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How the West can avoid a dangerous and costly confrontation with #China

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The Institute of Economic Affairs - our British member think tank - has released a new briefing paper, authored by the IEA's Head of Education Dr Stephen Davies and Professor Syed Kamall, the IEA’s Academic and Research Director, who sat on the European Parliament’s International Trade Committee from 2005-2019. The main conclusions of the report include:

  • Fears are rising that we are at the foothills of a new Cold War;
  • Covid-19 is provoking a major reorientation of our foreign policy. At the heart of this is our changing relationship with China;
  • We risk fundamentally misunderstanding China’s motivations because our assumptions are out of date: unlike the USSR China does not seek hegemony;
  • Rather it acts out of self-interest and seeks to become both a model nation for developing countries to emulate and the dominant rule setter in the international trade and financial system;
  • The strategy of constructive engagement or liberal internationalism is no longer working – but a more realist confrontational balance of power relations with China could be economically costly and politically dangerous;
  • Yet there is an alternative to simple confrontation and military competition;
  • We will have to restrain sensitive trade and respond robustly to the Chinese government’s actions in Xinjiang, Hong Kong and against Asian neighbours;
  • These actions should be supplemented with a programme of engagement between private individuals, organisations and firms in free societies with their counterparts in China;
  • A policy of encouraging organised contact at a civil society level could lead to reforms that the current rulers will have to go along with or find much less easy to manage.

“Chinese Puzzle” argues the West risks careening towards a politically dangerous and economically costly confrontational relationship with China.

Yet China's history – of accepting and recognising spontaneous bottom-up transformations and then encouraging them to go further by embedding them in a legal framework – and its culture of “saving face” or “mianzi” suggests Western politicians could be fundamentally misunderstanding China's motivations.

While the current strategy of liberal internationalism is no longer working, we should not see handling China as a binary choice between containment and confrontation. Increasing authoritarianism in China has put paid to hopes that markets plus prosperity would lead to more liberty. Its policy towards the Uighur population and over the so-called “Belt and Road Initiative,” as well as its behaviour in the early stages of the Coronavirus pandemic, have led many in the West to view China not as a partner but as a threat.

However, China’s activities in its neighbourhood may be partly explained by a certain defensiveness due to a determination to never again be dominated by foreign powers. What we are seeing is something far more subtle than plans for global hegemony. There is a competition to become the model or pattern nation that others look to emulate, particularly where nations that are developing economically are concerned. China also seeks to become the dominant rule setter in the international trade and financial system.

In response, we will have to restrain sensitive trade and respond robustly to the Chinese government’s actions in Xinjiang, Hong Kong and against Asian neighbours. These actions should be supplemented with a programme of engagement between private individuals, organisations and firms in free societies with their counterparts in China. This type of people-to-people engagement could still be considered far less risky overall than overt military confrontation and, in the longer run, more likely to succeed.

A policy of encouraging organised contact at a civil society level could lead to reforms that the current rulers will have to go along with or find much less easy to manage.

Dr Stephen Davies, Head of Education at the Institute of Economic Affairs and Professor Syed Kamall, Academic and Research Director at the IEA, said:

“The Chinese government should be believed when it says it does not seek hegemony. Instead, the Chinese government’s goals are access to raw materials, technology, and markets for Chinese companies. 

“This may lead to the Chinese government seeking to set international standards and rules and challenging the good governance mantra of western democracies, but unlike the Soviet Union during the Cold War it will not seek to export its ideology.

“This will pose a different type of challenge than the Soviet Union during the Cold War up to 1989. Western liberal democracies should still respond robustly to Chinese government aggression and violations of human rights, but at the same time seek more people-to-people contacts to help shape reforms within China itself.

“It’s also important to distinguish between the actions of the Chinese Communist Party and Chinese people when raising concerns over the actions of the Chinese government.

“The background to this is the way that the transformation of the Chinese economy since the 1980s has been produced as much by spontaneous bottom-up action subsequently recognised and accepted by the CCP as by top-down reforms. This shows the opportunities there are for genuine popular engagement as a way to respond to the challenge of the 'Chinese Way’.”

Download the full report

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EU-China investment deal stalls

Catherine Feore

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European Commission Executive Vice President Valdis Dombrovskis confirms that progress on the investment deal with China has stalled following March sanctions.

