. The EU manages and embraces pluralistic voices and in the long run the non-involvement of more stakeholders could be a problem for China.Li:He begins by finding that China and the EU have historically always learned a lot from each other. May it be gunpowder, paper-making or the compass – a lot came from China. He continues by pointing out that the concept of people’s republic as well as Marxism is from Europe.  Li lists more things that China implemented such as the law and measurement system. In the future, China has a lot to learn in terms of environmental-friendly and sustainable development as well as social policy implementation. He concludes by stating that he hopes in the future ordinary European citizens and students can turn their attention more to China and by this learn more.
  2. Q2: How do you see China’s strategy of dealing with the EU as a whole vs. trying to use bilateral channels (in the sense of “divide et impera”) Fischer: According to Fischer, China has used this strategy in the past (e.g. 16[17]+1) as others have also done so. However, the EU has strongly signaled that this strategy is not welcomed and will cause problems. China acknowledges a strong EU and says that this would be favorable. Nevertheless, viewing China’s behavior as “divide et impera” is quite widespread in the EU.Li:On the other hand, Li states that China wants to deal and cooperate with the EU on a whole. The EU is as a matter of fact not a sovereign country and does not have the same national policy making power as states. Thus, it is impossible for China to talk to Brussels on all policies regarding EU member states. So, there is a need to talk with specific actors especially when issues are urgent and need fast reactions and decisions.Fischer:Fischer agrees that not everything can be negotiated via Brussels. Anyway, she emphasizes the point in question, which is more about the atmosphere and the specific utilization of the “divide et impera” strategy, i.e. playing states against each other. In short: Has the Chinese government deliberately been trying to take advantage of decisions being made nationally? She points out that it is okay and reasonable to have bilateral talks but an overarching strategy might be more concerning.Li:Li does not think that China wants to divide the EU. In fact, the Sino-EU relations are based on supporting EU integration. He acknowledges that the EU members are not united in every aspect, which has nothing to do with China. He asks where the “divide et impera” interpretation comes from and speculates that the American media and politicians use this narrative for their advantage. This could be a strategy that is played against China. Li hopes that the EU does not believe and use this as a threat narrative.Fischer:Fischer agrees and adds that internal difficulties in the EU and between member states are not triggered by China. She knows that the Chinese government is not united in every aspect and there are fractions within the latter that have different ideas of strategic approaches. Unlike the US, the EU is not good at locating and understanding this variety within China. It could be helpful if Europe had more knowledge and insight into China’s political diversity and understood that there may not be a grand strategy behind China’s actions. She states that she cannot comment on processes of the press and diplomacy as she does not have enough insight.
  3. Q3: Do you think human rights violations within China (Xinjiang, Hong Kong) will affect the bilateral agreements between the EU and China? LiXinjiang and Hong Kong are China’s domestic issues. There is a trend of more politicization among Europeans. European discourse used to be more economically centered assessing the efficiency of bilateral agreements but now the EU has become more politically focused.Fischer:She agrees that in the past issues like this were treated separately but now it is more comprehensive and holistic. Furthermore, there is more media coverage educating the public and creating awareness. With regard to China’s expansion and growing influence in the international arena it is concerning that also certain rules could be exported. Those rules conflict with our European rules and standards. For example, the new Hong Kong security law is very controversial: upon reentering the country you could face persecution for saying something abroad. However, the economy, especially private actors, cannot and should not be held hostage in this regard. Situations and developments are simply too complex to be managed by companies. It is not possible for individual firms to adjust their global strategies according to human rights standards.

