Transcript CHINA’S EMERGING LEADERSHIP ROLE IN ASIA

Willem van Kemenade
Website: www.willemvk.org
E-mail: [email protected]
THE EMERGING EU-CHINA-US
GRAND TRIANGLE ?
The Rise of China and the Shifting
Global Balance of Power
Clingendael
October 24, 2005
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Contents
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China’s domestic political, social and
economic development
The US-Japan-(Taiwan) Alliance
The Trans-Atlantic Rift
China’s Global Scramble for Energy
America’s Hard and Europe’s Soft Power
M&A, Sanctions
Free Trade vs. Protectionism
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Hu Jintao (62), Closet
Liberal or Hardliner ?
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Since take-over in 2002-2003, hope was high that Hu would
introduce a new wave of political reforms. However, he has
suppressed the debate at the national level and focussed on rural
poverty, government austerity and anti-corruption.
Worried by people’s power take-overs in Ukraine, Georgia and
Kygyzstan and rebellion in Uzbekistan, there is a crackdown on
Internet and (foreign) media, tighter police surveillance of activists
and a clampdown on NGO’s.
As social unrest escalates, Hu wants to re-centralize state- and
party-power so as to maintain stability and order, ahead of the 2008
Olympics.
He reached out to liberals by rehabilitating Hu Yaobang and inviting
Taiwan’s opposition-leaders for high level visits to Beijing.
In foreign policy Hu stresses “Peaceful Rise” rebuking the US
Neo-Cons and Japanese right-wing, who see China as a “Threat”.
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The World Economy is
booming in China
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Sixth largest economy, second in PPP; 4th trading power.
22 % of the world’s population; GDP of $ 1.55 trillion is 4 % of
the world aggregate of $ 36 trillion. Per capita income 2004 $
1.196,--. Black economy is at least another $ 100 bn.
China is expected to match the US in coming decades as the
“locomotive of world economic growth”. It now contributes
18 % to global growth. In 2003 China accounted for 60% of
world trade growth
China's economy has continued to depend too much on
externals.
About 45 % of China's growth derives from exports, and so the
country's economic health is highly vulnerable to
protectionist pressures from the US and Europe.
"Exports are becoming a growth engine, but China will have to
carefully deal with these external risks."
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China’s Global
Technology Position
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China’s role in the world economy is largely defined by
its participation in global production networks, set up by
others, the Multinational Corporations (MNCs).
Their dominant role derives from their control over standards
and intellectual property. The big question is whether
manufacturing and trading giant China, will also become a
technology giant.
China now spends 1.4 % of GDP on R&D annually. The
OECD average is 2.3 %
85 % of high tech exports are from foreign invested firms,
which employ managerial skills and proprietary technologies
of MNCs.
China is in a “patent trap”, that requires it to pay substantial
royalties to the patent owners out of the sales of its
manufactures.
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When will China’s Economy
be bigger than the US’s ?
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In 2003 China's GDP was $1.41 trillion and America's
was $11.26 trillion. At constant, average growth rates of
8 % for China and 2.5 % for the US, China would have
a bigger economy in 2043.
Current demographic forecasts suggest that China's
population will peak around 2050 and then start to
decline. Well before that, say 2030, it will be
demographically one of the oldest countries in the
world, with a very high retiree-to-worker ratio.
Various imponderables – political crisis, effect of climate
change, war, may lead to different outcomes.
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Regional Relative Weight in the
World Economy
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Europeans are recognizing that in terms of economic
muscle and trading influence, the world is rapidly
coalescing into three blocs: America, Greater Europe,
and a China-centered Asia.
East Asian countries, including China, account
for 54 % of Japan's GDP.
In comparison, Central Asian countries Kazakhstan,
Kyrgyzstan, Tadjikistan, Uzbekistan, Turkmenistan,
Afghanistan account for 5 % of China’s GDP.
Latin American countries account for 15 % of the
United States' GDP.
East Europe accounts for just 8 % of the EU's GDP.
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China: A Regional Power with some Global Influence
and the Ambition to become a Two-Ocean Country
Gwadar
From: Zbigniew Brzezinski, The Grand Chessboard:
American Primacy and its Geostrategic Imperatives,
Washington DC, 1997
A China-Centred World
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An America-centred World
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A Europe-Centred World
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China’s
Budget
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Defense
At the opening of the annual session of the National People’s
Congress in March 2005, China announced to increase its national
defense spending by 12.6 % to $ 29.9 bn.
