Pragmatic view of relations

China's willingness to get involved in Europe's debt crisis is based on both economic and political considerations

Chinese and European Union leaders will meet on Tuesday in Beijing to attend the postponed 14th EU-China Summit. Undoubtedly both parties have a lot to discuss, notably China's role in alleviating the eurozone crisis, global economic governance, climate change, regional peace and other bilateral issues.

In the past decade, Sino-European relations have experienced ups and downs, changing priorities, and a period of readjusting that has redefined the partnership. Will the China-Europe Summit give new impetus to relations between the world's largest single market and second largest economy? Will the two parties regain the intimacy and harmony they enjoyed during the so-called honeymoon period between 2003 and 2006?

Nearly a decade ago, when China released its first policy paper on Europe in 2003, China and Europe experienced a brief period of intensive exchanges. The same year, for the first time, the European Union launched a comprehensive strategic partnership with China. However, this honeymoon period soon proved lacking in any real substance. Neither of the two main objectives, namely the lifting of the EU weapons embargo and the granting of market economy status to China, was realized. This made the Chinese leadership re-evaluate their expectations of relations with the EU.

At the same time the EU was confronting the growing pressure of its trade deficit with China and began to call for a more balanced relationship and for China to be a "more responsible player" in global trade. The bilateral relationship had almost stalled when the 2008 bilateral summit was canceled at the last minute.

However, the ongoing debt distress in Europe and the global economic recession has brought China and the EU closer again. With its foreign exchange reserves valued at $3.18 trillion at the end of December 2011, cash-rich China is regarded by the EU as the potential savior of its turbulent financial markets and fragile economies. Leaders of the EU and its member states have been actively courting China's support in aiding Europe, in terms of investment into the newly established European Financial Stability Facility and European Stability Mechanism, and equally importantly showing confidence in the single currency and eurozone.

During the forthcoming summit, Herman van Rompuy, president of the European Council, and Jos Manuel Barroso, president of the European Commission will certainly follow the steps of German Chancellor Angela Merkel in seeking to boost China's involvement in Europe's debt troubles. China has repeatedly shown its willingness to rescue debt stricken EU member states and the detailed lending conditions and methods will most probably be discussed by the leaders at the summit.

China's willingness to get involved in Europe's debt crisis is based on both economic and political considerations. According to the General Administration of Customs of China, Chinese exports increased 13.4 percent in December 2011, which marked the slowest export growth since November 2009. Exports of goods and services have been China's central economic powerhouse, accounting for nearly 40 percent of its GDP. Yet earlier last year, China's monthly trade surplus with the 27-nation EU, its biggest export market, declined to $11.8 billion in November from $13 billion in October.

Rising wages in the manufacturing sector are making Chinese exports less competitive and the depreciation of the euro against the renminbi will undoubtedly make the country's exports even more expensive for the European market.

Therefore, it is not surprising that China wants to prevent any further weakening of the euro. Furthermore, China is deeply concerned with the security and returns on its investments in the EU. China will be eager to see their European counterparts providing assurances they will repay Chinese loans or reduce the lending risks by going through a broker such as the International Monetary Fund.

Meanwhile, Chinese foreign direct investment to the EU was $4.28 billion in 2011, according to China's Ministry of Commerce. Chinese companies can now be found in all 27 EU member states. So safeguarding these investments and the access of Chinese enterprises to the greater European market will also be on the agenda.

Equally important are the political considerations of a closer Sino-EU partnership. The political uncertainty of elections and power transitions in countries such as Finland, South Korea, France, Russia and the United States, is further complicated by the evolving crises in Syria and Iran, as well as the aftershocks of the "Arab Spring" and the US administration's renewed strategic interest in the Asia-Pacific region.

As China starts to assert its global power, a broad political space and a respectful diplomatic environment will be essential for China's rise. Therefore, a closer partnership with the EU and aid to Europe may help to not only expand its influence but also boost its image in Europe. No wonder China and the EU have agreed to highlight the importance of dialogue and exchanges between their civil societies in the coming years.

China and the EU now have a more realistic view of their relations, so they should aim to take pragmatic steps to ensure their partnership is constructive and mutually beneficial.

The author is associate dean and professor of international affairs, ESSCA School of Management, Angers, France.

(China Daily 02/14/2012 page8)