Covid and the Ukraine war have left deep scars on the global economy. The US economy is in a slight recession. In the EU, growth is still over 2.5 percent, but there are also signs of a downturn. By comparison, China is in a much better position. A stocktaking.
By Frank Sieren
Nancy Pelosi leaves a roiled Taiwan Strait. In China.Table, researcher Zsuzsa Anna Ferenczy, former advisor to the EU Parliament, assesses the peril of the situation and possible EU responses.
By Redaktion Table
Two-thirds of all chips currently come from East Asia. The Europeans and the Americans want to change that. Both have passed enormous subsidy programs to promote their respective semiconductor industries. In the meantime, China creeps quietly to the top.
By Felix Lee
The relationship between China and Europe is complex. Economic and political interests have to be weighed up. Russia and the USA are important factors in these negotiations. All the news on the relationship between China and Europe is available from the Table.Media editorial team.
China and the EU have partly common and partly conflicting interests. Both politically and economically. How important the relationship is for both countries is shown by the volume of trade. This amounted to 586 billion euros in 2020. Europe exported goods worth 202.5 billion to China and imported goods for 383.5 billion euros. This made China the EU's most important trading partner for the first time in 2020, if services are not taken into account. A major influence on the relationship between Europe and China is Russia, but above all the United States. The government in Washington wants to prevent China's rise as a leading technological and military power. The U.S. is currently unbundling its own economy from China's and looking for new partners and trade agreements. So is the People's Republic. The EU sees itself as a dual-option power, seeking partnerships with both countries.
The CAI - EU-China Comprehensive Agreement on Investment - should have facilitated investment and trade between China and the EU. However, due to political tensions, particularly over the human rights situation in Xinjiang, the EU Commission suspended negotiations in the summer of 2021. Negotiations between the People's Republic and the EU have been ongoing since 2013, and the agreement was originally to have been ratified by the EU in 2022. The government of China has already signed. The CAI - EU-China Comprehensive Agreement on Investment should have solved central problems of European companies in China. First and foremost, the imbalance of closed markets in the People's Republic. While Chinese companies in Europe are not subject to any significant restrictions, some markets in China remain closed to European competitors. This is particularly true in the areas of transportation, telecommunications equipment, chemicals and the financial services industry. The CAI investment agreement should also have abolished the joint venture obligation in the automotive industry. In addition, the forced technology transfer should also have been ended. This is because European companies are only allowed to make direct investments in China if they pass on their research results to a Chinese partner. The European automotive industry in particular is hoping for the CAI investment agreement.
Within the EU, Germany is China's largest trading partner. The trade volume between the two countries totaled 212.1 billion euros in 2020. Germany imported more (116.3 billion euros) than it exported. Although the Federal Republic is a key negotiating partner for the People's Republic when it comes to relations with the EU, the relationship between the two countries is tense. Above all, human rights violations in China are straining relations with Germany and Europe. Germany criticizes the fact that freedom of the press, freedom of assembly, freedom of expression and freedom of communication do not exist in China. Through trade with China, Germany believes it can positively influence the human rights situation in China. However, the relationship between China and Germany is not only politically fractured, but also economically. Despite the high volume of trade. The background to this is the German government's concern that it is not an equal partner, while China benefits disproportionately from the partnership. For years, a reciprocal relationship with the People's Republic has been an important goal of German foreign and economic policy.
The New Silk Road is a global infrastructure project of China. The People's Republic wants to optimize land and sea routes between Europe and the Asian region. Europe has a particularly important role to play in one of the land routes. The route is to run via Kazakhstan, Russia, Ukraine/Belarus, Poland and Slovakia all the way to Germany. Around 150 countries have concluded memorandums of understanding (MoU) with China. In other words, declarations that represent an intention to cooperate. 18 of 27 European countries have one, Germany does not. Within the EU, Greece is seen by China as a gateway to Europe. Under the Belt and Road Initiative, the China Ocean Shipping Company (COSCO) has acquired a total of 51 percent of the port of Piraeus. It is now the largest container port on the Mediterranean. However, COSCO drastically cut the salaries and benefits of port workers and also received massive tax breaks that violate EU state aid rules.
