Search This Blog

Tuesday, 1 March 2011

Friend or foe: why Europe and the USA should beware of the Chinese friendship

In the practical art of war, the best thing of all is to take the enemy's country whole and intact; to shatter and destroy it is not so good.
Sun Tzu – Approx. 500 BC


The coming article is not meant as a xenophobic, populistic epic about the Chinese. So please don’t read it in it and… if you do, don’t complain with me. Now we have got that out of the way, here we go…

There IS definitely a movement of the Chinese government towards investing large amounts in Europe and America. If I say it is the Chinese government, that is because nothing happens in China without the government knowing it, approving it and probably paying for it.  So if the ‘Golden Dragon’ company from Guangzhou is buying a large warehouse in the port of Rotterdam, it is the Chinese government buying this warehouse.
And if Geely Cars is buying Volvo, it is the Chinese government buying Volvo. Because China and its government are inseparable.

And did they buy a lot:

Correspondent Garrie van Pinxteren (for the Dutch broadcaster “NOS” and various newspapers) writes this about Chinese investments in Greece (translated to English by me). Here is an extensive abstract of the article. :

-     China invests especially in the port of Piraeus and in shipping. That is a strategic investment. Piraeus should become the Rotterdam of South-Europe. China wants to ship Chinese goods to Europe and Afrika and land them in their own container port. Not really news that makes the Port of Rotterdam smile, dependent as they are from Chinese goods.
But there is a more important reason why Europe should scratch its head. The way China is investing in Greece is very similar with the way they are investing in Africa. It is an investment in a sector that is strategic for Europe. And Greece is not in the position to demand a lot from China.
In Africa the Chinese companies buy more and more farming ground, mines and oil wells to fill in the growing domestic need for food, minerals and energy. China rather invests in getting owner rights in Sudan and Angola than buying their oil on the free market. Besides that it wants to control the transport of Chinese consumer goods and commodities.[…]
With the Chinese investments in the Greek Port, the EU loses strategic influence to China. In the future it is China and not Greece or the EU that calls the shots in Piraeus.[…] Europe should use its economic power over China politically. But as long as Europe doesn’t operate as one unit, this will never happen, as it is too easy to play the “divide and conquer”-game.[…]
If we look how effectively and strategically China is operating, we don’t have another choice than to reinforce the EU. The European Container Terminal in Rotterdam is already owned by a Hongkong Company and in the future we might lose controle over the whole Port of Rotterdam. Politicians that say something else, look so strongely inside that they don’t see the challenges anymore that China is creating.
This is really a good article; that is the reason that I translated it almost integrally.

Other evidence of the growing Chinese influence in Europe

-  ( (no link to the article)) Companies at the Port of Rotterdam have to deal more and more with Chinese companies and this increases the influence of China on the port. A quarter of all containers at Rotterdam is already from China or goes to China. The Chinese want to increase their influence in the crude oil business. Therefore Chinese state companies try to get a positions in the leading three ‘oil ports’, like Rotterdam

The New York Times writes an absolute must-read article about the growing influence of China in Europe, here printed almost in full:

When Prime Minister Wen Jiabao of China visited Athens last month, he came bearing gifts: billions of dollars worth of business deals and a wave of favorable attention from a crucial foreign investor.
“The support of our Chinese friends is fortunate for us,” Greece’s minister of state, Haris Pamboukis, said by telephone. 
But China had much greater ambitions. Greece is one foothold for China’s broad, strategic push into Europe. It is snapping up assets depressed by the global financial crisis and becoming a significant partner of other hard-hit European nations. Ultimately, analysts say, Beijing hopes to achieve not just more business for its own companies, but also greater influence over the economic policies set in the power corridors of Brussels and Germany. “They are indicating a willingness to stick their nose into Europe’s business,” said Carl B. Weinberg, chief economist of High Frequency Economics. “It’s very clever and sends a clear message,” he added, “that China is a force to be contended with.” […] 

China is leading the charge [of the takeovers in Europe – EL]. It is singling out Greek, Spanish and other downgraded government debt, as well as ports, highways and industries in troubled countries on Europe’s eastern and southern edges. Ireland and Hungary, among others, are also competing to lure Chinese investments, in the hopes that they will create thousands of new jobs. “What is happening is that the Chinese are expanding in Europe as they did in Africa,” said François Godement, a senior policy fellow of the European Council on Foreign Relations. “But in Europe, they’re coming in through countries on the periphery, which is extraordinary.” China is concentrating its efforts on ports in Greece and Italy and highways that link Eastern Europe to Germany and Turkey, and aims to secure larger infrastructure investments over time. It has provided billions of dollars in state financing for key public works projects that support Chinese state-owned companies and Chinese workers. Such moves could give China a bigger presence in the European chain of distribution and production, while allowing it to build a track record of investments that it hopes will also encourage Europe to support its position on divisive currency issues and in trade disputes at the World Trade Organization. During his recent European tour, Mr. Wen reminded politicians in Brussels that China had acted as “a friend” to Greece, Spain, Italy and other troubled European countries in their darkest hour by buying bonds as other investors fled. In return, he admonished regional leaders not to “pressure China on the yuan’s appreciation,” referring to the Chinese currency, formally called the renminbi.

