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#China #BeltRoadInitiative seen as 'most ambitious development initiative since 1944'



A leading think tank says China’s Belt Road Initiative (BRI) is considered as the "most ambitious development initiative since 1944", writes Colin Stevens.

Giulia Iuppa, of the European Institute for Asian Studies, says the massive infrastructure project “could indisputably increase trade within the EU”.

Iuppa, a Researcher at the EIAS, based in Brussels, took part in a Q and A with this website on China’s flagship, multi-million-euro scheme. 

Here are his replies.

Q: What do you see as the main advantages of the initiative both to the EU and China?

Iuppa: “Official descriptions of the BRI as an umbrella initiative mention five areas in which not only China and the EU but also all the countries involved could benefit: policy coordination, facility connectivity, trade and investments, financial cooperation and people-to-people exchanges. The principal advantage of infrastructure development concerns increased interconnectivity, a potent driver for global growth and redistribution of wealth. In addition, it will result in reduction of transportation costs and time, as well as a decrease in the risks of trade flows such as blockages caused by conflicts or terrorism.

“The initiative holds considerable economic and political gains especially for China as the BRI could potentially redirect a large part of the world economy towards Asia. In fact, according to China’s policy communiques, Beijing aims at expanding Chinese export markets, promoting the RMB as an international currency and reduce trade tariffs, transportation costs and regulatory complications. Furthermore, to finance the BRI, Beijing has been injecting an enormous amount of capital into the Chinese Development Bank and the Export-Import Bank of China that are characterized by low borrowing costs and low interest rates so that companies working on BRI can enjoy the benefits of this cheap lending. This contributes to make SOEs highly competitive as the case of a bid for the construction of a high-speed rail project in Indonesia has demonstrated in 2015. Consequently, an increase in trade exchanges, investments and connectivity between China and Eurasia could concurrently result in considerable political gains as underdeveloped countries’ dependence on China could grant it political leverage.

“As for Europe, the development of infrastructures could indisputably increase trade within the EU which will eventually strengthen its economy – if it joins the BRI as a united front. Joining the BRI with a conscious, solid plan will allow the EU to negotiate from a favourable position to push its own demands such as environmental standards. Furthermore, Chinese markets becoming more accessible could boost exports to China and create more jobs all over Europe. Over time, the trade deficit could shrink and new venues for bilateral cooperation could appear in third countries.”

Q: Will BRI help lift China’s poorest regions out of poverty?

A: “One of the BRI’s aim was supposedly to boost development in the Western region which was largely excluded from the economic boom in the coastal regions. In fact, the poorest provinces are expected to gain the most from the infrastructure connectivity with Central Asia and beyond. However, some major impediments seem to reside with the low levels of labour mobility (few Chinese workers seems to be willing to move to those regions) as well as with the small – albeit growing - amount of China’s investments directed to Central Asia and the South Caucasus region. Indeed, the greater part of the investments is directed to South Asia, Southeast Asia and Russia and the Eastern and coastal provinces of China are the ones currently benefitting the most from the initiative.

Q: How can Europe/EU tap into the huge potential this project offers? In what way will this open up new markets for China (and maybe the EU)?

A: “Some preliminary considerations are needed before the EU considers how to tackle the opportunities the BRI presents. Both Beijing and Brussels have their own adjustments to implement if they intend to cooperate with one another. First of all, the EU should promptly decide on a common approach regarding China to avoid becoming a peripheral market due to uncoordinated policies. The EU members’ priorities should focus on the protection of the common European market from Chinese market distortions caused by the paradoxical lack of openness and competition to foreign participation in the BRI; and addressing competition in third markets.

“Consequently, the EU could construct a narrative based on its long successful history of promoting connectivity in terms of capacity building and regulatory frameworks and standards via the EU Connectivity Strategy towards Asia. By doing so, the EU could reassert its expertise in these areas and set the trend for any kind of future cooperation with China. In fact, China should align with the EU regulatory principles if it intends to further delve into the European market; study and implement existing cases of mixed economy in Europe so that the monopoly of the state-owned enterprises marking Chinese economy will not translate into market distortions in the common European market. Indeed, one of Europe’s greatest strengths, the open market, has allowed Chinese companies to freely enter and operate in Europe. By contrast, European companies have been struggling to invest in China due to the barriers this market presents. Therefore, transparency, feasibility and sustainability of BRI projects could be increased by exporting European expertise that could consequently pave the way for European companies to deal with Chinese ones on an equal footing.”

