Connect with us


How the West can avoid a dangerous and costly confrontation with #China



The Institute of Economic Affairs - our British member think tank - has released a new briefing paper, authored by the IEA's Head of Education Dr Stephen Davies and Professor Syed Kamall, the IEA’s Academic and Research Director, who sat on the European Parliament’s International Trade Committee from 2005-2019. The main conclusions of the report include:

  • Fears are rising that we are at the foothills of a new Cold War;
  • Covid-19 is provoking a major reorientation of our foreign policy. At the heart of this is our changing relationship with China;
  • We risk fundamentally misunderstanding China’s motivations because our assumptions are out of date: unlike the USSR China does not seek hegemony;
  • Rather it acts out of self-interest and seeks to become both a model nation for developing countries to emulate and the dominant rule setter in the international trade and financial system;
  • The strategy of constructive engagement or liberal internationalism is no longer working – but a more realist confrontational balance of power relations with China could be economically costly and politically dangerous;
  • Yet there is an alternative to simple confrontation and military competition;
  • We will have to restrain sensitive trade and respond robustly to the Chinese government’s actions in Xinjiang, Hong Kong and against Asian neighbours;
  • These actions should be supplemented with a programme of engagement between private individuals, organisations and firms in free societies with their counterparts in China;
  • A policy of encouraging organised contact at a civil society level could lead to reforms that the current rulers will have to go along with or find much less easy to manage.

“Chinese Puzzle” argues the West risks careening towards a politically dangerous and economically costly confrontational relationship with China.

Yet China's history – of accepting and recognising spontaneous bottom-up transformations and then encouraging them to go further by embedding them in a legal framework – and its culture of “saving face” or “mianzi” suggests Western politicians could be fundamentally misunderstanding China's motivations.

While the current strategy of liberal internationalism is no longer working, we should not see handling China as a binary choice between containment and confrontation. Increasing authoritarianism in China has put paid to hopes that markets plus prosperity would lead to more liberty. Its policy towards the Uighur population and over the so-called “Belt and Road Initiative,” as well as its behaviour in the early stages of the Coronavirus pandemic, have led many in the West to view China not as a partner but as a threat.

However, China’s activities in its neighbourhood may be partly explained by a certain defensiveness due to a determination to never again be dominated by foreign powers. What we are seeing is something far more subtle than plans for global hegemony. There is a competition to become the model or pattern nation that others look to emulate, particularly where nations that are developing economically are concerned. China also seeks to become the dominant rule setter in the international trade and financial system.

In response, we will have to restrain sensitive trade and respond robustly to the Chinese government’s actions in Xinjiang, Hong Kong and against Asian neighbours. These actions should be supplemented with a programme of engagement between private individuals, organisations and firms in free societies with their counterparts in China. This type of people-to-people engagement could still be considered far less risky overall than overt military confrontation and, in the longer run, more likely to succeed.

A policy of encouraging organised contact at a civil society level could lead to reforms that the current rulers will have to go along with or find much less easy to manage.

Dr Stephen Davies, Head of Education at the Institute of Economic Affairs and Professor Syed Kamall, Academic and Research Director at the IEA, said:

“The Chinese government should be believed when it says it does not seek hegemony. Instead, the Chinese government’s goals are access to raw materials, technology, and markets for Chinese companies. 

“This may lead to the Chinese government seeking to set international standards and rules and challenging the good governance mantra of western democracies, but unlike the Soviet Union during the Cold War it will not seek to export its ideology.

“This will pose a different type of challenge than the Soviet Union during the Cold War up to 1989. Western liberal democracies should still respond robustly to Chinese government aggression and violations of human rights, but at the same time seek more people-to-people contacts to help shape reforms within China itself.

“It’s also important to distinguish between the actions of the Chinese Communist Party and Chinese people when raising concerns over the actions of the Chinese government.

“The background to this is the way that the transformation of the Chinese economy since the 1980s has been produced as much by spontaneous bottom-up action subsequently recognised and accepted by the CCP as by top-down reforms. This shows the opportunities there are for genuine popular engagement as a way to respond to the challenge of the 'Chinese Way’.”

Download the full report


CCCEU submits feedback to European Commission’s public consultation on white paper on foreign subsidies



The China Chamber of Commerce to the EU (CCCEU) has submitted its feedback to the European Commission’s public consultation on the white paper on levelling the playing field as regards foreign subsidies, raising concerns over possible legal barriers to Chinese companies operating in the bloc.

Calling on the Commission to carefully examine the legality, rationality, and necessity of adopting new legislative tools on foreign subsidies, the chamber urged that the white paper not be turned into legislation.

CCCEU Chairwoman Zhou Lihong said: “The legal framework proposed in the white paper to scrutinize foreign subsidies will directly take a toll on non-EU undertakings, including our members, and the EU legislative and business environment they operate in.