This latest rise comes after increases of 11.6 % in 2004, 9.6 % in
2003, 17.6 % in 2002 and regular double-digit increases in the
decade before that.
Some Western experts estimate that the real size of China's military
spending is 3 to 5 times the official number, placing it third behind
the United States and Russia. China’s substantial arms
purchases in Russia and Israel are not included.
The combined defense budgets of EU members - $175 bn exceed the military budgets of China, Japan, and Russia combined.
The US' nearly $500 bn budget for the current fiscal year, exceeds
the aggregate total of the rest of the world.
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Is War over Taiwan
likely ?
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Majorities in the US, Japan and Taiwan probably prefer the
status quo of “no independence, no reunification, no war,
joint economic development and some integration”.
The US wants to maintain its dominance over both Japan as a
satellite ally and Taiwan as an unrecognized protectorate, as
the twin pillars of its military hegemony in Northeast Asia.
On all sides there are vocal minorities and interest groups who
think they will benefit from a war, which they reflexively assume,
the US/Japan/Taiwan will win.
One Japanese pro-Taiwan hardliner: “In coming years, public
opinion and the US Congress will be the ‘dictator’ of the
world, stronger than the president.”
No legal instruments mandate Japan to support the US in case
of war.
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Sino-Japanese Relations:
Energy-rivalry, Military Conflict,
Permanent Estrangement ?
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Tensions have escalated over gas reserves in the East China Sea. The
JDA revised its strategy late 2004 on the assumption that these
tensions could escalate into war.
In February, the US and Japanese Foreign and Defense Ministers [2 +
2] declared the Taiwan Question a “common strategic objective”.
And in April, Tokyo awarded two Japanese companies the right to drill
for oil and gas near the Senkaku’s.
Chinese citizens launched a global internet-campaign, opposing
Japanese permanent membership of the UN Security Council while
violent anti-Japanese demonstrations were staged in Chinese cities.
On October 1, Japan proposed a "comprehensive and final solution" to
the East-China Sea gas issue. China responded by offering talks on
the UN Security Council issue on October 16.
However, PM Koizumi’s visited the Yasukuni Shrine again on October
17, plunging bilateral relations in crisis again.
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Japan’s Attempts to lead Asia
stymied for decades by
subservience to the US,
Now by the Rise of China
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Japan has tried to break out of its “satellite-relationship” with the
US several times, but each time external events and American
pressure frustrated this. Koizumi’s announcement in 2002 that he
would go to Pyongyang, just after Bush had branded it part of the
“axis of evil” was the latest example.
Then Japan tried détente with Russia: getting the Kurile islands
back for a huge pay-out of $ 25 billion. Yeltsin wouldn’t play ball.
Then the first North-Korean nuclear crisis in 1993-1994 pulled
Japan back into the American orbit. China’s firing of missiles close
to Taiwan in 1995-1996 further re-strengthened the US-Japan
alliance.
During the Asian Financial Crisis in 1997, the US, followed by China,
torpedoed a Japanese plan to set up an “Asian Monetary Fund”
that would help Asian countries not according to the IMF criteria of
the Washington Consensus, but according to “Asian Values” with
Japan in the lead.
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The Coming East Asia Summit
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The East Asia Summit is scheduled for December 14 in Kuala
Lumpur as a first step to establish an East Asian Community.
Since China and Japan cannot lead because they don’t accept
each other’s leading role, ASEAN is in de drivers’ seat and will
chair the Summit with the ASEAN 10 + 3 – China, Japan, South
Korea, plus India, New Zealand and Australia.
Australia, one of the deputy sheriffs of the US has been trying
to rally support for US participation, but there is a consensus to
keep the US out.
Koizumi is expected to move forward with constitutional revision,
fully remilitarize Japan as the uninhibited global junior military
ally of the US and be very lukewarm about Asian
“mulitlateralism”.
In the anti-China prism of the US and Japan, China is planning
to use the EAC as an instrument to limit US influence in Asia by
establishing its political, economic and military dominance in the
region.
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“An East Asian Cold War”
Masashi Nishihara
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Senior figures in Japan openly express hope that China will
disintegrate: “If Taiwan is not integrated into China, that will be a
great favor to our defense”.
“We will definitely support US intervention to defend Taiwan …..