Opening statements for Discussion 2 „Decoupling and changes in geoeconomics“

Doris Fischer

China and the European Union have a solid tradition of economic cooperation, communication and negotiations. Against this background, the notion of decoupling is somewhat absurd. There are however a number of factors, that indicate a change in the economic relations between Europe and China. 1) The Europeans see an imbalance between the ease of market access for Chinese firms in Europe and the still existing restrictions for European firms in China. 2) The US complaints about China in terms of trade and investment are partially shared by European business and politics, even though the way how the Trump administration has stepped into a trade war with China has clearly not been appreciated by the EU. 3) China’s economic system, the role attributed to state-owned enterprise and the level of government support for specific industries and firms are factors that contribute to the European perception that competition with Chinese firms is skewed to the advantage of the latter. 4) The experience with Chinese trade strategies for medical supplies during the corona crisis have created an awareness for weaknesses within certain supply chains and a perception that China does not hesitate to use dependences for power play and securing materials in times of crises. 5) The US China trade war with its high tariffs on trade has encouraged relocation of production from China to South East Asia, both by Chinese and foreign firms. 6) As a result of corona, this trend will likely accelerate and eventually lessen the dependence of production networks on China as a location. 7) The recent signature of the RCEP agreement also indicates a growing importance of Asia as a region. However, Chinese firms will play an important role in this process. Therefore, we will not see a reduction of the importance of Chinese firms. Last but not least, Xi Jinping’s new doctrine of dual circulation is hardly one of self-sufficiency in general. It does indicate, however, that Xi envisages China as less reliant on technology from the US and EU while closely entangled with global markets for technology exports and resource and commodity imports.

In sum, the global centre of economic gravity will most likely continue to move to Asia. European firms are well aware of this trend and arguably so is the EU. Politics and policies will adapt to this, but hardly with a simplistic strategy of decoupling.

 

LI Yuan

The EU and China is each other’s most important trade and investment partners. The total GDP of China and the EU account for 34% of global GDP. In the first 8 months of 2020, China has become EU’s largest trading partner for the first time. The EU and China is also important cooperative partners in addressing common global challenges, such as climate change and the pandemic. Enhancing the cooperation between EU and China is not only good for themselves but can also lead to a steady recovery and growth of the global economy after the pandemic. Nonetheless, it is noteworthy that there has been a change in the EU’s attitude and strategic approach to China in recent years, which has made their relationship more complicated. This is also partly due to the influence of the US, which promoted protectionist and “decoupling” strategy during the Trump administration. On the other hand, China will enter a new phase of high-quality development with the introduction of the 14th Five Year Plan. China is dedicated to remaining open when it comes to its new efforts to circulate with the world, which would create broad space for countries around the world to come to China and share the opportunities here. Opportunities for cooperation between EU and China include: digital economy, green development, and the conclusion of the EU-China Comprehensive Agreement on Investment, etc.

Summary: EU-China Relations in Post-Corona Times, Discussion 1, 20.11.2020 Decoupling and Changes in Geopolitics

Notes taken by students Lisa Bauer, Dan Bachmann.

Speakers: Prof. FENG Zhongping, Prof. Eberhard Sandschneider

Host: Dr. Ágota Révész, CCST

Introduction:

The following protocol summarizes a Zoom lecture held on the 20th of November 2020. The discussion was part of a seminar called “EU-China Relations in Post-Corona Times” which is one of many seminars offered this winter semester by the China Center at the Technische Universität Berlin. Due to the current Corona situation, the seminar was held online via Zoom. Not only the participants of the seminar were invited to attend, the discussion was open for the public as well. The main topic of the lecture with the title “Decoupling and changes in geopolitics”, was discussed by two invited guests, Prof. Sandschneider from the Freie Universität Berlin, who was representing the EU side of view and Prof. Feng from CICIR (China Institutes of Contemporary International Relations), who was attending live from Beijing, representing China’s ongoing politics. Dr. Ágota Révész from the China Center, TU Berlin was the host of the seminar.

All attendees where allowed to ask questions any time and to actively participate. There where three main topics to discuss. Each topic was given about 15 minutes to discuss.

The first topic was about the EU policy paper from March 2019, just before Covid-19 set in, which names China a strategic partner and a systemic rival.

The second topic was about the current situation, when Covid-19 let the entire world struggle and how that affected the US-EU-China triangle in the difficult questions regarding the health system, the economy and global governance.

