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- Herausgeber: John Wiley & Sons
- Kategorie: Geisteswissenschaft
- Sprache: Englisch
For almost two decades, China has claimed that its expanding economy benefits Europe, stimulating European growth, exports, and employment. But the reality is not so clear-cut. Whilst individual companies may have profited from China's economic rise,unbalanced trade with China has actually cost Europe over 1.4 trillion euros in the last ten years as well as undermining its political influence. China's monumental infrastructural project, the Belt And Road Initiative or New Silk Road as it has come to be known - is set to make this situation even worse. The Silk Road Trap is the first book to expose just how risky this uneven partnership is for Europe. In it, leading expert on Asian affairs Jonathan Holslag, argues that Europe must reduce its reliance on China and work on building a stronger and more sustainable European economic model. By revealing the political aspirations and economic strategy behind the new Silk Road, he lays out its implications for specific European industries, from steel over aircraft to robots. Holslag, though critical of China, does not, however, make the case for confrontational, Trumpian protectionism. Instead, he posits that the new Silk Road need not ensnare Europe; it offers the continent a unique opportunity to transition from a future "made in China" to one that is "made in Europe".
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Veröffentlichungsjahr: 2019
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Contents
Cover
Copyright
1 A call for economic realism
Zero-sum
Poverty in Europe
Economic realism
Standards
Notes
2 Europe’s failed engagement
The unbalanced partnership
Why the trade deficit matters …
… and the China deficit even more
Notes
3 China’s ambition for the future
Manufacturing first
Technology must be Chinese
Expanding market share abroad
The end goal: comprehensive national power
Notes
4 China’s connectivity contest
The selective use of international economic governance and plurilateralism
Free trade agreements
Cross-border infrastructure development
National champions
Large Chinese banks
Dedicated funds
Package deals
Diplomacy
Notes
5 The ‘Belt and Road’ and ‘Made in China 2025’
The dredging industry
Shipping companies
Ports
Shipbuilding and maritime equipment manufacturing
Railways and rail supply industry
Steel
Construction and engineering
Energy networks
Aviation industry
The Digital Silk Road
Leading the fourth industrial revolution
Notes
6 A European future made in Europe
Ideals and reality
China’s future ambitions
Consequences for Europe
Index
End User License Agreement
Tables
Composition of China’s GDP (%).
The dependence of China’s manufacturing sector on exports.
Europe’s current account with China (billion euro).
Investment regime in China and Europe.
Chinese and EU exports to third countries vs competitiveness indicators.
EU28 total external trade and net exports of goods, services and royalties (billion Euros average 2010–2014).
China’s impact on three factors that influence GDP growth.
'Made in China 2025' priority sectors.
R&D spending in manufacturing (BERD, US$ billion ppp).
Presence of Mainland Chinese speakers (CN), European speakers with a track record of pro-China opinions (EUCN) and other European speakers (EU).
Assets of largest Chinese banks compared with the World Bank and the European Investment Bank (US$ billion, rounded).
China’s steel industry and the expected change after reform (million MT).
Selected credit lines of Chinese state banks to renewable energy producers (US$ billion).
Figures
Indicators of investment flows in the Chinese economy.
Chinese exports of manufactured goods: foreign and other companies (US$ billion).
Chinese exports to developed and developing countries (US$ billion).
Evolution of China’s net exports of raw materials and manufactured goods after the year of entry into force of FTA (US$ billion).
2016 disbursements of export credit and concessional loans by China and OECD countries (US$ billion).
EU Extra-EU 28 and Chinese steel and steel product exports (US$ billion).
EU external and Chinese construction services exports (US$ billion).
EU external and Chinese exports of semiconductors (US$ billion).
Summary of China’s foreign economic policy.
Boxes
How China creates its industrial champions: The case of Huawei.
Example of a package deal.
Guide
Cover
Table of Contents
Begin Reading
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The Silk Road Trap
How China’s Trade Ambitions Challenge Europe
Jonathan Holslag
polity
Copyright © Jonathan Holslag 2019
The right of Jonathan Holslag to be identified as Author of this Work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988.
