Recent Developments In Sino-EU Relations: The 2014 And 2015 State Visits By Xi Jinping And Li Keqiang
By Alvin Cheng-Hin Lim

Recent Developments In Sino-EU Relations: The 2014 And 2015 State Visits By Xi Jinping And Li Keqiang

Mar. 11, 2016  |     |  0 comments


China and the EU


On June 28, 2015, Chinese Premier Li Keqiang arrived in Belgium for the 17th China-European Union (EU) Leaders’ Meeting. This was followed by his state visit to France which included a visit to the headquarters of the Organization for Economic Cooperation and Development (OECD) (“Chinese premier,” 2015; “Li’s visit,” 2015). The timing for the premier’s trip was significant as 2015 marks the 40th anniversary of the establishment of diplomatic relations between the People’s Republic of China and the European Economic Community, the forerunner of the EU. China and the EU upgraded their bilateral relationship to a comprehensive strategic partnership in 2003, shortly after China’s ascension to the World Trade Organization in December 2001 (“China, EU, exchange,” 2015; “China-EU ties,” 2015).


Since the turn of the millennium, trade between China and the EU has soared. China has been the EU’s second largest trading partner for the past 12 years, and the EU has been China’s largest trading partner for the past 11. The value of trade between China and the EU increased from US$2.4 billion to US$615 billion between 1975 and 2014 (“Premier Li’s visit,” 2015). The EU currently has a cumulative investment of almost US$100 billion in China, while China has a cumulative investment of more than US$50 billion in the EU (“China-EU ties,” 2015). These bilateral investment flows are — in the eyes of the Chinese government at least—paltry given the much larger scale of Sino-EU trade. As such, Premier Li has called on the EU to quickly conclude a bilateral treaty that would facilitate Chinese acquisitions in Europe, and proposed that China and the EU begin studying the feasibility of establishing a free trade zone (Kynge & Oliver, 2015).


At the 17th China-EU Leaders’ Meeting in Brussels, which Premier Li co-chaired, China and the EU agreed to align China’s “Belt and Road” development framework with the EU’s recently announced €315 billion Juncker investment plan, to stimulate synergistic growth for both regions. The European Fund for Strategic Investments (EFSI), a financial vehicle for high risk ventures that is part of the Juncker plan, will eventually be linked to a Chinese initiative for international cooperation on production capacity, thereby allowing China and Europe to leverage their respective strengths in manufacturing capacity and advanced technology for the purposes of practical cooperation. Such practical cooperation will go beyond the traditional pattern of Chinese and EU foreign direct investment in each other’s economies, and will instead see Chinese and European firms linking up to expand into key emerging markets. Trilateral cooperation between China, its European partners, and third countries from emerging regional markets in projects like equipment manufacturing can accelerate industrial development and bring increased growth to not just the three partners but their respective regions as well, potentially accelerating global economic growth (Ash, 2008, pp. 210-213; Zhang, 2008, pp. 234-235; “Production capacity,” 2015; “Chinese premier’s,” 2015; “EU agrees,” 2015).



China and the EU agreed to align China’s 'Belt and Road' development framework with the EU’s €315 billion Juncker investment plan.



China’s “Belt and Road” development framework offers opportunities for such trilateral cooperation to take place, and the involvement of 18 European countries in the Asian Infrastructure Investment Bank (AIIB)—the primary financing instrument for the “Belt and Road”—highlights European interest in the “Belt and Road” projects. The AIIB and the Silk Road Fund, the secondary financing instrument for the “Belt and Road,” will both offer funding for Chinese and European joint ventures on “Belt and Road” projects (Lim, 2015e; “Premier Li’s,” 2015; “Production capacity,” 2015). Outside of the “Belt and Road” framework, China and Europe can extend their existing practical cooperation on climate change (Balme, 2012, pp. 168-171). China and the EU have agreed to cooperate on developing a sustainable low-carbon economy through technological innovation. Beyond technological research, China and the EU will also further their cooperation in emissions trading and the carbon market, as well as city-level partnerships in climate change mitigation projects (“Chinese premier’s,” 2015; “China, EU pledge,” 2015). In recent historical perspective, this proliferation in practical cooperation can be connected to the 2005 decision at the 8th EU-China Summit in Beijing for China and the EU to develop their strategic relationship through “concrete actions” (Song, 2012, p. 24).