China wants to become the world's largest economic and military power and the leader in technology and innovation by 2049. This is a goal toward which the People's Republic is working without regard for the interests of other nations or minorities in its own country. Accordingly, there have been major political upheavals and the formation of blocs. On one side is the United States, on the other China and, to a lesser extent, Russia. Europe sees itself as a dual-option region that wants to cooperate with both blocs. Because of the increasing tensions, but also because the Corona pandemic has shown how vulnerable global supply chains can be, China is increasingly relying on so-called dual circulation. This is a strategy with which the People's Republic wants to strengthen its domestic economy in order to become less dependent on imports. The USA reacted with decoupling. In other words, the unbundling of economic cycles. This has several consequences. First, several standards are emerging at the technical level. One Chinese and one American - for example in cloud computing, artificial intelligence or mobility. The political consequences are that both China and the U.S. are seeking new partnerships and trade agreements.
Relations between the U.S. and China are at an all-time low. In recent years, a trade dispute between the two economic powers has escalated. The U.S. wanted to use sanctions to slow China's rise as a global power. The U.S. Innovation and Competition Act of 21 (USICA) also served to minimize dependence on China. It provides for subsidies of technologies that America currently purchases from the People's Republic. Semiconductors, for example. Although the hardened fronts between the USA and China could have led to the USA and Europe moving closer together politically and economically, tensions also arose between these economic powers. The background to this was a burst submarine deal between France and Australia. Originally, Europe was to have cooperated with Australia and Great Britain as part of an Indo-Pacific pact. But Australia cancelled the supply contract and the USA took over the role of the Europeans.
EU sanctions against China have been in place since March 2021. The foreign ministers of the 27 member states want to take action against human rights violations in Xinjiang. The Communist Party is ruthlessly acting against the Muslim minority of the Uyghurs there. Three representatives of the Xiangjing Party Committee have since been placed on the EU sanctions list and are no longer allowed to enter the country. In addition, all their assets located in Europe are frozen. The Communist Party reacted to the EU sanctions against China with counter-sanctions against four institutions and ten individuals. They are not allowed to enter the People's Republic or do business with companies from the country. In response to EU and U.S. sanctions, China also passed the Sanctions Defense Law. It specifies when and how Chinese authorities will intervene should sanctions against the People's Republic be implemented. It allows the government to punish individuals and organizations that engage in "discriminatory measures against Chinese citizens" or "interference in China's internal affairs." Chinese citizens and organizations also have the right to sue European and U.S. companies and individuals for damages under certain conditions.
Disputes between Europe, the United States, and China have led to a marked improvement in relations between Russia and China in recent years. In 2001, the People's Republic and Russia signed the Russian-Chinese Friendship Treaty, which was demonstratively renewed in the summer of 2021. It clarifies contentious issues in foreign and security policy and deepens cooperation between the nations.
During the Corona pandemic, some supply chains between China, on the one hand, and the EU and the U.S., on the other, came to a standstill. Since then, the U.S. and the EU have been trying to minimize their dependence on the People's Republic. In the area of medical supplies and protective masks, for example, so-called on-shoring is being considered. In other words, bringing back production facilities from emerging countries. Whether this will be enough remains to be seen. Because at the same time, an analysis by the China think tank Merics showed that the EU is in a critical strategic dependence on China in 103 product categories. These include primarily goods in electronics, chemicals, minerals, metals, and pharmaceutical and medical products. However, in many of these sectors, building new supply chains is complex and costly.
The relationship between China and the EU is complex. In addition to economic interests, there are political disagreements. The EU is trying to reconcile the interests of the USA and other Western countries on the one hand and those of the People's Republic on the other. Whether this can succeed remains to be seen. The Table.Media editorial team has all the relevant news.
