Second German-Chinese Video Symposium: China and the EU

November 26, 2020

The Second German-Chinese Video Symposium between Global Bridges and the China Institute for International Strategic Studies (CIISS) was held to address issues related to the Chinese-European relations, such as the pursuit of a “level playing field” in trade and investment, as well as changing Chinese trade patterns. Since the EU and China have been working on a bilateral investment treaty for some time and the topic of China is featured prominently in the plan for the German EU Council Presidency that ends on December 31, 2020, the China-EU relations are a hot-button issue. Guest speakers as well as other participants were glad to be able to discuss the problems and future prospects in this matter with experts from both sides.

On the German side, the guest speakers were Jörg Wuttke, Vice President and Chief Representative of BASF in China as well as President of the EU Chamber of Commerce in Beijing and Petra Sigmund, Director General for Asia and the Pacific at the German Foreign Office. On the Chinese side, we were grateful to once again welcome our long-time friend Major General (ret.) XU Nanfeng, Vice Chairman of CIISS, as well as retired Senior Colonels BAI Zonglin, YU Hanmin, CHEN Fangming, CHEN Wei, and ZHONG Liangli, all of whom are senior research fellows at CIISS.

The symposium was moderated by Ambassador Dr. Volker Stanzel, Senior Fellow of the Foundation for Science and Politics (SWP) and former German Ambassador to China and Japan. On behalf of Global Bridges, Dr. Beate Lindemann and Dr. Hans Albrecht, Executive Chairman and Chairman of the Board, respectively, participated in the conference, along with around 40 members of Global Bridges.

Due to the relevance of the recent US presidential elections for the topic of our conference, Dr. Christoph von Marschall, diplomatic correspondent of the editorship at the Berlin daily Der Tagesspiegel, gave a short overview of the elections and their consequences for America and the world. He began his assessment of the situation by remarking that the transition from one president to the next appears to be underway, despite President Trump’s stalling and his accusations of electoral fraud. Dr. von Marschall argued that Trump’s unfounded allegations aim primarily at undermining the Biden presidency from the get-go. These efforts seem to be effective with large parts of the American public, as more than 80% of the Republican voters believe that Donald Trump is the legitimate president.

Dr. von Marschall added that the elections are not truly over, as it is still unclear whether Biden will be able to achieve a majority in the senate. Without it, he would be unable to appoint ministers and ambassadors or pass laws, severely limiting his administration’s ability to effectively govern the United States. Since both parties have very little common ground, according to Dr. von Marschall, a senate majority is crucial for the Biden administration. Even without a majority, however, Biden could still get his appointments approved by the senate, where Republican senators from more Democratic states, such as Susan Collins from Maine, might give their votes to democratic candidates, as they have done in the past.

Regarding the impact of the elections on the international relations, he contended that Biden would not act as aggressively and rash as Trump, and would treat Germany as a partner rather than an enemy. Citing recent opinion polls, he nevertheless contended that Germany and the US are heading into this new phase of cooperation with very different views about the quality of their relationship: a huge majority of American citizens believes that the relationship of the US and Germany is fine, while the majority of Germans believes that the relationship has gone sour. Still, many Germans believe that relations will normalise with the Biden administration.

Dr. von Marschall finished by saying that recent opinion polls had also shown that most Germans, who used to be largely in favour of “equidistance”, meaning equally good relations with both the US and China, now want closer ties with the US. Answering a subsequent question concerning whether Trump will remain a force in US politics or not, Dr. von Marschall replied that although the situation is uncertain at the moment, Trump’s legal difficulties might prevent him from playing an active role in politics in the future. He was also unconvinced that Trump will run again in 2024, seeing as how he will be 78 then.

Asked if Biden would be able to undo all the last-minute changes Trump made, he answered that while Biden wouldn’t be able to revoke the amnesties that Trump granted to Michael T. Flynn and Roger Stone, he would be able to revoke any executive orders from the previous administration without it having to be confirmed by the senate.


First Topic: China-EU comprehensive strategic partnership and the China-US relations

Jörg Wuttke, as an expert on Chinese-European trade, introduced the first topic of the symposium. He began his contribution by voicing his regret over the cancellation of the annual China-EU “CEO and Former Senior Officials Dialogue”, which happened due to Chinese attempts to bar participants critical of China from attending. He also remarked that the timing of this could not have been worse, as the EU and China are finalising the bilateral investment treaty, which according to Wuttke is sorely needed to foster trust between the two powers.

Concerning the trade shifts between China and the EU, he pointed towards the fact that China exports much more into the EU than it imports from it. Even terms of trade between China and the EU would, according to him, lead to more interdependence and therefore closer relations, but because China is a smaller market for the EU than Norway and Switzerland combined and the US imports more than twice as much from the EU, China is having a hard time attempting to build a closer relationship with the EU.