First published in 2019 by Polity Press
Polity Press65 Bridge StreetCambridge CB2 1UR, UK
Polity Press101 Station LandingSuite 300Medford, MA 02155, USA
All rights reserved. Except for the quotation of short passages for the purpose of criticism and review, no part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher.
ISBN-13: 978-1-5095-3470-8
A catalogue record for this book is available from the British Library.
The publisher has used its best endeavours to ensure that the URLs for external websites referred to in this book are correct and active at the time of going to press. However, the publisher has no responsibility for the websites and can make no guarantee that a site will remain live or that the content is or will remain appropriate.
Every effort has been made to trace all copyright holders, but if any have been overlooked the publisher will be pleased to include any necessary credits in any subsequent reprint or edition.
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1A call for economic realism
In April 2018, I was invited to The Hague, the Netherlands, to exchange views with officials about what remains one of the largest and most ambitious schemes of economic diplomacy in world history: the Belt and Road, China’s twenty-first-century highway to global economic leadership. My interlocutors were concerned about this new Silk Road, its impact on Dutch companies, the possibility of China using it to advance political influence, the likelihood that this state-driven project would challenge the liberal trade order, and that it might encourage the nationalists in the administration of Donald Trump to turn their backs on free trade altogether. While I was talking in The Hague, officials in Brussels were preparing a joint statement that criticized China’s new Silk Road for excessively benefiting Chinese state-owned enterprises (SOEs). After a period of great enthusiasm about the new Silk Road, Europe seemed to be having second thoughts. Yet, that very same day, the Dutch Prime Minister, on an official visit to Beijing, claimed that the Belt and Road was a good thing and that the Netherlands was ready to join it. About a year earlier, I had a similar experience in Poland. There as well, representatives of different ministries and intelligence services showed themselves critical towards China’s new Silk Road and the consequences for Polish manufacturers, but also then, the Prime Minister praised it during a visit to China.
For a long time, it was not possible to have frank conversations about China’s economic rise, even behind closed doors. Just questioning whether China’s rise was really good for Europe was often perceived as cursing in church. Is it not evident, the response was, that the success of another major economy is positive for European countries? Should we not be grateful and humble as Europeans, praise China for lifting hundreds of millions of citizens out of poverty, and was China not to become an infinite source of opportunities for companies? I recollect a meeting with ambassadors of the Member States in Brussels during which the common view was that Europe need not worry about China’s progress, but should become a part of it. In several cities that I visited, I saw large European firms publicizing the Belt and Road, through billboards in airports, advertisements in newspapers and sponsoring dedicated events. The Chinese government, meanwhile, eagerly encouraged this enthusiasm. At the time of writing this book, the centre of Brussels was lit with vast Chinese lanterns, part of the Ministry of Foreign Affairs Cultural Silk Road programme. Initially, I was told, the Chinese Embassy even asked to decorate the vast bulbs of the Atomium monument that tower above the Royal Palace. My attention was caught by an article in The Telegraph, a large British newspaper, that enthusiastically reported how British banks were working with Chinese financiers to back Belt and Road projects. The story, I read below the article, was provided by the Chinese state-controlled China Daily.
These are just a few cases of Europe’s difficulty in getting to grips with China’s economic rise. While the new Silk Road poses new challenges, trade with China has been at the top of Europe’s international agenda for a while. Germany and France were among the first to seek a so-called special relationship with China, the one country expecting opportunities for, among others, its car industry, the other to sell Airbus airliners. In the wake of the European debt crisis, since 2009, companies and governments have rushed to attract Chinese investment: southern European countries frustrated about the alleged lack of solidarity from the rich European countries in the north, eastern Member States assuming that close relations with China would allow them to strengthen their position towards Member States in the west. After British citizens voted to leave the European Union, China, more than ever before, came to be seen as an alternative source of capital. For over two decades we were told that the rise of China would be ‘good’ for Europe. It was explained by officials and business leaders alike that the more the vast Chinese economy opened up to the world, the more foreign companies would profit, that the burgeoning Chinese consumer market would bring about more export opportunities, and that this would all benefit European economic growth.
