Wary of a power shift, EU goes cap-in-hand to China

Europe's foreign policy chief attends talks between the European Union and China in a sign of the increasing strategic importance of the communist country's economic weight.

European leaders fear the debt crisis will lead to a power shift to East.

AMSTERDAM // Europe's foreign policy chief attended talks between the European Union and China yesterday in a sign of the increasing strategic importance of the communist country's economic weight.

Before departing for Beijing, Catherine Ashton said: "Our partnership with China is one of interdependent equals who share broad common interests, and we have an obligation to engage on a wide range of global issues."

The EU, and several member states, most recently Cyprus, have asked China for financial help in the debt crisis that is threatening the EU. This may provide leverage for China to get concessions from the EU on such issues as the arms embargo that is still in place and recognition of the country as a market economy.

Demetris Christofias, the communist president of Cyprus, had also sought a loan from Russia, which points to an eastward shift of the global economy - a shift that many Europeans fear will also mean a transfer of more political power to the east.

But as several reports noted last month, it is the growing influence of the Chinese that seems to be having a bigger effect on the EU's economic landscape as Beijing buys up companies and assets at an increasing pace.

Cyprus followed the same path that the EU as a whole took last year, when a high-level delegation went to China to ask it to contribute to Europe's emergency funds needed to deal with the euro crisis.

The European response has been characteristically hesitant and uncoordinated. On the one hand, the EU and its members are asking China for handouts, on the other, there is alarm at the potential influence of what may be a rising undemocratic hegemony that brings its own set of demands to the world stage.

"For those Europeans who really need money, they would hope China could invest more but others would be much more cautious because economics is always related to politics," said Jing Men, an expert in EU-China relations at the College of Europe in the Belgian city of Bruges.

The reality of Chinese economic muscle is still disputed and complex to calculate. China is the world's second biggest economy but it still has a per capita GDP well below that of western nations because of its sheer size.

While annual Chinese investments in the EU increased nine-fold between 2006 and last year to €7.4 billion (Dh33.3bn), this is still only a tiny fraction of all investments in the EU.

But the effect on a Europe screaming for cash should not be underestimated. The money from China helped create thousands of jobs at a time of soaring unemployment, according to a report last month by the professional services company, Ernst & Young. Many Europeans fear that the money comes with strings attached, particularly where sensitive Chinese issues, such as Tibet, human rights, and its imperfect market economy are concerned.

Such concerns are valid, said Ms Men. But they are beside the point, as the EU has never been able to influence Chinese policy to a significant degree.

"How would we determine if China's position is strengthened?" she said. "If we look at the real issues between the EU and China, concerning a market economy, concerning an arms embargo etc, these problems have never been solved."

The worries about a Chinese financial invasion echo similar European scares about the Japanese and Arab investors in previous decades and they may be fed by similar, slightly xenophobic, attitudes.

A report, The Scramble For Europe, issued last year by the European Council on Foreign Relations, contained this alarmist line: "China has moved on from buying African ports and building Saudi railways, taking advantage of its economic strength and European weakness to buy up Europe."

Now, Thomas Koenig, the head of the council's China programme, has argued that the issue is more nuanced. "It is an issue only among the alarmists, simply because China is far away, they are not a democracy, they seem very foreign. But among people who know China, there is no need for a red alert," he said.

Even so, Europe does need to be aware of the potential threat that Chinese money and policies may pose, he said. "We are observing that they are increasing their presence and lots of countries and companies may be benefiting from it now, but we have to think 20 to 30 years down the line."

Neither Mr Koenig nor Ms Men expect China to change its international posture much in the short term. The country's leadership is traditionally cautious, especially so this year when a change of guard in the country's top ranks is scheduled for the next Communist party Congress, said Ms Men. Any decision on a greater role for China's vast sovereign wealth fund in bailing out Europe will probably have to wait until next year, she said.

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