The last topic was focussing on the ongoing trade war between the US and China, nowadays referred to as “US-China decoupling”, which escalated all throughout 2019.

After answering all questions, the lecture ended after 90 minutes and was a very successful and interesting discussion about the decoupling of the US and China. The discussion also estimated, how much impact the EU would have in the future between the two most powerful nations.

Opening statements Sandschneider:

  • Not only the rise of China, but a series of major events is coming down to a policy of decoupling.

  • Election in US: A leading democracy is failing – Trump holds onto power.

  • China, 14th 5-year-plan (3 weeks ago): Dual circulation strategy concerning economy. Domestic and global Circle. Concentration on domestic circle. Going to be more difficult for foreign companies.

  • RCEP treaty: Signal of what rise of China means. Rise of China is a normal progress considering China’s size and power. China is able to get big projects done.

  • Big development going on inside China and US and in the relation of both. Poor Europe is “sitting in a sandwich”.

  • EU trying to talk about more engagement.

  • China as a systemic competitor. But: Hasn´t it been ever since 01.10.1949?

  • Concerns and political agreements are defining the future relations towards China.

  • US: democrats are as aggressive as republicans.

  • US wants EU to join political efforts concerning a containment of China. But: There is no way of containing a country like China with its size and power.

  • EU is forced into a selective situation. But European countries don´t want to give away shares in either economy (Chinese and US-American).

Due to Covid-19 all global relations existing before the outbreak have been accelerated dramatically. The impact and effects of geopolitical shifts and changes are visible.

The combination of the US unilateralism under Trump, the Chinese late response and dealing with the virus as well as the second wave throughout Europe leads to negative effects on EU-China relations.

US policies of “decoupling” may change under a Biden administration, but China’s “dual circulation” theory in the coming 14. Five Year Plan and the newly signed treaty for RCEP, creating the world’s largest free trade zone, will be core parameters for global politics post-Corona.

The free trade zone will definitely signal, what the rise of China will mean for the world. China is also able to organize allies.

China has been the systemic competitor since 1949, therefore the aggressiveness in the US politics is a huge concern. The EU might find itself in a selective situation, sitting between the US and China.

Opening statements Feng:

  • “Where is Europe?” Europe can play a big role in shaping new global orders.

  • China is not a perfect partner. But China supports some of Europe´s principles.

  • China does want multilateralism and China does want to play its own role in that framework.

  • (Conviction of West: China wants to exert its influence in a unilateral approach.)

  • Europe can play a role in stabilizing the economic order. Europe is among the three biggest economies.

  • China’s view on Europe in terms of trade and economy: Europe is a big player. Its consumption is striking. Power of bargaining. Setting rules, regulations. Europe plays an important role on a global and multilateral level.

  • China needs Europe and wants to work together with Europe.

China, Europe and the USA are the three most powerful economies in the world. They have the responsibility to lead the global efforts in addressing big challenges such as Covid-19, the economic recovery and climate issues.

Under the Trump administration, the relationship between the US and China became cold and distant. The question is now, where is the EU in all of that? They will have an important role because they are viewed as stabilizers of the global economic order and are therefore seen as a partner. China needs Europe and also wants to work with the US.

Discussion topics

  1. At the beginning of 2019, the EU´s perception of China is ambivalent. In its policy paper the EU refers to China as a strategic partner as well as a systemic rival. Furthermore, there are concerns that China might try to divide the political structure of the EU in favour of its own interests. What is your opinion on this?

Argument Feng:

Prof. Feng has followed the policy papers in the past two decades. He is of the opinion that all EU-member states need a lot of communication with China and with their fellow member states. He is also referring to the EU to determine their policy papers towards China. The 2016 paper for example was dealing with topics about terms of trade, migration and was very striking in his opinion. He also explained that China thinks the 2019 policy approach of the EU is different than the US approach. The EU policy sees China as a partner and as a systemic rival. China of course appreciates to be seen as a partner, which also means that Europe does not see China as a developing country in his opinion. But concerning the point of systemic rival, he thinks that the EU regards China as promoting an alternative (different) model of governance. Prof. Feng thinks that China has its own approach and wants to stick to it while strengthening international relations.

