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Heeding The Red Flag

Heeding the red flag
China now has a 51 per cent shareholding in the Greek port of Piraeus
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Nikolaos Diakidis

The European Union is finally coming face to face with a stark truth: China is on the rise and has Europe in its sights.

The decision last month by Italy to sign up to Beijing’s global infrastructure-building Belt and Road Initiative came in open defiance of EU and United States policy and marked China’s latest high-profile achievement in spreading economic and political influence through Europe.

Italy is the Eurozone’s third biggest economy whose current administration is at odds with the EU on issues such as public spending and immigration. The populist debt-laden government gave its official support to Beijing’s controversial BRI vision and agreed projects worth $2.8 billion, including energy, finance and agriculture, as well as Chinese port involvement at Genoa and Trieste.

The signing came only two weeks after the EU issued a belated and official warning about Beijing’s intentions toward Europe, describing it as an ‘economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance’.

French president Emmanuel Macron spoke of a ‘European awakening’, while the German chancellor Angela Merkel cautioned that China posed ‘fundamental challenges’ to the EU.

China’s European push began in earnest a decade ago when the global financial crisis left cash-strapped businesses and governments looking for new partners. Since then Chinese companies have invested more than $165 billion, against just $2.1 billion in 2010. Much of it is in critical infrastructure such as ports, telecommunications and technology.

Italy’s breaking ranks with its Western democratic allies raises crucial questions. Why does the EU, renowned for detailed regulations on selling bananas or the hours staff can work a week, have no road map to deal with the encroachment of a wealthy authoritarian state?  To what extent does China’s success so far expose the EU’s own weakness and what, if anything, can the EU do about it?

Unlike earlier global expansions, China has made no secret of what it wants to do and how it plans to achieve it.

When Britain took Hong Kong in 1842 as part of its booty in the first Opium War against China, the foreign secretary Lord Palmerst on was aghast, asking what interest his government could have in a ‘barren rock with barely a house on it’.

The United States became a force in the Pacific by mistake in 1898, ending up with the Philippines because it had defeated Spain in a Caribbean war thousands of miles away. ‘When I realised the Philippines had dropped into our laps,’ President William McKinley reflected, ‘I confess, I did not know what to do with them.’

China, on the other hand, has followed a structured path, without a shot being fired in anger and identifying which country it wants to move into and why.

The Europe plan gathered pace in 2012, the year that Xi Jinping took office. Beijing formed a special trade grouping, the Sixteen Plus One, with sixteen central and eastern European governments.  Eleven, such as Hungary and Poland, are EU members; the others, including Balkan states such as Serbia and Montenegro, aspire to be. This is a poor area of Europe that lived under Soviet influence and is more attuned to an authoritarian culture. It is ripe, therefore, for Chinese infiltration and it needs the money.

A year later, in 2013, Xi unveiled what has now been named the BRI, announcing plans to ‘open a transportation channel from the Pacific to the Baltic Sea’. Inevitably, this would run through the heart of Europe.

In 2016, China caused an open rift within Western democracies by inviting governments to join its new Asian Infrastructure Investment Bank, aimed at bolstering Chinese-led infrastructure projects. Much to American anger, Britain, Germany and other EU nations joined as founding members.

By January the next year, Xi was confident enough to argue his case in a keynote speech at the World Economic Forum at Davos, where he spoke about the future of mankind and marching ‘arm-in-arm toward a bright future’.

Then, in May, he hosted a BRI summit in Beijing attended by thirty heads of government, including leading figures from emerging autocracies such as Russia’s Vladimir Putin and Turkey’s Recep Erdoğan.

Also, by 2017, Beijing’s covert political influence was making its mark in Europe when  Hungary and Greece, both beneficiaries of Chinese investment, refused to sign EU statements condemning Chinese human rights abuses.

At the same time, rumblings of anti-EU discontent were growing openly among several less wealthy governments with the refrain: if the EU failed to produce the money or laid down too many conditions, China could be relied upon to step in. That, too, adopted political overtones, with Hungary, Poland, the Czech Republic and others arguing the case for a system that has become known as ‘illiberal democracy’.

But even then, it was clear that this European embrace of China was not confined to less well-off central and eastern European governments. Britain, by far the biggest recipient of Chinese investment, had declared a ‘golden era’ with China, inviting partnership in its nuclear industry, high-speed rail projects and telecommunications.

Chinese money poured into Europe’s developed democracies. In 2017, Chinese investment in Britain totalled $70 billion, in Germany $20billion, in France $13 billion and in Italy $31 billion. Those four countries accounted for 75 per cent of China’s overall investment in the EU market.

At no stage, did European leaders explain to voters the contradiction between enjoying Chinese money and the very different value system under which such wealth was created. Instead came a see-sawing policy of indecisiveness.

WORDS OF WARNING: French president Emmanuel Macron (l) and German chancellor Angela Merkel both spoke of China’s challenges to the EU
Image by
ActuaLitté

Britain’s ‘Golden Era’ melted away in 2016 because its cheer leaders, the then prime minister David Cameron and chancellor George Osborne, left office over the Brexit referendum. In its place are headlines about the Royal Navy challenging Beijing in the South China Sea.

One moment encouraging deep friendship, the next condemning Beijing’s authoritarianism has become a Europe-wide trademark, sowing confusion among voters and politicians as to what exactly China represents.

Until last month’s announcement about China being a ‘strategic rival’, no EU policy was in place and Italy’s decision immediately to defy it shows up the structural weaknesses within the EU and among wider Western democratic allies.

The current case in point is the debate over whether the Chinese tech giant Huawei poses a threat to national security. In the coming years there will be other cases, and the EU would be in a far stronger position if it designed detailed and binding measures.

These might include putting critical infrastructure off limits or specifying the level of foreign investment allowed. For example, the Greek port of Piraeus is now controlled by China, which has a 51 per cent shareholding.

Italy’s breaking ranks may prove to be the wake-up call that Europe needs, albeit one cloaked in irony. As Xi Jinping was being hosted to a lavish banquet in Rome’s presidential palace, European leaders had scheduled a dinner in Brussels aimed at fleshing out a united China policy. But that topic was shelved because of the need to discuss the more urgent Brexit crisis.

Once again, slow-burning China was kicked into the long grass.

Such has been the story of Europe and China over the last decade. As Beijing follows long-held plans, Europe lurches from crisis to crisis. Whether economic collapse, refugees, terror or nationalism, there has always been an issue more important than working out how to deal with an expanding China.
That, in itself, shows a weakness and it is this that Beijing feels free to exploit. ‘China plays on our divisions,’ warns President Macron. ‘The period of European naïveté is over.’

Originally published at Asian Affairs

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2 comments

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Walkin O'Shea April 11, 2019 at 7:32 pm

I think Russia has more to fear from China than it has from the US. Because they are neighbors doesn’t always mean they have the same intentions. China is an economic power house, while Russia is struggling to retain some visibility on the world stage. Before they know it China will have bought all the countries around Russia, then it’s only a matter of time and China will own them too. Perhaps Mr.Putin and Mr.Trump should be discussing this long term effect.

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Walkin O'Shea April 11, 2019 at 7:42 pm

Russia has more to be concerned with China than it does with the US. They may be neighbors but their interests are not necessarily the same. China as an economic and military power house, is slowly buying up all the countries around Russia, while Russia struggles to remain significant on the world stage. No contest there. Perhaps Mr.Putin would be better sitting down with Mr.Trump and discussing the long term effects. For all intents and purposes Europe is lost as nation states. The European Union has economically destroyed Europe and made it a socialistic poor man.

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