But how exactly can we evaluate the impact of China’s rise on Europe? Is it a matter of increasing trade, or attracting more Chinese investment? Should we equate the gains for Europe with the success of large companies? The answer to these questions is critically important, especially because the new Silk Road confirms that the Chinese government will continue to provide overwhelming political and financial support to its companies. If the United States invested about 130 billion in current US dollars in its Marshall Aid Plan, just after World War II, China is set to invest over US$1,000 billion, or one trillion to enmesh Eurasia and Africa into a dense network of trade, capital, transportation, communication and information.1 Chinese state banks have been instructed to support this initiative. Large state-owned enterprises are mobilized to implement the numerous construction projects, with thousands of smaller companies trailing in their wake. Evaluating the economic partnership has also become important because a new generation of Chinese leaders, headed by Chairman and President Xi Jinping, has proclaimed its desire to preserve the political monopoly of the Communist Party and to continue to develop socialism as an alternative to Western democracy and liberalism.2
This book answers several important questions related to China’s economic rise, the new Silk Road and the partnership with Europe. Chapter 2 reviews how successful Europe has been in bending the economic partnership with China to its advantage in the last two decades. It evaluates both the progress made in fulfilling European policy objectives and China’s impact on European gross domestic product (GDP). For the sake of clarity, I will use Europe and European Union interchangeably and focus on the level of both the European Union and Member States. Chapter 3 investigates the economic agenda of the new Chinese leadership and tries to interpret how Beijing sees the future of economic reform. Chapter 4 identifies the main instruments with which China seeks to execute its economic strategy – from the use of soft power to massive bank loans. Chapter 5 reconstructs the strategic ambitions behind the new Silk Road in strategic sectors, like maritime transportation, energy and robots. The conclusion searches for possible options for Europe to respond to China’s economic ambitions and to rebalance the partnership.
By taking this approach, I hope to add to some of the studies that have been published recently. It is encouraging that even if European politicians often do not seem to be overly concerned about the long-term consequences of China’s rise, many young scholars and think-tank experts have sought at least to advance the public debate and to explain that even if China’s rise allows some companies to profit, it remains a government’s responsibility to monitor the benefits for society as a whole, and preferably also for the long term. MERICS, a German think tank, warned in a detailed report that China’s economic influence is followed by political influence and that it has expanded its efforts ‘to influence Europe’s political and economic elite, media and civil society, in order to promote its authoritarian ideals.’3 Another report, by the European Think-tank Network on China (ETNC), provided a detailed overview of the role of China’s new Silk Road in its relations with fourteen European Member States. ‘No European country, nor the European Union, has so far developed a comprehensive strategic approach in responding to the Belt and Road’, it concludes: ‘The strategic implications of OBOR [One Belt One Road] result not so much from assemblages of single connectivity projects, but from its encompassing umbrella nature.’4 In its second Power Audit of Sino-European relations, the European Council on Foreign Relations (ECFR) found that China, through the new Silk Road, has gained more influence in Europe, but was relieved to see that Europe might become more cautious and realist in its dealings with Beijing.5
The contribution of this book to this body of important studies is in the first place that it connects the different layers of statecraft: soft power, economic power and hard, military power. It looks both back and forward, takes stock of what has happened between Europe and China since the 1990s and clarifies the implications of recent economic policies for the future of Sino-European relations. This book also combines an ambitious review of trade data with an enquiry into over 100 Chinese policy documents, official statements and statements of leaders of important Chinese companies. Finally, I hope that this work will add to the debate by combining the broad strategic perspective with detailed case studies of different sectors and policy instruments.
Zero-sum
This book, let there be no doubt, is a call for realism. It calls for rebalancing the partnership with China. I am aware that in Europe a commentator making such a call risks being branded a protectionist, a promoter of the kind of confrontational trade policy that the US President Donald Trump has put in place. So let me first clarify the conceptual lens through which I approach Europe’s relations with China. What shapes my perspective, and this is important, is that I am a public servant. I am an academic who receives his salary from tax payers. That means that my research should benefit the public interest. I am of the opinion that the primary contribution of an academic to society is his or her capability to ask fundamental questions: questions about matters that go beyond the day-to-day debates. China’s rise, I am sure, is one such topic, and in assessing its consequences I feel I should do so with an eye on the general good of my society, while taking into account the consequences for the next generations that will be part of that society. And, like many young Europeans, I consider my native country as part of a European community in which certain core values and geopolitical interests are shared.
