How should liberal democracies in Europe, each with relatively small populations and split by differing conceptions of national interest, deal with the adverse consequences of China’s rise?
The COVID-19 pandemic has demonstrated that things emanating from China can have a real impact, whether positive or negative, on the international system. Given the country’s size, a negative impact is too big to ignore or to easily contain. But working together with China is difficult when the country’s prickly ego, informed by all manner of real and imagined historical grievances, gets in the way of international cooperation by refusing to even acknowledge the origins of a problem such as the pandemic.
How should liberal democracies in Europe, each with relatively small populations and split by differing conceptions of national interest, deal with the adverse consequences of an authoritarian power’s rise, especially when that power follows the logic that norms and rights must bow before its own strength? This is a question that will shape the credibility of the European Union (EU) as a geopolitical actor even as slow economic growth ties its fortunes eastward, to China and perhaps other illiberal powers.
The EU, seeing itself as a bastion of humanitarian values, views China through a dual human rights and economic lens, with much greater emphasis on the latter. Of all countries, perhaps the most important role has been played by Germany, China’s leading trade partner within the EU. Germany accounts for over half the bloc’s exports to China. Having been deemed the ‘sick man of Europe’ in 2005, the country can be justifiably proud of an impressive economic performance during Angela Merkel’s chancellorship. Yet this performance has been dependent on Chinese goodwill. High rates of export growth, enabled by Chinese demand, helped the country undergo a V-shaped recovery during the 2008-09 financial crisis. Following the COVID-related economic slump in 2020, orders from the United States (Germany’s biggest trading partner overall) dropped, while those from China increased.
This means that the Chinese market is increasingly seen as crucial to staving off job losses — a good reason not to alienate Beijing. Even as the United States has pushed for its security partners to not adopt Huawei systems due to the espionage risk they pose, Berlin has tried to fence-sit. Merkel once even contemplated a ‘no spying pact’ with China over cybersecurity, seemingly oblivious of what became of American attempts to reach a similar pact with Beijing in 2015 (the Chinese became less obvious about committing economic espionage in cyberspace, but in any case had never accepted constraints on targeting entities which they considered of national security interest).
China continues to engage in economic espionage against Germany today much as it did a decade ago. At that time, such espionage was estimated to cost German companies a total of € 50 billion and 30,000 jobs annually (this count is not limited to the damage done only by China). Those who hoped that by ignoring Chinese transgressions and playing a long game they could win preferential access to the world’s largest market were subsequently disappointed. They instead discovered the tendency of the Chinese Communist Party (CCP) to, over time, entrench itself deeper in the corporate sector, rather than further opening up the country and levelling the playing field for foreign companies. In 2017, Beijing introduced two pieces of legislation, a National Intelligence Law and a Cybersecurity Law, that strengthened ties between Chinese private sector companies, especially in the information technology (IT) sector, and state security agencies. Given that foreign businesses operating in China have long needed to have a local partner (a stipulation sometimes viewed as helping unauthorised transfers of industrial secrets), the new laws seemed ominous for data security.
Transfer of confidential data is becoming enough of a problem now as to cause some German policymakers to ask whether partnering with China is only propping up an eventual rival. During 2016, a number of technology companies were purchased by Chinese venture capitalists. The acquisitions seemed to resemble a tactic previously seen in California’s Silicon Valley: Buying up local IT companies to legitimately access their latest product designs and replicate these in China. Worries about outright espionage operations from China were also voiced by the German domestic intelligence service in 2017. Chinese operatives were allegedly using the professional networking site LinkedIn to target up to 10,000 German citizens, in some cases for intelligence recruitment. Traditionally, sectors which have been of highest priority to Chinese economic intelligence collectors are those where German firms are most competitive such as automobiles, pharmaceuticals and machine technology.
Concerns are growing about the United Front, a Beijing-based organisation that works to harness the Chinese diaspora to the objectives of the CCP. In Germany, the Front is linked to approximately 230 cultural, commercial and scientific organisations peopled by Chinese-origin professionals. The organisation is thought to be one of many ‘operating in the conceptual space between influence and interference’ and attempting to shape discourses about China in Western countries. Independent of it, but possibly with similar goals, are about 80 Chinese student associations at German universities and 20 Confucius Institutes. Germany is the biggest source country in Europe to the Thousand Talents Plan, a programme aimed at enticing exceptionally skilled Chinese-origin researchers to return home and use their knowledge to help develop the Chinese nation. While laudable in its patriotic spirit, there remains a possibility that the programme might also be used to lure Chinese technical specialists working for foreign companies, in order to gain access to confidential business information. There are thought to be 57 recruitment stations for the plan in Germany alone, amid a total of 600 worldwide.
Looking at a broader picture, it has been reported that there are more Chinese intelligence operatives in Belgium, the home country for most EU organisations, than there are Russian. Considering that Russia shares land and maritime borders with the EU while China does not, this is a notable statement. The EU is a pearl in an oyster shell, protected by a hard casing. The casing is the security shield provided by the United States and the North Atlantic Treaty Organisation (NATO). Hence, Germany and other member states of the EU, while wearing their economic lenses, tend to be blasé about confronting China as a non-military security threat. They wholly distinguish between economics from politics. One example of this differentiated approach is the recently-announced investment treaty with China.
The treaty was railroaded during the latter half of 2020, when Germany held the six-month rotating presidency of the EU Council. It is expected to be ratified in the first half of 2022, when the presidency will pass to France. Perhaps, unsurprisingly, French president Emmanuel Macron was the only EU head of state besides Merkel herself to be invited to a videoconference with Chinese president Xi Jinping on 30 December 2020, after which an agreement on the treaty was announced. It is understandable that given the exclusion of other EU leaders from deliberations, and especially since China had voiced scepticism about such a treaty just a year previously, views have surfaced that Beijing is trying to throw a wedge between the EU and incoming US president Joe Biden. The latter is expected to take a tough stance on China while also seeking to work with European partners. Making concessions to the EU could, therefore, be a preventive move by Beijing against any coalition forming against itself.
The fact is, Chinese overtures are not being ignored by EU leaders. The latter look to individually strengthen their own economies by partnering with China even as they simultaneously moan about American unilateralism in the security realm. Until they realise that the dichotomy between politics and trade is false, and that Beijing is highly experienced in weaponising economics to serve its own strategic interests at the expense of others, the EU will remain caught between being subconsciously wary about China’s long-term intentions but unwilling to act on this sense of unease.
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Prem Mahadevan leads geoeconomics research at the Indo-Swiss Future Leaders Forum.
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