Commentary / World

The Chinese have landed in Europe

by David Howell

It can no longer be pretended or avoided. The Chinese presence in Europe has now reached a significant level — a tipping point where it begins to influence the shape and direction of economic and social progress in the West in ways that require not a blind eye, or the occasional wringing of hands, but a clear and constructive response.

Take first Europe’s main ports — the points at which the traded goods arrive and depart that are Europe’s lifeblood. China is now heavily invested in key seaports all around the continent. These include Piraeus in Greece, Valencia and Bilbao in Spain, Sines in Portugal, Zeebrugge in the Netherlands, Genoa in Italy, and now, following a much publicized visit of Chinese leader Xi Jinping to Rome, the ancient key port of Trieste, giving access to the heartland trade routes of Central Europe.

In all it is estimated that China now controls one-tenth of European port capacity. At the latest tally it also owns four European airports, large wind farms in nine European countries, a mass of real estate in the City of London and some highly prominent European enterprises such as Volvo in Sweden, Pirelli in Italy and Syngenta in Switzerland.

On top of that a major Chinese company holds a $9 billion stake in Daimler (parent of Mercedes-Benz) and China has a key role in Britain’s civil nuclear renewal program — so far through its one-third financing of the giant new Hinkley Point nuclear plant, but with more to come. It also has direct stakes in British water utilities, banks and the traditional energy sector.

Admittedly the inward Chinese investment flow eased in 2017 and 2018 from its staggering 2016 annual peak of $18 billion. But it will certainly pick up again, and anyway the issue is not so much the inward flow as what happens to the implants once in place. And implants grow and influence.

All this is visible and open for all to see. What is happening beneath the surface, in the way of intelligence penetration, cyber intrusion and acquisitions behind anonymous fronts can be only be guessed at. Certainly the security services of most European countries are at sixes and sevens about what to do in the face of domination by Huawei and other advanced Chinese technology enterprises in the oncoming 5G generation of communications and information linkages .

The European public is left uneasy and confused. For the last few decades it was Japanese investment that was the big factor, depicted and exaggerated by some, particular American commentators, as a threat, but generally coming to be seen as an unqualified asset , especially in the British case. Partly as a result, Japan has come to be regarded, certainly in Britain, as a close and reliable friend and ally on all fronts, not just confined to trade and investment.

But the China presence seems much more complicated, extensive and insidious. There is dawning awareness that Chinese initiatives and involvement are expanding in every part of the world, from the Indian subcontinent (notably in Pakistan and Sri Lanka), to most parts of Africa, to the islands of the Caribbean and to Latin America. Much of this is connected with China’s all embracing “Belt and Road” initiative. Suddenly the tentacles seem to be reaching everywhere.

Meanwhile, within Asia itself Chinese projects dot the islands of the South Seas, while both Australia and New Zealand, having once welcomed Chinese trade and investment, are now getting very uncomfortable at too much of what once seemed a good thing, but is now going far too far and coming far too close.

European Union leaders have been gathering recently to ask themselves what to do about this fast emerging situation. Across the Atlantic, U.S. President Donald Trump has already decided. He wants to do a limiting deal with the Chinese giant, and Congress mirrors many, if not all, of his anxieties. It may all come to nothing, but “America First” is where he wants to be seen going.

But for Europe it seems much less straightforward. For many countries the cash is irresistible, and many China-based projects and products are thoroughly welcome. There is a fascinating historical symmetry here between China’s own predicament in the 19th and early 20th century — as the Empress Dowager Cixi struggled to decide with her advisers what to do about the ever more invasive Western “barbarians.” In some, although not all, respects the reverse situation now confronts Europe.

But if the situation is reversed the questions arising appear strikingly similar. Are the intruders friend or foe? Should there be cooperation or exclusion? Should the newcomers be ceded special ports (they already have some, see above) and cantonment areas in which to operate? Can insatiable demand for their imports be checked? And is it too late anyway to stop the onward march of totally globalized trade, even if the EU is supposed to be a trade protected area?

There is one fundamental difference with history, however. We now live in a transformed era of almost total connectivity, communication and dialogue. There is a possibility for all parties to shed ambiguity and talk openly and frankly.

On the European side some kind of common approach, welcoming but selective, has to be crafted. On the Chinese side, bland assertions that overseas investment is all a commercial matter, a win-win situation for all, and quite free of government backing or semi-colonizing aspirations, have to be put aside. The facts to the contrary are too strong to be denied. Everyone knows that China is a state capitalist system with obedience to state and party priorities being the ultimate discipline.

A good bit of statesman-like honesty all round could yet lead to harmony, development prosperity and mutual gain, instead of fear and suspicion. Or is that too much to ask?

David Howell is a Conservative politician, journalist and economic consultant. He is chairman of the House of Lords International Relations Committee.