Britain Outside Europe? The Chinese View

China would lose its European free-market ally

21/02/2014 | by Lirong Liu

Category: European Union, China, Europe, East Asia

With the Chinese snubbing London for Brussels, Paris, and Berlin on President Xi Jinping's spring European visit and arguing that “Britain is easily replaceable in China’s European foreign policy,” it is clear that the UK's influence on China – including its desirability as a single-market location for East Asian investment – is far greater within the EU than without.

Photo © SEBASTIEN PIRLET/Reuters/Corbis, CC BY

China’s vision of a multipolar world shapes its views of both the EU and the UK’s place in the EU. A united, strong, and open Europe that is a credible global actor suits China’s interests. However, in pursuing this vision, China’s interests in the EU and the UK alternate between being primarily economic and geopolitical, albeit with considerable overlap between the two. China’s geopolitical thinking concentrates largely on its neighboring states and great powers such as the US. Uncertainties over European integration and cooperation, especially since the eurozone crisis, have temporarily marginalized the position of the EU in China’s geopolitical thinking and have made China focus instead on bilateral relations with individual EU member states. However, despite the eurozone crisis, the EU remains of central importance to China’s economic thinking. Similarly, China’s views of the UK’s position in the EU alternates between support for the UK’s strong free-trade approach toward EU-Chinese trade, and concerns about UK support for a more value-oriented diplomacy towards China. Despite these tensions, British marginalization within or withdrawal from the EU would change China’s relations with both the EU and UK, possibly in ways damaging to all concerned.

Chinese Views of the EU

China looks at the EU through the lens of four underlying factors: the global strategic balance of power, the way European integration has developed over time, the development of the EU’s China policy, and China’s changing role in the world. Based on this framing, China’s actual EU policy is characterized as follows:

Firstly, economic and trade cooperation has long been, and remains, the basis of Chinese-EU relations. As a result, China’s policy towards the EU concentrates on cooperation on economic, cultural, and technological matters. Despite the eurozone and European debt crisis, Chinese analysts and businesses are optimistic about Europe’s economic prospects.

Secondly, China considers the EU to have a limited role as a global actor. This is due to the internal coordination problems seen in the repeated failure to develop a credible Common Foreign and Security Policy (CFSP). Even when the EU does act, for example in crisis management, this applies almost exclusively to areas surrounding the EU or its traditional spheres of influence such as Africa. As far as East Asian security is concerned, for example over tensions surrounding the Diaoyu islands, the EU and its member states have so far played no active role. Despite some policy differences and transatlantic spats over NSA spying, the EU and its members clearly remain close allies of the US on most international issues. In China's view, the EU embraces the role of a “civilian power,” while its members continue to relegate hard security issues to NATO.

Thirdly, EU-China relations have been disturbed by the many debates about human rights and democracy. China and the EU have had a series of long-running disagreements on human rights issues such as Tibet, China’s policy towards Africa, and over environmental issues. For example, between 2006 and 2008 the European Parliament adopted a series of resolutions and drafted reports on China which provoked negative responses from Beijing. As a way of countering a collective EU values-based approach, China has attached more importance to bilateral relations with individual EU member states. China’s experience has been that member states, in particular Germany, are more open to pragmatic relations in isolation.

Fourthly, the global financial crisis caused disturbances in EU-China-US trilateral relations, and although there are many unsolved problems in the transatlantic relationship, the close relationship between the US and Europe should not be underestimated. China has doubts about the Transatlantic Trade and Investment Partnership (TTIP), currently under negotiation between the US and EU. Beijing worries it could come to shape new trade rules and dominate the governance of global trade at the expense of China and other emerging economies. These fears have been heightened by Japanese efforts to connect the free trade negotiations it started with the EU in 2013 to TTIP negotiations. China sees this as an attempt to balance its rising economic power. Such free trade agreements (FTAs) have the potential to become an important factor influencing the way Chinese-EU trade relations develop in the next decade.

Finally, the priority of China’s EU policy has oscillated between focusing on relations at the supranational and intergovernmental levels. Since the failure of the EU constitution in 2005, the Chinese government has focused on developing bilateral relations with individual EU member states. The eurozone and European debt crisis has only heightened this approach, a topic of much concern among participants at the November 2013 annual meeting of the Chinese Association for European Studies held in Shanghai.

Chinese views of the UK and of the UK in the EU

David Cameron's 2013 visit to China provided a series of examples of Chinese views about the role of the UK in the world. According to an article [CN] published in the Global Times, a newspaper owned by the official Communist Party People’s Daily newspaper, the UK is no longer considered a great power and “is easily replaceable in China’s European foreign policy.” This evaluation was not so much an accurate estimate of Britain’s position in the world, but an expression of the Chinese government’s dissatisfaction with Britain’s value-oriented foreign policy vis-à-vis China.

China is well aware of the UK’s difficult relationship with the EU. The UK has hindered European political integration because of several factors, most notable of which from China’s perspective is its special position between the US and Europe. The UK’s position in a changing EU has not passed unnoticed in China. The eurozone crisis has created a situation where the UK appears increasingly isolated, both by developments within the rest of the EU and by growing skepticism in the UK. Thanks to efforts principally led by France and Germany to reform the eurozone, a “Union within the Union” is emerging, meaning the UK can be excluded from decisions within this new core. This has heightened tensions between the EU’s “Big Three” states. From Beijing’s perspective [CN], the British government needs a renewal of its European policy and a better diplomacy.