If we have to choose between the US and China, Japan will
choose the US. That’s the worst situation to arise”.
“Tensions will continue for some time. I cannot see even ten,
twenty years from now, we will become good friends. We will
have huge trade, summit meetings etc. but tension will continue.
Like during the Cold War, the Soviet Union and the United States,
two very different powerful empires. They could never get really
close. But there was détente, disarmament, reduction of tensions
etc. They managed to be able to coexist, without fighting. Maybe
something like that can develop between China and Japan.
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America yields to
Chinese
leadership on
North-Korea
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After 13 months absence, North Korea returned to Beijing on
July 27 for another round of negotiations about a possible end to
its NWP.
A meaningful step forward was taken when the US after years of
public insults and threats, conveyed to Pyongyang that it
recognized North Korea as a sovereign country and had no
intention of invading it.
By September, China intensified the pressure on the US to
extend some trust to North Korea, backing Pyongyang's right to
a peaceful nuclear energy programme once it dismantles its
weapons and returns to the international nuclear nonproliferation treaty.
Then on September 19, North-Korea agreed to give up all its
NWP’s in exchange for oil and food aid, a non-invasion pledge
and diplomatic recognition by the US and Japan.
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North-Korea:
Background to the
“Six Party Talks”
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Washington had become alarmed by the progress of SouthKorea’s “Sunshine Policy” with the North – linking North and
South by big infrastructure-projects, setting up investment-zones
in the North and even de-mining the Demilitarized Zone, which
the US refused to approve. On top of this came a conciliatory
approach towards Pyongyang of America’s most obedient ally,
Japan. This had to be stopped.
Not ready for a preemptive strike on North-Korea in the run-up of
the Iraq War, Washington decided to cook intelligence and to
mobilize a coalition against Pyongyang, the “Six Party Talks” not
so much for negotiations as for a “diplomatic tribunal” to
pressurize North-Korea and persuade the other participants to
agree with America’s hardline and join Washington in imposing
sanctions.
Selig Harrison, Did North Korea cheat ? Foreign Affairs,
January/February 2005
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The Impact of “9-11”
on Chinese and
Central Asian Security
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The war on terror has loosened China's grip on the geostrategic
zone to its west. China fears that the US will dominate the
Eurasian heartland for the long haul.
By uprooting Al-Qaeda in Afghanistan, the Bush Administration
has also weakened China's influence in Pakistan and the
Persian Gulf region.
Presidents Putin and Hu Jintao have increasingly shown their
dissatisfaction with the US military presence.
Beijing saw Karshi-Khanabad, in Uzbekistan, and Manas, in
Kyrgyzstan as US bases for the long term containment of China.
After US protests against the Andizhan massacre in Summer, the
Karimov regime ordered the US to leave its Uzbek base.
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Sino-Russian Strategic
Convergence during the 1990s
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Frustrated and humiliated by US-hyperpower, China and Russia
together with Kazakhstan, Kyrgyzstan and Tadjikistan, set up
the “Shanghai Five” in 1996 to jointly stabilize Central Asia.
The “Shanghai Cooperation Organization” replaced the
“Shanghai Five” June 15, 2001. Uzbekistan joined as a new
member. The six signed the "Shanghai Treaty on Cracking
Down on Terrorism, Separatism, and Extremism.“ .
This multilateralism was unsettled by the US intervention in
Afghanistan in late 2001, which Russia welcomed.
China however, accused the US of using military action in
Afghanistan “to seize the chance to expand its military presence
in Central Asia”. in addition to the US-presence in Korea, Japan,
Taiwan and in SE Asia.
The Secretariat of the SCO is based in Beijing.
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China’s Global
Scramble for Energy
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An unprecedented need for resources is now driving China's
foreign policy.
Twenty years ago, China was East Asia's largest oil exporter. Now
it is the world's 2nd largest importer.
Last year, it accounted for 31 % of global growth in oil demand.
But it still imports only 12 % of the energy it consumes, compared
with 40 % for the US and 80 % for Japan.
For every US $ worth of output, Chinese energy consumption is
4.3 times that of the US, 7.7 times of Germany and 11.5 time of
Japan.
Anticipating a military conflict with the US, China is considering to
build pipelines to the Indian Ocean through Burma and/or to the
Arabian Sea through Pakistan.