This means that my enquiry goes far beyond the narrower corporate interests. It is perfectly possible that individual private companies make money in China. I have friends who own firms that source from China or produce in China. The cars they drive tell me that you can indeed make money in China. Yet my interest is to assess the success for our society as a whole, so we need to consider both the successes and the losses, the companies that flourish and the companies that are being challenged. It requires an assessment of the entire economy. For that reason, we cannot confine our investigation to a particular sector. It may well be that German car producers sell a lot in China, but a public servant has the moral duty to look beyond this, no matter how large their lobbying power in Brussels may be. I also understand that some politicians see the short-term benefits of going along with China, the loans China is willing to disburse or the photo opportunities next to Chinese leaders on the red carpet in the Great Hall of the People in Beijing. Whereas going to the West gave status to Chinese politicians in the past, these days travelling to China gives prestige to European politicians. Yet even if the pursuit of such opportunities is understandable from an electoral viewpoint, we need to look further and deeper.
How, then, to approach the ‘general interest’ when it comes to our economic relations with China? This question, indeed, implies a degree of scepticism towards the optimistic liberal premise that the growth of one economy tends to be good for the rest of the world, and that countries will progress as long as state borders are kept open. I understand the ideal of a free market, markets that are organized so transparently that citizens are able to make rational decisions, markets with enough diversity that choices cannot be manipulated by oligopolies, and markets in which growing efficiency reduces the costs of pollution, financial bubbles and so forth. But this remains an ideal. The notion of free trade has been around since ancient times and has always been overshadowed by the reality of political intervention as well as the fact that free trade is championed usually by those strong countries that stand to gain from openness. States can work towards the ideal of free trade, but as long as states exist, they have the responsibility to look after the interests of their citizens and to make sure that partnerships are beneficial.
That does not mean that I consider the world economy as an arena in which the gain of one country is automatically the loss of the other. The seventeenth-century politician and advisor to the Sun King, Louis XIV, following the reasoning that underpinned the English protectionist navigation acts, famously stated that the scope of international commerce was limited because the number of ships and the volume of gold were limited.6 This zero-sum thinking implied that states had to maximize their share in global shipping, also in terms of their share of global gold possessions. Traditional mercantilism therefore implies that a state has to avoid at any expense money being lost as a result of a trade deficit. Such zero-sum thinking has re-emerged. After a period of optimism about globalization, concern about job losses as a result of trade has increased. An extreme viewpoint is taken by Peter Navarro, an economic advisor to the White House.7 Economic hawks of his type insist that the problems of the West are due to a silent pact between the Chinese Communist Party leadership and Western multinationals, a pact that robs countries like the United States of their jobs, technology and wealth. China is the villain; we are the victims. I share some of the criticism of Navarro, especially with regard to the compliance of our elite. Yet realism, and here is where we differ, is less a matter of putting the blame on the other and more a matter of trying to resolve your own weakness.
I believe China’s pursuit of wealth, and even the central role of the government, are no reason to vilify it. All countries want to grow rich, and all successful countries have had the groundwork of their economic rise at least partially carried out by the state. The Netherlands grew thanks to the establishment of trading companies and state monopolies. Britain’s emergence as a trading power in the eighteenth century coincided with heavy protectionist policies, like the Navigation Act and the Calico Act, with the latter seeking to defend infant textile industries. The German Empire and the United States in the nineteenth century also provided support to emerging national industries. Friedrich List and Alexander Hamilton provided the intellectual justification for such policies. Japan followed in their footsteps, and, after World War II, the Four Asian Tigers, South Korea, Taiwan, Singapore and Hong Kong did the same. From a historical viewpoint, China is copying from our textbooks.