Argument Sandschneider:

Prof. Sandschneider took the audience back to the 1980´s, when China was seen as one of the most critical nations towards multilateralism. He then referred to the year of 1995, in which the first initiative, also called the “Shanghai 5” was established and has become the Shanghai Cooperation Organization (SCO) of today. He also spoke about the recent RCEP negotiations, he said that China was a driving force in the RCEP negotiations which lead to the signing of the agreement in November 2020. Former fears on the European side of an enclosed China are not relevant anymore today – regarding its own interests, China drives further towards multilateralism, he continued.

Europe tries to keep positive relations towards both countries, China and the USA. As the EU shares more common values with the USA than with China, different values imply bigger challenges concerning the foreign policy towards China. He also remarked that it is a normal process, that a powerful country like China on its rise tries to implement its interests. It is up to Europe to face these emerging interests wisely. Is China a developing country? According to Prof. Sandschneider, it can be both: China can be a developing country as well as a relevant partner and a country applying pressure in its foreign policy. China always had a big ambition to overcome the developing country status. The angle of perception now defines the policy, which is of eminent importance. The perception is one of the core aspects to base the foreign policy on.

As a second concern of the EU, Prof. Sandschneider mentions the discussion whether or not Chinese firms should be included in the implementation of the 5G network in Europe.

  1. What choices does the EU in the already mentioned US-EU-China triangle have? As geopolitics might change massively, what are the options of the EU?

Argument Sandschneider:

Prof. Sandschneider had the following to say regarding the question. He said that the RCEP treaty is signed but not implemented yet and that it usually takes years to embed such a treaty into actual policies. He also said that the EU should not see it as its duty to tell both countries (US, China) how to act politically. The EU should rather first focus on itself, work on its own topics and should be more active in terms of border security or economic cooperation. He also noticed that the EU is currently not able to convince all member states to financially get involved into fighting Covid-19 together and that this is one of the biggest challenges Europe is facing at the moment.

Argument Feng:

Prof. Feng states the question from the Chinese perspective as whether or not the EU can survive. The Covid-19 pandemic showed, that the EU member states did not really work together, as they had different approaches. By the end of the year China wants to sign the investment agreement with the EU, also broadening marked access between the two economies, and therefore making China a more important partner for the EU.

Counterargument Sandschneider:

Prof. Sandschneider explained, that the main concern about the current politics lies in the dialogue: “We are talking to each other but not speaking to one another”. Both countries should work on their negotiation style as a successful negotiation can only occur, if both sides are satisfied with the compromises made. So far both sides are not yet willing to give up on their core interests and probably won´t sign the agreement this year. Furthermore Covid-19 implies a less effective atmosphere of discussion, as negotiation is better done in person than virtually, he closed his statement.

Counterargument Feng:

Prof. Feng answered by saying, that chancellor Merkel wants all 27 member states to work together and have concluding conversations. This could be a good chance for an agreement among the 27 member states. In his opinion the pandemic stopped an effective discussion, what makes a closure of the agreement by the end of the year unlikely.

Counterargument Sandschneider:

Prof. Sandschneider agrees in the point, that a consensus among the member states of the EU is unlikely at the moment.

  1. What is the long lasting impact of Covid-19 to the EU-US-China triangle?

Argument Feng:

Prof. Feng describes his perception of the relations at the beginning of the pandemic as pessimistic towards the future. This was also due to the negative response of the Western media, including the EU and the USA. As 2020 has been the US election year, strategic competition in terms of the trade war between the US and China intensified. The competitive policy together with the pandemic led to the most difficult diplomatic relations between the USA and China since 1979, according to Prof. Feng. He agrees with Prof. Sandschneider in the fact, that Joe Biden as the next president of the United States probably will still follow a policy of decoupling concerning China. This also complicates the relation between China and the EU. The European Union is facing a situation where it is basically forced to decide between China and the USA. The discussion around 5G is an example for that.