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“West-Pipelineistan”
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“East Pipelineistan”
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Iran and China:
Two old Asian Empires
Who don’t accept orders from the US
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Iran alone already accounts for about 11 % of China's
oil imports, and in October 2004, the state-controlled
China Petroleum and Chemical Corporation, known as
Sinopec, one of China's three major oil companies,
signed an oil and natural gas agreement with Tehran
that could be worth as much as $70 billion -- China's
biggest energy deal yet with any OPEC producer.
Beijing committed to develop the giant Yadavaran oil
field and buy 250 million tons of liquefied natural gas
over the next 30 years; Tehran agreed to export to
China 150,000 barrels of oil per day, at market prices,
for 25 years.
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Australia has become China’s
Major Supplier of Iron Ore,
Oil and Gas
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Despite Australia’s close military alliance with the US, China has
become a larger trading partner than the US – iron, coal, gas.
Starting in 2006, Australia has agreed to export to China, some
$1 billion worth of LNG per year for 25 years. Such deals are
enhancing China's soft power in Australia, perhaps to
Washington's detriment.
According to a poll taken last spring, 51 % of Australians
surveyed believe that a free-trade agreement with China would
be good for Australia (only 34 % think well of the existing U.S.Australian free-trade pact).
And 72 % agreed with Australian Foreign Minister Alexander
Downer when he said last year that Washington should not
automatically assume that Australia would help it defend Taiwan
against a Chinese military attack.
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China in Rivalry with
the US for Canada’s
Alberta Tar Sands
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Energy diplomacy has also prompted China
to seek access to the massive tar sands of
Alberta. Since late 2004, Beijing and Ottawa
have concluded a series of agreements for
developing Canada's natural gas sector, its
vast oil sands deposits, and its uranium
sector.
Last April, PetroChina and the Canadian giant
Enbridge signed a MoU to build a $ 2 bn
pipeline that would carry oil to the Canadian
west coast for shipment to Asia. Without
Chinese investment, the fields would remain
undeveloped.
The deal could create tensions between the
US and China, as well as the US and Canada,
particularly since VP Cheney's 2001 energy
policy report stressed the importance of the
tar sands to U.S. energy security.
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Latin America:
China’s New Oil Frontier in the
US’s Backyard
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Beijing is strengthening ties with the temperamental Venezuelan
president, Hugo Chávez: "We have been producing and
exporting oil for more than 100 years, but these have been 100
years of domination by the United States. Now we are free, and
place this oil at the disposal of the great Chinese fatherland."
President Hu toured the region in November 2004, during which
he announced $20 bn in new investments for oil and gas
exploration and other projects.
Brazil's trade minister visited Beijing 9 times in 2003-’04. Brazil
and Argentina granted China "market economy status”. However,
Brazil failed to persuade China to voluntarily curtail its exports of
textiles and shoes.
Trade between China and Latin America has quintupled since
1999, reaching almost $ 40 bn by the end of last year.
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China Dominant Foreign
Oil Power in Sudan
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China's crude oil imports are
expected to reach a record
110 million tonnes this year, 21
% more than last year.
Half of China’s oil imports are
from the ME, half from Africa.
It is China’s strategic policy to
get oil from anywhere,
particularly there where the US
is not in control.
In 1997 US sanctions banned
US oil-companies from Sudan.
CNPC poured hundreds of
millions in Sudan’s oil industry,
took a 40 % stake in Sudan’s
“Greater Nile”, constructed oil
fields, a refinery and pipelines.
Sudan, formerly an oil-importer
now earns $ 2 bn on exports.
From Sudan, China plans to
expand to Nigeria through
Chad.
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Shift in Global Strategic Culture
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Several developments are changing the psychology of global
strategic relations:
The decline in American power and prestige as a result of:
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The bungling of the war in Iraq;
The bungling of aid and rescue during Hurricane Katrina;
The inability of the US to impose its will on Iran;
US failure with North-Korea and the indispensability of China to
solve the North-Korea problem.
The Rise of China and the emergence of a “comprehensive
strategic partnership” with the EU has made the US realise
that it cannot exert too much influence over the future of China.
The vehement row over the lifting of the arms embargo has
led to tentative trans-Atlantic steps how to jointly deal with
China, the most momentous question of our time
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Trans-Atlantic Rift
over China
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China expressed its desire for a “strategic partnership” with the
EU in its first EU-policy paper in October 2003, when anger over
the war in Iraq had just reached its peak in Beijing and several
European capitals.