On behalf of CCCEU members, we expressed our views and concerns in the feedback document. We hope the European Commission will duly and carefully consider our concerns and, in the end, reduce business and investment barriers as well as adopt a fair, transparent, and non-discriminatory approach towards foreign companies including Chinese ones.”

Released by the European Commission, the white paper, which was undergoing a public consultation process until September 23, put forward options aimed at “addressing the distortive effects caused by foreign subsidies”, in three areas: in the single market generally, in acquisitions of EU companies, and during EU public procurement procedures.

In its response to the public consultation, the CCCEU stressed that it would be unnecessary for the EU to formulate a new set of legal instruments.

The new legal tools proposed in the white paper lack a clear legal basis under EU treaties, will overlap with a number of existing EU and member states’ instruments, and produce "double standards" in their enforcement, the CCCEU noted.

The proposed legal tools could also potentially be incompatible with the EU’s WTO obligations including principles such as national treatment, most favored nation status, and non-discrimination.

Meanwhile, the new rules contain “unclear or unreasonable concepts and standards, unequal procedural rights, or contradict the fundamental principles of law".

For instance, the white paper reverses and imposes the burden of proof on investigated companies, which should not be obligated to provide information beyond their ability. It could violate the right of defense of investigated companies as they will only be notified after the preliminary findings are made.

The CCCEU believes the white paper falls short of clarifying key concepts such as definition and forms of “foreign subsidies,” “leveraging effect,” and “material influence,” which will create great legal uncertainties and grant the EU more discretionary power.

Going into detail, the CCCEU also believes the minimum threshold for a foreign subsidy investigation proposed by the white paper - a cumulative amount of €200,000 over a consecutive period of three years - is too low to achieve “substantive justice”. Therefore, the CCCEU recommends different review thresholds depending on the size of transactions or companies, and a sector-specific approach.

The EU should also take into consideration businesses’ solidarity efforts in crises, the CCCEU said, and proposed “grandfather clauses” to be inserted in possible future legislation, as some Chinese companies’ investments in Europe followed invitations by member states in the aftermath of the European debt crisis. The favourable terms they enjoyed at the time should be legitimately protected and exempted from future scrutiny, the chamber said.

The CCCEU holds the view that it will become necessary for the competent supervisory authority to run an "EU interest" test before determining the need to redress foreign subsidies. “Having invested millions of euros in supporting European societies and projects of public interest, many Chinese companies have been playing an active role in local community development, donating to educational, environmental, and social assistance causes based on local needs,” the CCCEU said.

The European Commission issued the “White Paper on Levelling the Playing Field as regards Foreign Subsidies” on June 17 and has since launched a public consultation open till September 23.

The CCCEU set up a task force comprising lawyers, business representatives and EU affairs experts to prepare its response to the public consultation. In July, the CCCEU organized a video seminar to discuss the white paper’s potential impact on the activities of Chinese business in the EU. In parallel, intensive surveys and discussions have been underway.

On 10 September, the CCCEU and Roland Berger jointly published the 2020 Recommendation Report, urging Brussels to address Chinese businesses' pressing concerns amid declining sentiment on the ease of doing business in the bloc. In the Report, the CCCEU suggested the EU conduct feasibility studies before adopting new laws and regulations on trade and investment activities.

Founded by Bank of China (Luxembourg) S.A., China Three Gorges (Europe) S.A. and COSCO Shipping Europe GmbH in August 2018, the Brussels-based CCCEU now represents up to 70 members and chambers in member states, covering about 1,000 Chinese enterprises in the EU.

Continue Reading


Huawei chief: The world needs an open approach to scientific research



At the webinar for Beijing-based research and science attaches from Europe and from the EU, I made the following comment on the subject of research collaboration in Europe: “The nationalization of scientific activity – country by country – is not what the world needs at this time,” writes Abraham Liu.

Here’s why

The events surrounding COVID-19 have given us all some time to reflect upon many different issues – some are of a micro or personal scale – others have a larger macro-economic dimension.

But as the world is embarking on finding a vaccine for COVID-19, there is one clear dawning realization for us all to reflect upon.

Research, educational, private, and public bodies from all over the world must collaborate on basic and applied research. Without intensive international engagement and co-operation, society will not be able to benefit from new innovative products and services. Governments and the private sector alike must substantially invest in basic scientific research if the new products of tomorrow are going to be delivered into the global marketplace.

The process of innovation must not be confined to any one company or any one country. Scientific excellence working together across borders can create new products that address key socioeconomic challenges in the world today. That is why so many multi-jurisdictional research teams across the globe are working on a vaccine for COVID-19.

The same principle – namely the need for international engagement and co-operation – applies to the ICT sector and to the capability to bring new technological innovations into the marketplace.

Huawei is one of the most innovative companies in the world.