Q: Would you like to see Europe/EU deepen its ties with China?

A: “In a fast-changing global order, the major threat for the EU concerns the preservation of its values and social model. Adapting to changing economic realities should then be considered a priority. Considering the relevance of EU-China economic relations as well as Chinese relevant cultural presence within European countries, it seems important to prioritize developing a more balanced relationship.”

Q: Do you have any concerns about Chinese economic and political expansion? What about the costs which are huge? 

A: “China has already been utilizing its economic diplomacy to achieve political objectives. For instance, in 2008, it cancelled Airbus contracts when France hosted the Dalai Lama; in 2010, it shut Norway out of the Chinese market when Liu Xiaobao was awarded the Nobel Prize; it restricted rare earths exports to Japan in retaliation of a maritime incident within the East China Sea dispute. Therefore, China’s increasing economic and political expansion could subsequently increase its leverage on the EU. China could try to exploit economic interdependence to influence EU policy making or retaliate against behaviours Beijing disapproves of. Moreover, if European countries fail to promptly implement a common approach towards China, such lack of coordination could eventually weaken the common market.

“Indeed, China could capitalize on the divergence within the EU member states regarding their stances towards China. In 2012, the Chinese Ministry of Foreign Affairs launched the former 16 + 1 platform (now 17 + 1) to promote cooperation between China and the Central and Eastern European countries (CEECs) which have acknowledged improvement in development levels thenceforth. In fact, CEEC countries look favourably at heightened cooperation vis-à-vis China and, especially after the economic and financial crisis, are leaning towards the more dynamic, less saturated Chinese markets. By contrast, Western European countries perceive Beijing’s interest in Eastern Europe as an attempt at replicating the Roman military strategy divide et impera for which the Belt and Road incarnates the means to that end. Consequently, coordination among the various members will unquestionably prove challenging since different stances permeate the EU.

“At the moment, most of European companies are being overly critical of the initiative and the political debate has concentrated on the perceived debt trap rather than envisaging trade opportunities. In fact, the BRI has been considered as the most ambitious development initiative since 1944 and the establishment of the Bretton Woods institutions and China has been massively investing in the project to fill in the global gap in infrastructure development. China appears to be extremely confident in the success of this initiative since it has declared no limit with financial outflows aimed at the initiative. But the BRI will ultimately be considered successful only if China will recoup what has been investing and if the majority of BRI countries’ economies will benefit from it. Many challenges still lay ahead and the outcomes are yet undefined since many projects are still in their planning phase.”

Q: Do you support Putin's efforts to link his Eurasian economic union with the BRI?

A: “The Eurasian Economic Union (EAEU) has a great deal to offer to China since the EAEU Member States  have a surplus of natural resources. Russia specifically covets access to the Chinese market as a safer alternative energy partner, due to American and European sanctions over the annexation of Crimea, in 2014, that remain in place. The BRI’s bulk of investments are currently directed towards Russia in the oil and gas sectors. This liaison between the world’s second largest gas producer and the world’s second biggest economy is producing concrete results in the form of a major pipeline, “the Power of Siberia”, that will in fact link Siberia to China. However, such an impressive feat of engineering insinuates more of a geopolitical choice at a time when the supremacy of the United States has been diminishing but not disappearing.

“The growing perception of Washington and Beijing as opposed strategic adversaries could likely expand Chinese interests for more venues for cooperation between Beijing and Moscow including the security realm. Nonetheless, Gazprom refused to seek out Chinese funding to avoid debt traps and maintain leadership over the project. Infrastructures for the pipeline had to be built from scratch since the pipeline starts from one of the remotest and most inhospitable regions of the world and profits from this project won’t be expected before its completion between 2022 and 2025. And according to Gazprom statistics, Russian gas sold to Europe remains the most profitable.”


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.

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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.

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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.

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