One of China’s demands was the lifting of the EU arms embargo,
imposed after the bloody repression of 1989.
The EU linked the lifting to improvement of the Human Rights
situation in China but during 2005 it became evident that American
opposition and threats were the main reasons for EU wavering.
The US views China as its main future adversary, whereas
Europe sees China as an emerging pole, that together with a
more cohesive future European Union will give shape to a
multipolar world, to replace a US-dominated unipolar world.
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Escalation of trans-Atlantic rift
over the Lifting of the Arms
Embargo during 2005
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US rhetoric: “Immoral Europeans making fast bucks by
selling arms to Communists to better kill Americans,
defending Taiwanese democracy”.
The issue had become entangled in how the hardline Chinabashers in Congress perceive China.
The House of Representatives on July 14 rejected the “East
Asia Security Act” giving the president the authority to bring
sanctions against European companies that would sell arms to
China.
The US arms industry had strongly lobbied against the
legislation, because more export controls would result in
unspecified American job-losses.
EU businessmen didn’t expect that lifting the embargo would
result in quick, big arms deals but would facilitate other high
profile deals such as the Airbus A 380.
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Why Different European and American
Approaches towards China ?
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Unlike the US, Europe doesn’t have military alliances, troops
and navies in East Asia - Japan, S.Korea, Taiwan (?) European
involvements are mainly trade, investment and soft power.
The US Right is obsessed by the determination to remain the
pre-eminent military power and will not tolerate any challenger
anywhere in the world throughout the 21st century (see: Project
for the New American Century).
It is European policy to “socialize” China into the international
institutional order by offering it the full range of assistance and
collaborative programs.
American policy is ambivalent. Trade and investment are huge
but aid programmes are mostly carried out by private
foundations.
Government policy frequently shifts from engagement to
confrontation and v.v.
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Rumsfeld to China for first time:
“Non-Euphoric Encounter”
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Secretary of Defense Rumsfeld, the most outspoken antiChina hardliner has visited China last week.
China has actively sought the visit by Rumsfeld for four years.
The Chinese military wanted this visit far more than the
American military and Rumsfeld's reluctance to go to China
was legendary.
Rumsfeld asked to visit the underground military facility in
Beijing known as the Western Hills Command Center, but the
Chinese refused. Instead they allowed him to visit the
“Second Artillery”, China’s missile forces.
In a speech at the Central Party School, Rumsfeld warned
against China’s emerging threat to its neighbors and
domestically against restrictions on freedom of speech.
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Solana’s hardly veiled
Criticism of the US
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“Multilateralism and respect for international law are
fundamental tenets of the EU's foreign policy. And I
know the same is true for China. Together we need
convince our other partners to put these
principles at the centre of their foreign policy
too.” (Speech at CEIBS, Shanghai, 6-9-’05).
Asked to compare China’s relations with the US and
the EU, a senior FM official said: “Our relations with
the US are candid, cooperative and constructive. Our
relations with the EU are comprehensive,
strategic – i.e. longterm, beyond ideology and not
disturbed by minor issues – and a partnership, i.e.
equality”.
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US: Security Threat First ~
Business Second
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Public discourse in the US concerning China
invariably refers to its rise and is dominated by
analysis of China’s increasing hard power, the
growth in Chinese military power and its effect on U.S.
national security interests in East Asia, both with
respect to Taiwan and more generally.
Notwithstanding popular discontent over the loss of
U.S. manufacturing jobs as a result of outsourcing to
China, even China’s substantial economic prowess
and trade surplus with the United States take a
backseat in these debates to the national security
implications of China’s rise.
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Europe focuses on the
“Non-Traditional” Security
Threat of China
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The strategic partnership between the EU and China,
agreed to in 2003, reflects the European view that
China has become a key player on the types of soft
security issues that Europe considers significant.
The EU believes that the main threats to its security
are of the transnational variety: terrorism, illegal
immigration, international crime, contagious diseases,
energy, environment, and problems related to poor
governance.
The EU views China as one of the major powers that
will shape the effective handling of these problems.
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Americans use the
Megaphone, Europeans
the Telephone
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The United States is holding China to a higher standard than
others, because China is a divisive partisan issue in US
domestic politics.
Its size, its impact on other major economies and the world at
large are perceived as a potential threat in the U.S., more than in
any other Western nation.