Argument Sandschneider:

Prof. Sandschneider is pointing towards Trump’s calling the virus the “China virus”. Even though naming after geography is common practice in the scientific world, Trump’s purpose with this naming was to geographically point out an enemy whom he can blame. By bashing China, he positively wanted to support the outcome of the 2020 election. He failed with his tactics, even though narrower than expected. According to Prof. Sandschneider, a stronger containment of China ultimately leads to a more aggressive policy, which might be a threat as well as a challenge in the future.

Covid-19 acted as a systemic acceleration of all major trends, said Prof. Sandschneider. This includes not only political trends, but also digitalization. With an enhanced digitalization, the world after Covid-19 will be much faster. Consequently decision-making might be less reflected and “wrong decisions” of political leaders might augment. This is a danger the world after Covid-19 might contain.

Questions of the audience:

  1. To Prof. Sandschneider: Is there any hope that the EU will ever find a shared strategy to deal/engage with China and “pull its act together” and if so, how do we get there?

Sandschneider:

According to Prof. Sandschneider, the creation of peace and stability has always been a driving force in political developments. Hence, the history of the EU can be seen as a European success story. Naturally a number of 27 member states does lead to a diversity of interests. External pressure, such as the urge to create stable peace can drive a potpourri of interests towards a consensus. Right now, the external pressure is not yet big enough to drive the EU member states into that direction. A pressure growth might create more engagement and a more active decision making in the EU. Thus, the EU might become a noticeable, third party between the USA and China.

  1. To Prof. Feng: If China is aware of the danger of dividing the EU, what are measures from the Chinese side to prevent the division and the increasing mistrust of the EU?

Feng:

Prof. Feng points out, that back in 2001 when China joined the WTO it did not negotiate with a diversity of member states (EU), but just with one spokesperson. Thus, the EU is able to speak with one voice. Furthermore, according to Prof. Feng, China wants a strong and united Europe. Dividing the EU is not of interest for China. China rather wants to see the world balanced among the powers. To increase trust, China is maintaining the communication with the leaders of the European Union.

  1. China has been in the UNSC since the seventies. Did it really only arrive as a player on the multilateral field in 1995? - Actually as an active player it did, as China was reluctant to join global activities in the early 70´s. When taking on an active global role, a country has to take the costs also. The government of China is now able and willing to deliver, and its initiative on the multilateral field will increase in the future. The future challenge of the European Union will be, that some of China`s interests are controversial to European interests.

I wonder, if China is a “systemic” rival. A different system yes. But does China want to establish its system in order to “rival” other systems, in particular parliamentary democracies?

Feng:

Prof. Feng points out, that there are also shared values between the EU and China. He poses the question, if a systemic rival translates to a comprehensive rival. In his opinion, the EU is not treating China only as a rival. A search for and agreement on common interests does exist.

In many ways, the development of China started early. The modernization of China though started late. China thus is still in a process of catching up. As a country with a population of more than a billion, China does need a different governmental system without being in the need to make it a rivalling system.

  1. Given the fact, that the US is putting enormous pressure on China, China definitely needs to safeguard the support or neutrality of Europe. However, China is actively promoting the superiority of its political and economic models. This is what Europe fears. Could you please explain why China does this and how China will form a unified front with Europe?

Sandschneider:

According to Prof. Sandschneider, there is a natural drive of Western European foreign policies towards the USA. Rebuilding transatlantic relations is of actual importance for the EU. China can thus not expect, that the EU prefers a drift towards China in the near future. Prof. Sandschneider indicates, that China will be an enemy if a country chooses it as such, which increases the cost of political decision-making. The EU should not think in terms of enemies and thus should find a way towards both, the USA and China.

  1. Concerning the Investment Agreement between China and the EU, two major points seem to block a common consensus. These are the intellectual property, including forced technology transfer and Chinese state-owned enterprises with non-transparent subsidies. What do you think: Is there a chance of finding a common ground?

