There is a lot of talk about Chinese isolationism and the world’s second largest economy politicising trade. Admittedly this is, in part, also true for the West; however; the ferocity with which China is currently using this tool is a reason for concern.
Think of blocked Norwegian salmon exports, threats against the Czech Republic and the much-publicised threat by the Chinese diplomat Wu Ken that there would be consequences if Germany decides to reject Huawei. Meanwhile, the threats and attempted multilateral pressure to embargo Lithuania over its recognition of Taiwan is just the latest example of Chinese pressure.
This, however, is just one part of the story. European countries wouldn’t have to worry so much about this if their economies weren’t quite as dependent on China. Germany relies on China as a major export market, while China acts as a major infrastructure financier for Greece and Portugal. Hungary also has a warm relationship with China, which might explain the increasingly shrill complaints about unfair Chinese business practices.
So what should Europe do? Rather than lament Chinese actions, we should critically assess the situation, and a bit more realism might be a good start. Whether we like it or not, China is an economic superpower, that will — just like the other superpower — enforce its will. In that, Europe’s policy choice is merely to pick the least painful option. Right now Europe is simply too weak to mount serious resistance.
More importantly, however, is the realisation that we will not change China by constantly moaning at it — not about how China is conducting business, nor by moral finger-wagging about Uyghurs, privacy rights or whatever else we think China is doing wrong. All we can do is to decide on what terms — and whether — we are willing to do business with China. This is far more relevant than we seem to realise.
China’s Dual Circulation Strategy, outlined in its 14th five-year plan, works only moderately well. While domestic demand is lacklustre, exports are steaming ahead — and so is China’s dependency on European markets. In that, we should look to the currently debated course of the new German government.
While the camp around Olaf Scholz wants to continue Angela Merkel’s course of multilateral engagement, the party takes a more robust attitude towards China. This is probably the vanguard of a new European-wide debate on China.
Martin Kaspar is head of business development at a German mittelstand company in the automotive industry.
This article first appeared in the February/March 2022 print edition of fDi Intelligence. View a digital edition of the magazine here.