The United States has confronted China on the issues of
Intellectual Property Rights and distribution- and trade rights this
year and the Europeans and Japanese have reluctantly
supported this approach.
Europeans accord priority to negotiating because they cannot
impose their will on others anymore. The US has the sanctions
approach – Section 301. As former European Trade
Commissioner Pascal Lamy observed last year, Americans like
to use a megaphone, we Europeans prefer the telephone.
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EU-China: More
than Trade
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The EU has already become China's leading trade partner, and
China is the second-largest destination in the world for EU
exports.
The summit in Beijing in September bolstered an everdeepening set of EU-China relations that includes work on a
new and wide-ranging Framework Agreement to further
formalize political relations; strengthened scientific and
technology cooperation; collaboration on labor, tourism and
migration issues; and a specific effort aimed at climate change
and energy supply security.
EU-China cooperation on space is already far along, as China
is a major partner in the development and deployment of the
Galileo navigation system.
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Ninety Percent of the EU-China
Relationship is Economic
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China is now the EU's second-largest trading partner after the
United States.
In 2004, EU-China trade grew to € 126 bn, or $ 163 bn, a 22 %
increase from the year before. But trade between the two has
been far from untroubled. Much of it is Chinese exports flowing
to Europe, to the point that in 2004 the EU's trade deficit with
Beijing ballooned to € 78 billion.
The EU has complained to China about inadequate protection of
copyrights and patents, barriers to agricultural imports and
services such as banking, and China's booming garment
exports. European officials in Beijing stressed that the Union is
generally satisfied with the progress of China's economic
reforms and hopes to resolve disputes through negotiation.
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Europe’s Focus: Improve the Governance, the
Legal System, the Business Culture of China
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Europe views China’s rise in terms of its domestic transitions, i.e.
a multiple transition from state socialism toward a market
economy, a more open society, and a more representative and
accountable government.
Unlike analysts in the US, who focus on China’s external posture,
European analysts focus on China’s internal scene and want to
assist China in managing its transition and reforms.
Europe does not want China to become a failed state. Unlike the
US, Europe is more willing to accept China as it is.
Accordingly, the EU believes that it has a great deal to offer.This is
the case not only because of western Europe’s own long
experience with social democracy and the welfare state but also
the ongoing East- European states’ experience as transitional
economies and polities that have emerged from a similar period
of state socialism.
41
Opposition against Lenovo’s
acquisition of IBM’s PC
division for “phoney security
reasons”
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The U.S.-China Economic and Security Review Commission
wanted to derail the deal under the pretext that Chinese
computer experts could conduct espionage from IBM facilities.
Another complaint was that technologies that Lenovo acquired
could have a "dual use" and enhance China’s military.
However, the PC business has become a low-margin
commodity business, based on costs and efficient assembly
and distribution more than on new technology. IBM sold this unit
in part to focus its resources on higher-margin consulting and
software.
By making Lenovo the world's third-largest computer maker, the
$1.3 billion sale would draw China more tightly into global
economic interdependence and raise the price of any Beijing
aggression. A computer maker dependent on foreign
markets will not want its country invading Taiwan.
42
CNOOC’s Failed Bid for Unocal
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China National Offshore Oil Corp (CNOOC) made a $ 18.5 bn
bid this summer for a small US oil company Unocal, while
Chevron made a rival bid of $ 16.8 bn.
Anti-China hysteria in Congress poisoned and killed the deal:
“China is pursuing a national strategy of domination of the
energy markets and strategic dominance of the western
Pacific.”
For China the deal was a diversion away from buying massive
amounts of depreciating dollars. (At present $ 230 bn).
The great paradox: The US strongly criticizes China for
having oil-dealings with rogue states. This time China
wanted an M&A deal in a “stable” country.
China craves global integration but was rejected just for reasons
of hypocrisy and paranoia. .
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Some Major Sino-European M&A and
Major Chinese Contracts in Europe
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In November 2003, Thomson and Chinese firm TCL merged
their TV and DVD manufacturing to create the world biggest TV
maker.The Chinese group will own 67 % of the venture, to be
called TCL-Thomson. The JV will have factories in China,
Vietnam, Germany, Thailand, Poland and Mexico.
Huawei is now the world's second-largest supplier, after Alcatel
of advanced digital-subscriber lines, the primary conduit for the
world's broadband connections. Last year, Huawei won
contracts in France, Spain, Germany, Holland and Portugal.