Perhaps one should not pay too much attention to the Communist Party of China and its ambition to preserve the responsibility to guide, protect and support the economic development of the country. Indeed, the one-party system is a form of dictatorship. Chinese citizens have no free elections, the Communist Party structure with its ninety million members pervades the whole society and Communist Party membership remains crucial for social mobility. The Communist Party, as we will see on the following pages, holds immense power over economic affairs and has a clear fixation with economic sovereignty – trying to make the nation less dependent on foreign companies and pursuing what it calls ‘comprehensive national power’. At the National Congress Meeting of the Party in 2017, President Xi Jinping made it very clear also that China, for now, will stick to socialism and the so-called dictatorship of the people.8 Yet, in Western history too, industrial take-offs often coincided with the centralization of both economic and political power. At the beginning of the eighteenth century only one in every fifteen citizens in Europe was eligible to vote – which is about the same proportion as the number of Communist Party members to the total Chinese population. Voting rights were determined by possession and the society was highly unequal. It was, in effect, the success of industrialization that went along with the maturing of Western democracy.
So, to make sense of what is happening in China today, it is perhaps better to compare China with the situation in most of the Western world in the nineteenth century; in the midst of a transformation from a predominantly rural society into a society that was both urbanized and industrialized. When China is located on this trajectory, it is not leading, as many have argued. In fact, it is still following the typical industrialization trajectory that Europe spearheaded. Some Chinese regions might be close to completing this stage of industry-led urbanization, but, overall, China’s production per capita, even at purchasing power parity, remains only one third that of the Euro-Atlantic world. If there is anything making modern-day China special, it is the size of its population, implying a much longer industrial take-off. What also makes China’s industrialization different is the overall growth model. As a result of historical productivity gains and growth, becoming thus less labour-intensive, China needs to appropriate a much bigger share of global industrial production to employ the same number of workers. Finally, it is the first large industrializing country since World War II, after the Soviet Union, that is not an ally of the leading power, the United States, so that China’s success creates much more strategic uncertainty and coincides with great power rivalry. But even the coincidence of strategic and economic rivalry has been seen numerous times before in history.
In its economic ambitions China is no exception. It is not an evil power. Yet it is also inadequate to assert that China is more benign or magnanimous than Europe, that, as some of its leaders have stated, it is restoring fairness and building a more virtuous international order. The idea that China, because of its history, has a strategic culture that is more benign and geared towards Confucian harmony should be contested. This argument crops up in debates again and again. China looks back at a long history of bullying, aggression, conquest and slavery.9 Whereas European empires projected their power overseas, Chinese empires projected their power overland into many parts that once did not belong to the imperial realm, areas inhabited by so-called barbarians. They did so not with caravels but by means of war chariots, riverine navies and large infantry. Neither is it treating poorer countries better today. China pays local elites in poor countries to get to their raw materials, uses its power to impose conditions, shows increasing paternalism to weaker partners and is developing railways and roads to penetrate their markets. It can also not be taken for granted that it will steer clear of the typical imperial curve, in which growing commercial interests overseas are followed by the hardening of influence and the use of military force. China is thus not necessarily more malevolent, but certainly not more benign.
Poverty in Europe
The fact that China’s economic ambitions are not exceptional does not make them less of a challenge for Europe. What China aspires to is understandable, so it must be equally understandable that Europe reflects upon how it is and may be affected. That China shows a lot of caution, balance-of-power thinking and political realism in its economic strategizing is all legitimate, and it is also legitimate that governments in partner countries think about their own interests. This is what they must do. Any government, politician, administrator or other public servant has the duty to reflect upon the general interest of their society, to identify opportunities and challenges and to use the country’s power as efficiently as possible to deal with them. As has often been said, China has successfully lifted hundreds of millions of citizens out of poverty, but Europe also needs to lift many millions of people out of poverty.