Belgium and France


In his visit to Belgium, Premier Li and his Belgian counterpart Prime Minister Charles Michel signed cooperative agreements worth €18 billion, in sectors ranging from finance to telecommunications. Premier Li also stated that China will help Belgium develop into a key distribution and logistics node between Asia and Europe. China and Belgium will also cooperate on industrial joint ventures in key emerging markets like those in Africa (“China, Belgium,” 2015).


Following Belgium, Premier Li traveled to France and met with French Prime Minister Manuel Valls. China and France agreed to expand their cooperation in the civilian nuclear energy sector including cooperation in the development of nuclear technology. In particular, Areva and China National Nuclear Corporation agreed to cooperate on a series of projects including uranium mining. In addition, China and France signed over 50 business agreements, including the Chinese purchase of 45 A330 passenger jets from Airbus. In turn, Airbus, which already has an A320 Family Final Assembly Line and Delivery Center in the Chinese city of Tianjin, agreed to set up an A330 Completion and Delivery Center in that same city, its first wide-body aircraft factory outside of Europe. Significantly, China and France also agreed to cooperate on ventures in Africa’s and Asia’s emerging markets. As noted earlier, such trilateral cooperation will boost economic growth in not just the emerging market concerned but also the Chinese and French economies. Africa, for example, hosts seven of the world’s fastest growing economies, and foreign direct investment in this high-growth region offers significant growth potential for foreign investors. In the telecommunications sector, Alcatel-Lucent won a deal worth €1.3 billion to supply telecommunications equipment to Chinese firms operating in Africa. China and France will also form joint ventures and other cooperative ventures in sectors like agriculture, aviation, and green energy in emerging markets in Africa and Asia (Lim, 2015a; “Airbus A330,” 2015; “China, France pledge,” 2015; “China, France to,” 2015; “Chinese premier’s,” 2015; “France woos,” 2015).


While in Paris, Premier Li also visited the OECD headquarters. During this visit, the Chinese delegation officially accepted the OECD’s invitation for China to join its Development Center. This gives China an important international forum to share the knowledge and expertise it has learned from its recent decades of rapid economic growth. Involvement in the OECD Development Center will also provide China with a wealth of practical research on economic restructuring and sustainable development, which should prove useful as China transitions from its previous decades of double-digit growth to a “new normal” of single-digit growth. Apart from its new role with the OECD Development Center, China will also enhance its two-decade long partnership with the OECD with strengthened cooperation in areas like sustainable development and the management of the macroeconomic environment (Lim, 2015c; “China joins,” 2015; “China, OECD,” 2015; “Premier Li,” 2015).


President Xi Jinping’s 2014 European Tour


Premier Li’s European tour built on cooperation agreements achieved by Chinese President Xi Jinping during his state visit to Europe the previous year. President Xi started that tour on March 22, 2014 with a state visit to the Netherlands, one of China’s key European economic partners. The Netherlands has been China’s second-largest trading partner in the EU for over a decade, and Sino-Dutch bilateral trade reached US$70.15 billion in 2013. During President Xi’s visit, China and the Netherlands signed cooperation agreements in a range of economic sectors including agriculture, energy, and finance. Both countries also agreed to cooperate in emerging sectors like green energy and smart cities (“China, Netherlands,” 2014; “President Xi begins,” 2014; “Xi arrives,” 2014). During his visit to the Netherlands, President Xi attended the Nuclear Security Summit, in which he voiced China’s view that the benefits of civilian nuclear technology should be equitably distributed among the world’s populations for global sustainable development; and that international cooperation is required to establish a global system of nuclear security that can successfully avert the threat of nuclear terrorism (“China’s role,” 2014; “President Xi calls,” 2014).


