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We are experiencing a change in Sino-European relations. Where flourishing economic transactions previously formed a solid basis for the relationship, they have now turned into a source of conflicts of interest. This shifting economic and ideological context calls for strategic thinking by Europe.

China’s industrial policy seems threatening for the German economy, with renewed competition between the two systems. Particularly in economic policy, conflicts are looming. That’s why the economic pillar should be complemented by a second pillar of common development and security interests.

In the light of transatlantic drift, emerging trade wars and Eurasian integration, Germany’s tranquillity is particularly worrying. Instead, this development calls for a re-evaluation of EU-China relations. European Commission president Jean-Claude Juncker and French president Emmanuel Macron have already made attempts here. But neither the Commission’s ‘global strategy’ from 2016 nor European leaders have concisely and precisely formulated what role China should play for the EU beyond external economic policy.

The necessary debate about strategic priorities is missing. Media and politicians persist with their reactive attitude and engage in unremitting navel-gazing over the refugee crisis and integration. But how could causes of flight in North Africa be reduced if not by involving the considerable investment and infrastructure power of China?

Unlocking China’s potential

In longer-term strategic forecasting, leaders should consider the possibility that the eurozone will stagnate and East Asia’s economic growth will continue for another decade. Should the Silk Route Initiative succeed even only in a rudimentary way, China would become the decisive player in the whole Eurasian region, including East Africa, and would also better connect the Indian Ocean to South America.

Instead of automatically assuming that China is battling for hegemonic dominance, it is worth unlocking its enormous potential for social stabilisation and economic transformation in the EU’s neighbouring regions. To imagine Sino-European relations in this way offers a great opportunity to understand one’s own interests in the context of post-Atlantic global policy.

A balanced perspective also includes this: The German economy is undoubtedly among the big winners of China’s opening-up process so far.

However, both Germany and the EU suffer from a problem of perception. On the one hand, China is seen as a threat, rather than an opportunity to inspire discussions on shared political interests in a multipolar world. Despite all the warnings by German commentators, China is still a long way from achieving global dominance. On the other hand, European leaders overlook that Eurasia’s new political formation is one of the big historical events of our time. These observations pose fundamental questions about Europe’s place in global politics. Neglecting this would create considerable costs at governmental, societal and corporate levels.

Integration at stake

To understand these developments, we need more efforts in geopolitical and geo-economic analysis. With the economic rise of East Asia, geo-economics has become the main element in power struggles and conflicts. Competition for the construction of cross-border stretches of railway, streets and IT networks has intensified, as has competition for new regional trade and investment agreements.

Further integration of the three global economic blocs – US, EU and Asia – into a globalised system is at stake, with US President Donald Trump threatening to put up economic walls against both China and the EU. After negotiations about two big free-trade agreements in the Atlantic and Pacific areas – TTIP and TPP – collapsed because of the Trump administration, trust between North America and Europe is at an all-time low. Meanwhile, as China tries to get the Europeans on its side in the trade war, European industry points to unfair subsidies granted to domestic industries in China.

The rejection of Beijing’s state-centred development approach is expressed in the EU’s desire to implement investment screening and further protection instruments so it can reject state-subsidised acquisitions of European firms. In principle, the European Commission is following the US example: it would like to put investments relating to strategic and security policy under the microscope and, where necessary, prevent them.

An exporter of ideologies

However, a balanced perspective also includes this: The German economy is undoubtedly among the big winners of China’s opening-up process so far – even if foreign companies feel they face regulatory problems and arbitrary market barriers. The prevailing view in Berlin and Brussels is that China is promising improvements in market access, but major sectors continue to be inaccessible due to direct or indirect obstacles. The awarding of large contracts is opaque and the ruling Chinese Communist Party (CPC) increasingly ensures that it has direct economic influence.

In this context, normative conflicts inevitably appear. China and Europe are miles apart not only in their assessment of economic models but also in their value systems. And so it becomes harder and harder for the German government to navigate this regulatory terrain – and to formulate a common approach in the conflict between ordoliberalism and neo-mercantilism, between rule of law and legalistic pragmatism, between short-term high-speed acting and a long-term approach, between a digitalised surveillance state and citizens’ rights in the private sphere.

Turning away from China and committing to a new Cold War in terms of rhetoric is, by contrast, not really an option.

The ideological escalation is driven by Chinese politicians, companies and experts, who are brimming with self-confidence and are replacing Western with Chinese ideological dominance. Many already see the country as an exporter of ideologies, which can offer better regulatory approaches and development models for the global South. This offer ranges from concepts for the construction of cities, the creation of special economic areas, to ‘the management of society’ via digital monitoring infrastructure and artificial intelligence.

The Communist Party’s new constitution from October 2017 explicitly refers to the expansion of Chinese soft-power. This is also being achieved through non-transparent foreign networks of the Communist Party, whose activities have been the subject of criticism in Australia and New Zealand.

No longer a cohesive bloc

Consequently, Germany sees China in an ambivalent way. As Angela Merkel discusses climate issues with Chinese President Xi Jinping and tries to coordinate development policy in Africa, German politicians and businesses criticise how market access in China is being made harder for German firms while Chinese investors have a free hand in Europe.

Losses due to these frictions become ever more clear in the case of the Chinese flagship project. German ambassador Michael Clauss explained in an unusually plain way that the Silk Route Initiative is about a Chinese-centric campaign – ‘globalisation with Chinese characteristics’, which is falling short in terms of equal opportunities among the participating partners. There are no projects that can be jointly achieved. This is also because European firms believe in the logic of an ordoliberal economic policy, so it continues to be unclear how they should act in the context of a large-scale neo-mercantilist strategy.

Moreover, China’s influence in Central and Southeast Europe is a cause for concern. Some believe that China could convert its infrastructure loans and investments in crisis-ridden southern countries into political influence to divide the EU on foreign and economic policy issues. In reality, the EU no longer stands as a cohesive bloc when it comes to China-related decisions.

Turning away is not an option

Can the tensions be overcome? Agitated narratives and mutual suspicions undermine productive exchanges of views. It is disconcerting that the rhetoric of the Cold War seems to be back, with invocations of the ‘yellow peril’ running wild in places. Caricatures and feelings of superiority threaten to impair central political decisions.

One thing is clear. If the economic relations increasingly produce conflicts, then Europe and China must make a bigger effort to avoid the vicious cycle of ‘securitisation’. If one takes the German security services’ warning about China seriously, it must be countered in a skilful and comprehensive way.

There is a dual strategy that can be used to prevent the mutual threat perception. On the one hand, the European Commission should react in a more strategic, more easy-going way to China exerting influence over more recent EU member states. In comparison to Russia, Turkey and Saudi Arabia, China is of no real geopolitical importance in Southeast Europe. On the other hand, in the face of the overall situation, the whole investment and foreign trade policy should not be declared a national security issue. Instead, it is worth picking out security and development interests with China as central themes in North Africa, Central Asia and the Near East.

Europe should think of China as a security and stabilisation partner. EU foreign minister Federica Mogherini’s speech in Beijing in April 2017 pointed in this direction. Why not explore the possibilities of developing a concrete stabilisation approach for Afghanistan? How could the EU and China work together on the reconstruction of Syria? Similarly, closer coordination in Libya, the Horn of Africa and the southeastern Mediterranean area would also be conceivable. That way, China could slowly and to a limited extent grow into a European security partner, even as trade and industry competition intensify. Strategic relations on two pillars would be more stable. Turning away from China and committing to a new Cold War in terms of rhetoric is, by contrast, not really an option.