  2. Can there be a robust common agenda, considering different values concerning human rights, democratic priorities and data protection – but also shared interests like environmental protection, renewable energies and infrastructure development?

Sandschneider:

In the opinion of Prof Sandschneider, an unwillingness to get off the table dissatisfied is at the moment prevailing. Neither side is willing to compromise. In this regard, an agreement cannot be expected soon.

Feng:

Both sides wanted to sign an agreement as quick as possible. Both sides are in the need to compromise and both sides are able to, according to Prof. Feng. It should be possible, to reach a common point.

  1. Where are the European weaknesses?

Feng:

The truth is, says Feng, that foreign policy is still in the hands of many member states. The countries do not want to give away the decision-making to Brussels. In addition each of the 27 countries does have its own interests.

Sandschneider:

According to Prof. Sandschneider, a balance of interests and values should be made in regard to different, but also common perspectives on political systems, human rights, climate protection, etc. In order to not stand alone, it is necessary to up keep diplomatic relations and a continuous dialogue. Foreign policy is not unidimensional. If there are no common values, there most probably still are common interests. In Prof. Sandschneider’s point of view, foreign policy should not be value-based. Policy needs domestic support as well as international acceptance, though. Looking at the United States, the parting president for example did not share common values with a big number of US-citizens.

Political leaders, when pursuing foreign policy, should give up the attitude towards domestic values. They should give up on aiming to teach domestic values to strategic partner states. Even though if these values might be highly competitive ones, trying to teach them is not a constructive base for foreign policy.

Opening statements for Discussion 1 „Decoupling and changes in geopolitics“

Eberhard Sandschneider

The Covid Pandemic is the great accelerator of our times. All major megatrends which are shaping global relations have been existing before the outbreak, but since the pandemic started they have all been accelerated dramatically. While our time to adapt to new circumstances keeps shrinking, the effects for geopolitical shifts and changes are already visible.

Most importantly, the combination of US unilateralism under Trump, Chinese efficiency in dealing with the virus and a massive second wave throughout Europe leads to a threefold geopolitical challenge which will have massive effects on Eu-China relations as well.

US policies of “decoupling” may change under a Biden administration, but China “dual circulation” theory in the coming 14. Five Year Plan and the newly signed treaty for RCEP, creating the world’s largest free trade zone, will be core parameters for global politics post-Corona.

These are the challenges for Europe: managing the effects of the triple crisis of decoupling, China’s growing self-assertion and the new standard setting capacities within RCEP.

For Europe, it is time to leave its moral high ground and give up its “future blindness” (Die Welt, 17.11.2020) if Europeans do not want to end up squeezed between two major economic blocs and forced to make choices no one in Europe really wants to make.

 

Feng Zhongping

China, Europe and the USA are three most powerful economies in the world. The three giants also have responsibility to lead the global efforts in addressing big challenges such as Covid-19 pandemic, economic recovery and climate issues. The reality, however, is that the relationships amongst the three powers have been facing many difficult problems. Over the past 4 years, the Trump administration’s China policy have shifted from the engagement to the containment. Decoupling with China in the high technologic area has already taken place. The US secretary of state, Mike Pompeo is virtually treating China as a cold war enemy.

Europe’s perception on China has also changed but is still different from that of the US. The Europeans view China both as partner, competitor and rival and therefore refuse to take the confrontation line with Beijing.

Although there have been significant frictions in the EU China relations, the two powers will continue to engage with each other. Decoupling is not in Europe’s dictionary. The economic recovery will be crucial for the Europeans, so will be for the Chinese and the Americans. China hopes to strengthen economic and trade ties with Europe. Both sides have emphasized the importance to conclude the investment agreement by the end of the year.

President Trump have tried quite hard to force the Europeans to follow the US’s China policy. So far it has not been very successful. With Joe Biden winning the US election, the transatlantic ties will be improved. What will this mean for the relations between Europe and China? Let us wait and see.

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