Under the EU industrial scoreboard for research and development 2019 Huawei ranks fifth in the world in terms of the levels of financial investment that the company makes in the fields of R&D. This a  finding of the European Commission having surveyed 2,500 companies in the world that invest a minimum of €30 million in R&D per annum. We:

  • Run 23 research centres in 12 countries in Europe.
  • Hold 240+ technology partnership agreements with research institutes in Europe.
  • Collaborate with over 150 European Universities on research.
  • Employ 2,400 researchers and scientists in Europe.
  • Invest 15% of our global revenues into research each year and this level of investment is going to increase.

International collaboration is at the heart of the Huawei business model when it comes to our research activities.

Europe is home to 25% of all global R&D investment. A third of all scientific publications that are reviewed in the world today emanate from European researchers. Europe is home to the best scientists in the world. And this is why so much of Huawei investment on the research side is based in Europe.

Huawei has participated in 44 collaborative research projects under both FP7 and under Horizon 2020. We have engaged in research covering, for example, 5Gcloud and device technologies and the building of ICT platforms that will deliver the smart cities of the future. So Huawei has a strong embedded imprint on research in Europe, and this remain the case for many years to come. In fact, Huawei’s first research facility opened in Sweden in 2000.

The Huawei Research Center in Gothenburg

Horizon Europe – the next EU research, innovation and science instrument 2021-2027 will play a central role in delivering upon the policy agenda of the EU institutions. This includes strengthening the industrial strategies of the EU, delivering upon the EU Green deal and tackling the UN sustainability goals.

Huawei can positively support the implementation of this exciting new EU policy agenda.

The ‘nationalization’ or ‘de-compartmentalization’ of scientific and research activity – country by country – is not what the world needs today. The public, private, educational and governmental sectors  need to take an open approach to scientific engagement. This will ensure that the key global challenges facing the world today can be positively addressed for all of mankind.

Further reading


Disclaimer: Any views and/or opinions e

Continue Reading


Thoughts on post-Abe Japan in foreign policy



After more than seven years of steady rule, Shinzo Abe’s (pictured) resignation as Japan’s prime minister has once again put the country’s foreign policy into the world’s spotlight. With the Liberal Democratic Party (LDP) racing for the selection of new party leader and later on, the nation’s prime minister, several possible candidates have come to the fore. Apart from the ambitious Shigeru Ishiba who attempted to challenge Abe for the party’s leadership in the past, others such as Yoshihide Suga (current Cabinet Secretary) and Fumio Kishida, are expected to stand as contenders for the top post within the LDP as well as the government.

First, the perception of China within the Japanese public and LDP, has been at a low level even before the COVID-19 pandemic struck Japan. According to Pew Research Center’s Global Attitudes survey in late 2019, as much as 85% of Japanese public viewed China negatively ⸺ a figure that put Japan as the country which had the most negative view of China among the 32 countries polled that year. More importantly, such survey was conducted months before the three events: the spread of COVID-19 pandemic, the passing of the Hong Kong security law and the continuing dispute of the Senkaku (or Diaoyu) Islands. With all these three issues involving China converging at the same time, it will be challenging to expect the Japanese public will have a more positive view of Beijing this year.

The US-China rivalry today has also entered uncharted waters in which military conflict is no longer a distant dream for many. Given its vested relationships with both US and China, such challenge remains to be the most difficult for Abe’s successor to grapple with. On one hand, Tokyo has to safeguard its close trade ties with China while on the other, the former has to depend on its security alliance with the US to safeguard both national and regional security against hypothetical threats (including China). As reported by Kyodo News in last July, Suga himself was aware of such dilemma as a middle power and even recognised that the balance of power strategy might not be suitable anymore given the current freefall relationship between Washington and Beijing. Instead, Suga alerted of the possibility in siding with one of the two powers as the eventual option for Japan in the near future. While he did not mention which country to side in case such scenario becomes a reality, political observers should not be too conclusive in that he will choose China as opposed to the US if he becomes the new Japanese prime minister.

Last, Abe’s successor inherits his legacy of Japan as a proactive leader in the Southeast Asia region. As a person without much experience in foreign policy, it is challenging for Suga (more than Kishida and Ishiba) to preserve Japan’s leadership status in Asia without heavy reliance on the foreign policy establishment. That said, the current Abe administration’s policy of encouraging its manufacturers to shift production from China into either Japan’s own shores or Southeast Asian countries, will likely to be continued in consideration of the urgency compounded by the COVID-19 pandemic and the freefalling US-China relations.

With Japan’s collective pursuit with the US, India and Australia for the Free and Open Indo-Pacific (FOIP) vision as a security counter against Beijing in Southeast Asia, on top of Tokyo’s national economic interest to reduce its overdependence on China, the country fits well into the sort of external power needed by the ASEAN member states.

ANBOUND Research Center (Malaysia) is an independent think tank situated in Kuala Lumpur, registered (1006190-U) with laws and regulations of Malaysia. The think tank also provides advisory service related to regional economic development and policy solution. For any feedback, please contact: [email protected].  

The opinions expressed in the above article are those of the author alone, and do not reflect any opinions on the part of EU Reporter.

Continue Reading