President Xi followed this with a state visit to France, which was timed to commemorate the 50th anniversary of Sino-French diplomatic relations. Indeed, France was the first Western power to establish diplomatic relations with the People’s Republic of China, and their bilateral ties have since been upgraded to a comprehensive strategic partnership. Sino-French bilateral trade reached US$50 billion in 2013, and President Xi sought to strengthen this economic relationship. Chinese and French enterprises have long been cooperating in sectors like finance, nuclear energy, rail transportation, and civil aviation, and President Xi encouraged these enterprises to cooperate in new sectors like green technology, and he also encouraged Sino-French joint ventures to seek trilateral cooperation in emerging markets (“China, France vow,” 2014; “Xi’s France visit,” 2014; “Xi’s visit,” 2014). As noted earlier, Premier Li’s 2015 tour of Europe offered further encouragement to such trilateral ventures.


President Xi followed his state visit to France with state visits to Germany and Belgium. Germany is China’s largest trading partner in Europe, with bilateral trade amounting to US$161.6 billion in 2013. President Xi called for an expansion of Sino-German trade and investment, especially in infrastructure projects in Eurasia and Central Asia that will be constructed under the Silk Road Economic Belt development framework. China and Germany are already linked by transcontinental rail connections, including the Chongqing-Xinjiang-Europe International Railway which was launched in 2011. Infrastructure development under the Silk Road Economic Belt will add to the existing transportation and logistics linkages between Asia and Europe (Lim, 2015b; Zhou, 2013; “Chinese president arrives,” 2014; “Chinese president calls,” 2014; “Xi calls,” 2014). President Xi ended his tour of Europe with a state visit to Belgium, where he and his Belgian counterpart Prime Minister Elio Di Rupo officially strengthened Sino-Belgian relations to an all-round partnership of friendship and cooperation, and agreed on a range of cooperative ventures in sectors like science and technology, telecommunications, and trade (“Xi expects,” 2014; “Xi leaves,” 2014). In Brussels, President Xi visited the headquarters of the EU, the first Chinese president ever to do so (“Xi Jinping,” 2014). President Xi also witnessed the opening of the EU-China Research Center at the College of Europe, and in his address to the College on April 1, 2014, he highlighted the opportunities afforded by cooperation between China and Europe (“EU-China,” 2014). As he observed: “China and Europe may seem far apart geographically, but we are in fact in the same time and the same space. I even feel that we are close to each other, as if in the same neighborhood. Both China and Europe are in a crucial stage of development and facing unprecedented opportunities and challenges. As I just said, we hope to work with our European friends to build a bridge of friendship and cooperation across the Eurasian continent. For that, we need to build four bridges for peace, growth, reform and progress of civilization, so that the China-EU comprehensive strategic partnership will take on even greater global significance.” (President Xi's speech”, 2014).


Afterword

This paper was originally published in Eurasia Review (Lim, 2015d). Since that time of writing, China has won a key ruling at the World Trade Organization (WTO) that the EU has illegally imposed anti-dumping duties on Chinese iron or steel fasteners like screws, nuts, and bolts. China’s Ministry of Commerce calculates that the illegal duties have had a significant negative impact on the Chinese iron and steel industry, generating US$1 billion in export losses as well as over 100,000 job losses. If the EU does not remove these duties, China is considering the option of requesting WTO trade sanctions against the EU (Miles & Martina, 2016; “WTO favors,” 2016). A similar dispute that may end up with the WTO is the European Commission’s planned imposition of anti-dumping duties on Chinese steel imports (Miller, 2016).


A separate issue with the WTO that affects Sino-EU relations is the EU’s pending decision whether to accord market economy status (MES) to China. Granting MES will make it more difficult for the EU to impose anti-dumping duties on China; on the other hand, granting MES could significantly expand Sino-EU trade. Globally, China has already received MES recognition from over 90 countries, including the member states of ASEAN. Opponents include the US, which has been lobbying the EU not to grant MES recognition to China (Liu, 2016; Teo, 2016; Clauss, Chen, & Lee, 2016).


There have also been Sino-EU troubles over human rights issues. The EU has criticized China’s human rights record, in particular the recent televised confessions of detained suspects as well as the “disappearances” of several Hong Kong bookstore owners; in turn China has described such foreign criticisms of its judicial affairs as irresponsible (Martina, 2016). It should be noted that the EU’s criticism of China comes at a time when the behavior of its own member states towards refugees has drawn condemnation from observers like Human Rights Watch (Alfroy, 2016).


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