China has no monopoly on hardship. Europe also faces massive social and political uncertainty. China considers industrialization to be key to generating the economic gains that in turn have to keep the country united, to prevent the kind of chaos that tormented whole generations, including that of the incumbent Chinese President Xi Jinping: The Great Leap Forward (1958–61) and the subsequent Cultural Revolution (1966–76). Growth is critical to overcome the divide between rich and poor provinces, to uphold the legitimacy of the government. This is no different than in Europe. The European Union might not be a nation state, but rich Western European countries have a tremendous political interest in making countries in the East and the South of the Union more prosperous, so as to avoid them becoming hotbeds of dictatorship and anarchy, as happened in their post-war history. This has been the main imperative for the enlargement of the European Union: not the search for commercial profit, but the search for geopolitical stability. Just as Beijing, for strategic reasons, cannot turn its back on, say, the Province of Shanxi, Western Europe cannot ignore countries like Bulgaria and Greece; it cannot ignore the need to make them prosperous too. And if it does not concern the members of the European Union, there are numerous other poor countries around Europe that risk becoming cradles of insecurity if they continue to fall behind in terms of jobs and income growth. So the task that Europe faces in strengthening its economic position is by no means different from China’s. It only seems that Chinese officials, perhaps as a result of their suffering during the Cultural Revolution, are more aware of it.
Yes, the European countries have, for now, warded off the destruction of the internal market and the monetary union, and yes, Europe’s democracy is still resilient. But trust in national governments remains low. Consumer confidence has only just crept back to its pre-crisis level. Economic recovery remains fragile. The aggregated figures for the European Union hint at an upswing of trade and production. Still, about one third of the economic growth since 2008 has been generated by Germany. The difference between surplus and deficit economies remains large. The problem is not limited to the distribution of the gains of economic recovery; equally important is that the overall benefits of the current economic recovery are modest. Despite the growth of GDP and trade in the European Union, the private sector still employs 2.1 million fewer people than in 2008, real household consumption has hardly grown since 2008 and, displaying a lack of confidence in the future, corporate investment in machinery, computers and software has dropped. Most Europeans do not think the economic situation in their country will improve. Fewer and fewer citizens are confident about the merits of globalization and entrepreneurship.
Economic realism
So far, I have stated what I believe our response to China’s economic ambitions and the consequent economic realism should not be. It should be about neither zero-sum mercantilism nor commercial opportunism, short-term electoral concerns, or the kind of dogmatic liberalism that takes ideals for reality. But what kind of response should we then consider, in the light of the economic uncertainty and political fragility in Europe? Some readers might at this point become a bit impatient and wish to continue instantly with an analysis of Sino-European trade and Chinese economic policies. Still, I believe it is essential to provide more clarity about my interpretation of economic realism, for creating a sense of urgency without giving a sense of direction in terms of solutions can be rather dangerous.
I believe that economic realism prescribes societies to maximize their economic power, for the possession and distribution of power is what fundamentally shapes their ability to defend themselves, to influence external relations, to preserve internal cohesion, and to shape their own future. Economic power depends on the availability of resources, like labour, capital, and raw materials, but even more on the efficiency with which a society converts this into wealth, and thus into factors like good governance, education and research. Still, and this is what I recollect from many classic writers on statecraft, power is a means, not an end. The end is wellbeing, happiness, pride and dignity. Growth and the accumulation of economic power should be about human progress, the kind of progress that uplifts citizens, that gives them the satisfaction of contributing through their efforts to a better life for themselves, their relatives and society at large, that allows them to have a prosperous private life yet also to be part of loftier aspirations that tie those private lives together. A society without such common goals, even if it has material prosperity, will be fragmented and weak.
In this regard, it is not very useful even to look at China for inspiration and to consider it the new leader. China’s economy is vast and growing. Its transition is spectacular and any visitor to its cities feels overwhelmed. However, when it comes to wealth, wellbeing, the quality of life, the liveability of cities and happiness, it is not thus China that leads, but Europe, or at least North-west Europe. If one considers the world economy as a pyramid, this region, with some others, still holds the top. Countries like China, through hard work and sacrifice, are slowly climbing up. Some of its cities are catching up fast. But instead of pushing to the next level of development, Europe stands idle, enjoying the comfortable position that it carved out for itself in the past. Europe seems to be held back, on the one hand because it became accustomed to its wealth and takes it for granted, and on the other because it is always more difficult to decide what the next destination should be than to follow and to catch up. It is this lack of a clear common vision of a better future of what economic growth could be about that contributes to Europe’s sense of disorientation.
So, at the core of economic realism is the ideal of creating a better and cohesive society. Only if those ideals are clear can one organize