Mr. Wuttke also noted that Foreign Direct Investment (FDI) from China into Europe had slowed down tremendously due to disastrous prior investments, the high costs of entering the European market, and the fact that Chinese investment is more and more unwelcome in Europe. FDI from Europe into China, according to him, is doing well, but has not reached the limits of its potential. As an example for how well European FDI into China can work out, he used the case of BASF that three years ago started a US$ 10 billion investment program in Guangdong, which, aside from the market access problems in China, is going well.

Mr. Wuttke rejected the premise that trade shifts between China and the US are as significant as they are made out to be, noting that despite the so-called “trade war”, the US and China are trading more than they ever have, while the trade volume between China and the EU is declining. Nevertheless, he pointed towards the potential financial loss of especially Chinese high-tech companies, which over 10 years could amount to up to US$ 76 billion. The US is losing much less revenue than China in this respect.

Lastly, Mr. Wuttke addressed the technical decoupling of China from US hardware and the US export ban on semiconductors. Many companies in China, especially the car industry which relies heavily on semiconductors, are struggling with these restrictions. Other companies have already decided to split their software into American and Chinese software so as to stay ahead of any future political involvement from the Chinese or US side.

Senior Colonel (ret.) BAI Zonglin expressed his relief over the outcome of the US election and posited that there was arguably no other world power that was as relieved about the election as China was, with the exception of the EU. Still, he saw much potential for future conflict, such as human rights issues and minority rights issues, which he claimed are exacerbated by Trump and the anti-China agitators in the US. It would have to remain to be seen what Biden’s stance on China will be.

With regards to the China-EU relations, Senior Colonel (ret.) BAI Zonglin remarked that while there have been ups and downs in the relationship since the establishment of the comprehensive strategic partnership in 2003, the two powers have moved forward. Recently, however, the EU rhetoric towards China characterises the country as a rival rather than a partner, while China still calls the EU a partner. Senior Colonel (ret.) BAI Zonglin noted that one might think the China-EU relations are on the brink of collapse when listening to the remarks of European decision-makers who wish to stand together with the US against China.

In light of this, he proposed that the EU and China should work together more closely, drawing on each other’s strengths to find solutions to global problems such as climate change. Also, in terms of trade, the two powers had much to gain from collaborating with one another. He went on to criticise the market access restrictions imposed by Europe, which, to him, stifle China-EU trade for no apparent reason.

Questioned how the recently-signed Regional Comprehensive Economic Partnership (RCEP) between China and most of ASEAN would affect other free trade zones like the EU and NAFTA, Senior Colonel (ret.) BAI Zonglin predicted that the RCEP would only benefit China-EU relations, as it could serve as a legal foundation for conducting trade between China and the EU. NAFTA would in his view not be affected so much. He added that China is also interested in joining other multilateral agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) between Canada, Australia, and several South American and East Asian countries.

Chinese economic activities in Europe, especially on the Balkan, have been nothing but beneficial, according to him. Using the examples of a Serbian steel mill and the Greek harbour of Piraeus, he argued that Chinese investment not only benefits the host states financially, but that China makes an effort not to lay off any workers in the businesses it acquires. Rejecting allegations of China trying to divide the EU by making bilateral treaties with member states, Senior Colonel (ret.) BAI Zonglin remarked that China had always honoured EU regulations and would continue to do so in the future.


Second Topic: Reciprocity and Mutual Benefit

Petra Sigmund introduced the second topic of the symposium by underlining the importance of reciprocity in the EU-China relations. The EU and its companies stand before major structural access restrictions, which she identifies as a major factor in the in her view asymmetrical trade and investment relations between China and the EU. She noted the need for a structural opening of the Chinese market to make the relationship more even, as China enjoys a much less restrictive business atmosphere in the EU.

The planned bilateral investment treaty between China and the EU would, according to Ms. Sigmund, achieve better structural market access for European investment and even out the economic relationship. While the negotiations concerning the treaty are moving on, there are still some issues that are left unresolved, and it is unclear whether the negotiations will conclude by the end of 2020.

Ms. Sigmund also admitted to worrying about the “promise fatigue” of European political and business leaders about the Chinese promises of a further opening of its economy. In her view, it has taken too long to settle many disputes, and the investment treaty has been negotiated about for more than eight years, so now it ought to be concluded. This would demonstrate the mutual desire of both China and the EU to solve problems and move forward in their relationship.

Aside from economic issues, Ms. Sigmund stressed that reciprocity should also be achieved in the political, and cultural field. In her view, the EU gives Chinese diplomats and cultural institutions ample access opportunities, while access is much harder for European diplomats and cultural institutions in China. She subsequently likened the European view on the concept of reciprocity to the Confucian Golden Rule “What you do not wish for yourself, do not do to others”, urging Chinese decision-makers to take this into account when dealing with Europe.