Yet, as explained above, China’s relationship with the EU is mostly of an economic nature, and London plays a strong role in this area. The EU is China's biggest market, and the UK can and has played a positive role in the development of economic relations between the two. Among the EU’s “Big Three,” the UK has always been a leading advocate of free trade and open markets. This contrasts with France’s preference for protectionism, and Germany’s alternation between the two. During the EU-China Summit in 2012, the former Chinese Prime Minister Wen Jiabao proposed a bilateral free trade deal similar to the TTIP negotiations. This proposal was welcomed by Cameron during his 2013 visit. Cameron also promised Britain’s support to facilitate trade and investment relations between China and the EU. His statement was criticized by the European Commission which argued it was too early to start such negotiations.

The UK has also played a prominent role in the EU’s approach on matters of human rights and fundamental freedoms. These are key elements of the EU’s overall foreign policy. However, the EU’s human rights dialogue with China has not been unified, with some member states emphasizing human rights and others prioritizing economic cooperation. The UK has taken an active role in the EU-China human rights dialogue while also pursuing its own bilaterally. Germany, despite also having its own human rights dialogue with China, has tended more toward economic cooperation. As a clear example of this, British prime ministers have met the Dalai Lama more often than their French or German counterparts.

Concerns over security issues in East Asia do not play as prominent a role in the EU’s China policy. The EU has expressed concern about stability in East Asia, and also stressed that the US military presence is an important factor in maintaining stability in the region. At the same time, proposals to lift the EU’s arms embargo against China, in place since 2004, have been met with opposition from the UK. The proposal, pushed by France and Germany, was initially welcomed by the UK, but thanks to US pressure, especially on the UK, the embargo remained in place.

What a Change in UK-EU Relations Would Mean for China

Chinese scholars view the discussion of a UK withdrawal from the EU as reflecting two factors: Cameron's need to appease the euroskeptic parts of his Conservative Party and maintain the party’s unity; and at the same time, in facing the aforementioned changes to the EU that have come about because of the eurozone crisis, Cameron's push [CN] for more favorable conditions for the UK to remain inside a reformed EU. Cameron’s success will depend on the rest of the EU agreeing to give the UK a new relationship inside the EU, in particular granting the UK continued access to the single market. This will in part be shaped by Britain’s place in EU foreign and security cooperation, where neither France nor Germany want Britain to leave the EU, as it would damage EU efforts in these areas.

The Chinese government has not made any clear statements about the possibility of the UK renegotiating its relationship with the EU. It has, however, paid close attention to the eurozone crisis and Britain’s role in EU China policy. When former Prime Minister Wen Jiabao visited the UK in June 2011, Yang Jiechi, the former Chinese foreign minister, reiterated a long-standing view that a healthy and stable development of Sino-British relations was useful in promoting China-EU relations. Overall, it can be argued that Beijing would prefer to see the UK stay in the EU and play an active role in European integration. In January 2011, former Chinese Vice-Prime Minister Li Keqiang met British Deputy Prime Minister Nick Clegg in London. Li reaffirmed that Beijing attaches great importance to China-EU relations and that China is ready to help European countries overcome the eurozone crisis. According to Li, a further deepening of China-EU relations is not only beneficial for both sides, but also helpful in creating a stable multipolar world. He hoped the UK would play an active role in the EU’s China policy by continuing to oppose protectionism, pushing for the EU to recognize China's full market economy status, and urging the EU to relax restrictions on high-tech exports to China.

China would face some serious problems should the UK withdraw from the EU. Firstly, a British withdrawal could change the regional integration of Europe and the EU’s trade policy towards China. Since the outbreak of the debt crisis, China’s exports to the euro area have experienced ups and downs, whereas according to the IMF's 2014 Direction of Trade Statistics, China’s exports to the UK increased from $31.3 trillion in 2009 to $46.3 trillion in 2012, a growth of 47.9 percent. If the eurozone does not recover, then China’s trade with the EU could be confronted with stronger support for protectionism – and Britain would be lost as a free-market advocate.

Secondly, Sino-British trade could be affected. The UK is China’s third-largest trade partner in the EU, and Britain’s EU membership is crucial to the future development of Sino-British trade relations. The view in Beijing is that the UK will only be able to access the world’s largest single market by being an EU member.

Thirdly, Chinese investment in the UK will be affected too. In recent years Chinese investments in the UK have increased rapidly, especially since the financial crisis; the UK’s independent monetary system and stable regulatory market mechanisms make it an appealing destination within the larger European market. After a UK withdrawal Chinese industry investors would have to pay customs as they export products to the EU. However, compared with Japanese investments in the UK, the impact on China would be relatively limited, since Hong Kong investments focus mainly on utility assets and mainland Chinese on real estate investment.

In its relations with China, Britain has both an EU and a bilateral identity. This produces particular challenges for China. On the one hand, the view of the UK and EU focuses on the UK’s support for free trade, its central role in maintaining the EU's international power and influence, and its role in shaping the EU’s approach to matters such as human rights in China. At the same time, the UK’s often half-hearted approach to the EU means that Beijing has increasingly looked to other EU member states to build and manage China-EU relations. China has also adjusted its focus toward individual EU member states in managing the eurozone crisis and handling matters related to human rights. Especially notable here are relations with Germany. The importance of Germany, and the lesser position accorded to the UK, was shown in May 2013 during the first overseas trip of the new Chinese Prime Minister LI Keqiang: the only EU country he visited was Germany. This trend has begun to change, with the March 2014 European visit of Chinese President Xi Jinping set to include a visit to the EU institutions, accentuating again the importance of EU-China relations at a supranational level. However, the trip will also include visits to France and Germany. Should the UK push more toward an EU exit, then this trip could set how relations will be managed in future.

Read the first two contributions to the series on British exit from the Union, the US view and the French view.

Lirong Liu is an associate professor of European Studies at Fudan University in Shanghai, China.



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