The Italian eagerness to sign a memorandum of understanding with the Chinese government over participation in the Belt & Road Initiative (BRI) sent shockwaves throughout Europe. Under the Eurosceptic coalition government in Rome, Italy has found a friend in China, which sees the ‘forgotten’ port of Trieste as the perfect gateway to the heart of Europe for its 21st Century Maritime Silk Road. Whilst the symbolism of Italy – a founding member of the EU, a NATO member, the third largest economy of the Eurozone and a G7 member – subscribing to the BRI is striking, economic and, eventually, geopolitical implications will be inevitable.
The main argumentation put forward by Vice-President Luigi Di Maio and Sinophile Michele Geraci, who holds the official title of Undersecretary of State for Economic Development, suggests that signing an MoU concerning Belt & Road will intensify Sino-Italian trade and foster Chinese investment. This in turn, according to them, will bring manufacturing jobs back– Made in Italy. Whilst signing this MoU will come at a high political cost in Brussels, there is, however, no reason to believe that signing a MoU is a prerequisite for increased trade with China. Besides this, the Eastern European countries that already signed up on the BRI have complained that China’s big promises have not been materialised.
There were already writings on the wall of the EU turning more hostile towards China’s industrial rise. The latest EU-China Strategic Outlook is the most recent example of the harsh stance towards China the EU has been taking, with the Outlook labelling China as a “strategic competitor” and even as “a systemic rival”– words borrowed from Germany’s industrial interest group BDI. This wording stands in stark contrast with the 2016 EU Strategy on China which was built around the premise that the EU expected their bilateral relation to be of “reciprocal benefit in both political and economic terms”. To sum Brussels’ renewed stance on China up: while the EU remains open to the prospects of cooperation with China, the days of naiveté are long gone.
To understand the origins of this more staunch resistance against China’s growing influence in European affairs, one does not only have to look to Rome, with the main argument for a more confrontational stance coming from up north – more specifically, from Germany. China’s announcement in 2015 of its industrial modernisation campaign Made in China 2025 in particularset a few alarm bells ringing in Berlin. This government programme aimed at securing China’s position in high-tech industries, reducing its reliance on foreign technology imports, is seen as a major threat for industrial countries with a strong high-end manufacturing sector. As the Berlin-based think tank MERICS noted in 2016, of all the economies, the countries that are the most vulnerable to increased Chinese competition in this sector are Germany and South Korea.
Ever since 2016, when Midea took over robotics manufactural giant and Industrie 4.0darling Kuka, fear has been growing in Berlin that China will supersede Germany in the global supply chain. Next to this single event, the leading economy within the Eurozone, grew by only 1.5 per cent last year, its slowest rate since 2013. When most of the debates in Brussels are dominated by the Brexit debacle, Berlin, with the support of French President Macron, has been building up its economic and political arsenal to counter this systemic decline.
On the 18th of February 2019 the Ministers of Economy of France and Germany, Bruno Le Maire and Peter Altmaier respectively, jointly put forward an industrial strategy proposal that calls for more investment in innovative technologies and an overhaul of the EU’s competition rules. While not explicitly mentioned in the communique, the industrial outline is an implicit answer to China’s industrial rise.
Recently, German Minister Altmaier was once again at the forefront of creating a state-owned fund to foil foreign – read: Chinese – takeovers. It seems as though Germany has given up its ordoliberal approach of free markets contained by a strong regulatory framework, in favour of a strategy more akin to economic nationalism.
In order to advance this strategy of safeguarding Germany’s national, industrial and economic interests, Berlin is urging the EU to follow Germany’s trajectory and adjust its strict competition rules while at the same time shielding its economic ecosystem from Chinese investments. The German EU Budget Commissioner even went as far as to propose giving the EU the right to veto Chinese-funded infrastructure deals in Europe if they are deemed to “not serve the EU’s common interests”. Italy, with the BRI MoU approaching, abstained from this vote.
During the improvised quadrilateral summit in France, where Chancellor Merkel, President of the European Commission Juncker and President Macron did a joint press communique with President Xi, the tone from the European side towards China became less harsh than the build-up of the months before. Chancellor Merkel even went as far as to say that the EU wants “to play a role in the One Belt One Road Initiative”– radically contradicting the staunch opposition Germany had towards Italy’s endorsement of BRI.
This might come off as a change of nature towards China, but it is not. Whereas industrial competition with China will remain and intensify in the coming years, the larger picture of Eurasian connectivity still sounds appealing to Europe. As the EU Connectivity Strategy points out, the EU is all in favour of interconnecting Europe and Asia. It is also all too eager to strike trade and investment partnerships, just as Macron struck deals worth over € 40 billion with Xi Jinping during his latest trip to France. However, when it comes to the practice of endorsing the Chinese Silk Road philosophy, the EU does not want to entirely jump on the bandwagon. This explains the systemic ambiguity in EU-China relations, and alludes to the difficulties in constructing a comprehensive and coordinated strategy to deal with this issue.
With the April EU-China Summit fast approaching, the EU will try to present itself to China with a united, coordinated voice. However, as this coordinated European approach will be de facto the one of the Franco-German axis, question remains whether it will be possible to represent the Union as a whole.
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