Senior Colonel (ret.) YU Hanmin mentioned that the EU is an important stakeholder in the sustainable growth of China and that China needs European business, which is evident when looking at the main beneficiary of China’s opening up in last decades, namely Europe. Europe is not only its most important trading partner, but also its largest supplier of technology. Aside from this, China benefits greatly from European management experience. According to him, European input has allowed China to upgrade and excel in several manufacturing sectors.

He also noted that EU-China trade volume is larger than it had ever been, and that European companies such as Daimler and BMW increased their sales in China by more than 30% year-on-year, due to which Chinese sales amount to up to a third of the companies’ profits.

Senior Colonel (ret.) YU Hanmin took these examples to show the mutually beneficial character of the China-EU economic relations. He subsequently lamented the recent downturn in China-EU economic relations, which he believes to be largely due to the “Made in China 2025” initiative and the Chinese acquisition of the leading German industrial robotics company Kuka in 2016. Due to these events, the EU has made an effort to limit Chinese economic activity in Europe, which he sees as an attempt to contain China.

According to Senior Colonel (ret.) YU Hanmin, another reason for the increased European wariness when dealing with China is the fact that Europe lags behind both China and the US when it comes to 5G and other high technology. Europe, in his view, is fearful of China’s rise in this sector. In addition, the COVID-19 pandemic will make the EU more inclined to reduce its dependence on China, which might be accomplished by moving commodity chains out of China. These attempts, according to him, are unwise and ill-fated, as China is not only a “world factory”, producing many of the goods that are sold in Europe, but also a “world market”, which foreign companies are eager to enter.

Concerning the issue of market access restrictions, Senior Colonel (ret.) YU Hanmin stressed that China has continually worked on opening up its markets, as evidenced by the passage of its new Foreign Investment Law in 2019, which provides legal protection to foreign investment in China. He also noted that the pace of China’s opening up has increased significantly in the last years, leading to much more relaxed market access regulations for foreign business and a more conducive investment atmosphere overall. He expressed his hope that these changes would bring about a renewed sense of trust and further cooperation between China and the EU, which would be beneficial to both sides.


Round-up Discussion

In the round-up discussion, questions were posed to the guest speakers by the audience, the moderator, and each other. Jörg Wuttke made the start answering a question about the impact of Chinese trade shifts on Europe and the world economy, especially concerning the new Five Year Plan which is supposed to reduce Chinese reliance on foreign export goods. In his opinion, the US is to blame for the worrisome position that foreign business now finds itself in, and it would have to remain to be seen how the situation develops to fully grasp the consequences.

Subsequently, the question of when markets in China would be as open as they are in Europe, especially with regards to equal treatment of Chinese and European companies, was asked. The Chinese side denied that markets are as open in Europe, explaining that Chinese companies investing in Europe are faced with restrictions and low profit margins, while European companies in China can profit from ever-rising profits and steadily declining restrictions. Chinese authorities have also been faced with handling the repercussions of European regulations such as anti-dumping laws. All this has fostered resentment towards Europe in Chinese business and political circles.

Concerning the issue of reciprocity, Petra Sigmund added that while European values forbid restricting markets like China does, there are certain key areas, such as government procurement, in which the EU would take a hard line to show China that it needs to drop the restrictions on its markets. Jörg Wuttke partly rejected the allegations of the Chinese side, saying that Chinese business enjoys easy market access in the EU.

The Chinese side then asked Ms. Sigmund how the Biden presidency would affect the plans of Germany and the EU to achieve strategic autonomy, to which she answered that Germany is committed to the idea of strategic autonomy and European sovereignty. Partly due to US demands for more defence investment and partly due to Europe’s own aspirations, the EU has increasingly stressed the need to expand its defensive capabilities. Germany would, in pursuit of this goal, have to invest more heavily in high-tech, especially the digital and AI sector, where Germany lags behind China and the US. While she expressed a need for having competitive European companies in these sectors, she also stressed that Europe would continue to rely on free market policies and international cooperation to achieve its goals.

As part of his finishing statement, Maj. Gen. (ret.) XU Nanfeng thanked the participants and remarked that while there remain misconceptions after the discussion, it is important to keep an open line of communication; a purpose which the symposia serve. Dr. Hans Albrecht thanked the Major General for his words and advised closer collaboration between China and the EU when dealing with global issues such as climate change, migration pressures, inequalities, and of course the COVID-19 pandemic. Dr. Lindemann concluded the symposium by thanking the speakers and wishing everyone happy holidays and a good New Year.