Haier, China’s largest household-appliances manufacturer has
factories in Slovenia and Italy.
After an on and off M&A and rescue process with the Shanghai
Automobile Industry Corporation, SAIC’s rival Nanjing
Automotive Group has agreed to buy parts of Rover and set up
a new company with British entrepreneurs.
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Punishment of Foreign Companies by the US;
Europe more willing to transfer Technology
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The United States penalized eight Chinese companies,
including some of the country's biggest military contractors, for
supplying missile technology to Iran. ( >Taiwan)
The arms transfers to Iran, a more practical problem, illustrate
the widening European-American divide on strategic thinking
about China, with Europe less inclined to impose restraints on
China than the United States.
The Australian company BHP Biliton is licensed to use the
American geological survey technology “Falcon” since 1999 to
detect underground deposits of minerals from aluminum to zinc.
In April 2005, the Pentagon told BHP it will not be allowed to use
the system in China.
The disclosure came as the US was seeking to prevent Europe
from lifting the arms embargo against China.
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Galileo
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The EU on July 28 signed contracts with a group of
Chinese companies to develop a range of commercial
applications for Europe's planned Galileo satellite
navigation system.
The announcement is likely to ruffle feathers at the U.S.
Defense Department, which controls the rival Global
Positioning System, a system it is racing to upgrade.
Beijing has contributed $ 230 m to develop Galileo but
has also put pressure on the EU to gain access to
Galileo's sensitive military data and technologies.
After a difficult discussion with the US, the EU has
declined that request.
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The Textile War:
EU Compromise
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The EU and China signed a deal on 5 September that
will permit the release of nearly 80 million pieces of
imported Chinese clothing that have been impounded
at EU borders, thus ending an episode in what the
British press has dubbed the "bra wars."
It thus effectively amends the terms of the 10 June
agreement that limited ten types of Chinese textiles
exports to the EU to annual increases of no more than
8 to 12.5 percent over the next three years.
China agreed to let half of this increase be counted
against the import quotas for 2006, while the EU
agreed to allow the rest to be imported over and
above the previously agreed quantities.
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EU and US in full agreement
that China does not deserve
Market Economy Status Now
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The EU has been a stringent enforcer of China’s obligations and
has been particularly tough-minded against Beijing’s demands
that China be granted market-economy status (MES), which
would effectively eliminate antidumping tariffs.
In 2004 an EU internal study concluded that China still fell far
short on four of five criteria necessary to achieve MES status.
Over the past year, Beijing has exerted considerable pressure on
Brussels to grant MES and relax its antidumping penalties, but
thus far the EU has not succumbed to this pressure.
For its part, the U.S. Department of Commerce is also bringing
an increasing number of antidumping cases against Chinese
firms. In both cases, this trend reflects not only unfair Chinese
trade practices, but also the ballooning trade deficits that the EU
and United States have with China.
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Triangular Manoeuvres
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China and Europe have had a series of disputes over trade and
MES status as well as disagreements over human rights.
Europe has concerns about China’s proliferation practices, as
well as the arms embargo.
More recently, China’s Europe specialists have begun to criticize
the motives underlying EU programs to promote civil society in
China as an ideological ruse to “Westernize and divide China”
(Xi-hua, fen-hua).
The EU and the United States sometimes side with each other,
China and the EU sometimes find themselves in agreement, the
United States and China sometimes work well together, and
sometimes the interests and policies of all three intersect, while
each side simultaneously has disputes with the other two.
What has not occurred, to date, is a situation where U.S.
and Chinese perspectives converge against European
interests.
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Peter Mandelson on
Globalization, Free Trade
and Protectionism
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Europe has to develop a much more sophisticated response to
the challenge of globalisation. Let me suggest four principles for
action:
– First, Europe has to attract talent from all over the world.
– Second, we should launch a drive to promote inward investment and
industrial collaboration.
– Third, Europe should pursue a policy of openness to the world.
– Fourth, we need more explicit policies in Europe to address the problems of
the ‘losers’ from globalisation and tackle the new inequalities that
globalisation brings.
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Mandelson is already under pressure to take anti-dumping
measures against Chinese shoes, whose imports are
devastating the Italian footwear sector.
“Yesterday textiles, today footwear, tomorrow what ? Consumer
electronics ? Cars ? Where will it go and when will it end ? We
are at the beginning of the China story, not the end.”
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