In the past several months, China has pledged to buy Greek bonds when the government starts selling again, and purchased $625 million in Spanish debt. On his visit, Mr. Wen hailed scores of business deals in Italy and Greece, including one that allows a Chinese state firm to run Greece’s top shipping port — one of the largest European gateways for Chinese goods.
For China, plowing a small but growing share of its more than $2.3 trillion in foreign currency reserves into European investments instead of low-yielding United States Treasury bills helps diversify its portfolio. Beijing also hopes that this kind of push helps reduce the international political pressure to raise the value of its currency.
“It’s not a coincidence that China is doing this,” said Jens Bastian, an economist at the Hellenic Foundation for European and Foreign Policy. “They have huge currency reserves, and these countries where they are going right now have a dying need for foreign investment.”
While Chinese foreign direct investment in Europe is still small compared with its investments in other regions, it has grown quickly over the past two years. And this spring Europe overtook the United States as China’s largest trading partner.
Struggling Ireland is also looking for a piece of the action, and moves are afoot to create an “investment gateway to Europe” for China in the town of Athlone, which hopes for the creation of thousands of jobs. Prime Minister Brian Cowen of Ireland said in June that China had vowed to be “as helpful as they can to a friend like Ireland in the difficult times that we have.”
The investments also allow Beijing to advance the interests of Chinese companies as they go global. Mr. Wen last month talked up a $4.5 billion credit line that troubled Greek shipbuilders could tap — but almost exclusively to purchase Chinese-made ships. An additional $5 billion is flowing to Greek coffers from China’s state-run Cosco shipping company, which is leasing Piraeus, the port of Athens, to transform it from Europe’s largest passenger port to a much bigger hub for cargo, with aims to more than double traffic to 3.7 million containers in 2015.
In Italy, Cosco is expanding the port of Naples, while HNA, a logistics, transportation and tourism group based in Hainan Province, China, is in talks to build a giant air terminal north of Rome for cargo arriving from China. Mr. Wen pledged an additional $100 billion in trade with Italy through 2015 and heralded 10 business deals between Chinese and Italian businesses.
Some of China’s investments have already raised eyebrows. Last year, China outbid European companies to build a highway in Poland using a Chinese business and workers — with European subsidies — prompting Chancellor Angela Merkel of Germany to call for reciprocity.
In the coming decade, Europe will be considering numerous new projects, such as clearing the Danube River of wartime ordnance to use it as a transportation passageway; building railways between countries like Germany and Macedonia; and carving new highways from Germany to Turkey, Mr. Bastian said.
“What Europe lacks is a transportation infrastructure network where Western and Eastern Europe meet,” he said. “This is where China is trying to take advantage of their current buildup.”
Still, for all the fears of ulterior motives on China’s part, many Europeans welcome the investment with open arms. China is mainly interested in promoting trade and making money, said Mr. Pamboukis, the Greek minister of state.
China’s investment strategy in Europe is “discreet and well thought-out,” he said. “I don’t think China is coming in here as a Trojan Horse.”

-         ( Chinese authorities approved the intended takeover of Volvo Cars by the Chinese car manufacturer Geely. […] Earlier the European Commission gave the green light. According to the commission the takeover is not violating the European rules for competition. […] Geely wants to develop a new Volvo factory in China itself. The Chinese car manufacturer expects to sell 150,000 Volvo’s per year in China in 5 years. 
-         Small European companies that sell hi-tech equipment to China are often either forced to deliver blueprints showing their company secrets to the Chinese authorities, or forced to manufacture the equipment in China itself. These companies are not sure then that not a second factory will arise next to “their” factory, that produces exactly the same goods for half the price. 
I am not so sure that China is not trying to come to Europe as a Trojan Horse. Of course it is a defensible strategy when you try to secure your sales channels and supply lines with your own workers through your own ports and highways.

But looking at the wise words of Sun Tsu and Confucius on top of this article it is wise to remember:
-   It is the best thing to take over your enemy’s country whole and intact
-   Ignorance is the night of the mind, but a night without moon and stars

So, in my opinion, it is a good thing if we don’t erect trade barriers towards China. NOBODY is waiting for a trade war with the most patient people in the world. But let’s not be naïve over the intentions of the Chinese people in Europe and let’s not be too glad when our Chinese “friend” with the virtually endless supply of money is willing to help us in our darkest hour. It can be the kind of friend that makes enemies unnecessary.

Therefore I would advice to the European countries and the US:
-   Never give (company) secrets and patents away to China that you can’t miss as a country
-   Never sell properties to China that you can’t do without as a country
-   Never let companies be taken over by China that you consider a strategic asset for your own country.

And in the Netherlands we have a beautiful proverb that goes like this: “when a fox is smoothtalking to you, it is time to watch your geese”

Well, the time to watch our geese is now.

No comments:

Post a Comment