The EU concluded what Dombrovskis describes as an “asymmetric deal” with China at the end of last year. Known as the Comprehensive Agreement on Investment (CAI), it was presented on 30 December. 

Today (5 May) he said: ”There are substantially more new commitments from China as regards market access, with regards to the level playing field and this is something that European companies have been asking us for for many years. So as regards the agreement itself, that technical work is ongoing to prepare the ground for ratification.”

At the time of the agreement Dombrovskis said: “This deal will give European businesses a major boost in one of the world's biggest and fastest-growing markets, helping them to operate and compete in China. It also anchors our values-based trade agenda with one of our largest trading partners. We have secured binding commitments on the environment, climate change and combatting forced labour. We will engage closely with China to ensure that all commitments are honoured fully.”

Wider political context

When asked about whether the deal had been suspended, Dombrovskis said that the position of the European Commission has not changed. He said that the “ratification process of comprehensive agreement on investment cannot be separated from the wider political context. I will repeat that the ratification process cannot be separated from evolving dynamics of the wider EU-China relationship. And in this context, Chinese sanctions targeting among others members of European Parliament and even an entire parliamentary subcommittee are unacceptable and regrettable, and prospects and next steps concerning ratification on comprehensive agreement of investment will depend on how the situation evolves.”

The Commission faced much criticism when the agreement was reached, by appearing to move ahead of the United States, before the new administration had taken office. It was felt by some that the EU should wait to see if there was the possibility of finding common cause with the new Biden team. 

There were also accusations that the EU was ignoring China’s human rights record, particularly in relation to the treatment of the Uyghur muslim population in Xianjang province and the crackdown on the democracy protesters and the introduction of the national security law in Hong Kong.

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G7 to discuss decisive action to counter threats like Russia and China

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Britain's Foreign Secretary Dominic Raab meets with Japan's Foreign Minister Toshimitsu Motegi in Kent, Britain May 3, 2021. REUTERS/Tom Nicholson/Pool
Britain's Foreign Secretary Dominic Raab speaks at a news conference following a bilateral meeting with U.S. Secretary of State Antony Blinken in London, Britain May 3, 2021 during the G7 foreign ministers meeting. Chris J Ratcliffe/Pool via REUTERS
U.S. Secretary of State Antony Blinken attends a news conference with India's Foreign Minister Subrahmanyam Jaishankar following a bilateral meeting in London, Britain May 3, 2021 during the G7 foreign ministers meeting. Ben Stansall/Pool via REUTERS

Britain on Tuesday (4 May) sought to agree decisive action from G7 partners to protect democracies against global threats like those posed by China and Russia.

Hosting the second day of a foreign ministers' meeting in London designed to lay the groundwork for a leaders' summit in June, Dominic Raab (pictured) will lead talks among the Group of Seven wealthy nations on threats to democracy, freedoms and human rights.

"The UK’s presidency of the G7 is an opportunity to bring together open, democratic societies and demonstrate unity at a time when it is much needed to tackle shared challenges and rising threats," Raab said in a statement.

In addition to the G7 members Canada, France, Germany, Italy, Japan and the United States, Britain has also invited ministers from Australia, India, South Africa and South Korea this week.

Their first face-to-face meeting in two years is seen by Britain as a chance to reinforce support for the rules-based international system at a time when it says China's economic influence and Russian malign activity threaten to undermine it.

On Monday (3 May), having met with Raab, US Secretary of State Antony Blinken said there was a need to try to forge a global alliance of freedom loving countries, though stressed he did not want to hold China down, but make sure it played by the rules. Read more

Tuesday's discussion also covered the coup in Myanmar, urging stronger action against the military junta in the form of expanded sanctions, support for arms embargoes and more humanitarian assistance.

In the afternoon talks will turn to Russia, including how to respond to a troop manoeuvres on the border with Ukraine and the imprisonment of Kremlin critic Alexei Navalny.

Raab said on Sunday he wanted the G7 to consider a joint rebuttal unit to tackle Russian disinformation and propaganda. Read more

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De-coupling from China would be the wrong way to go, Germany warns

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The European Union needs to engage with China despite many differences instead of opting for a more isolationist approach, Germany said on Wednesday (21 April).

"In the EU, we have been describing China as a partner, competitor and systemic rival at the same time," German Foreign Minister Heiko Maas (pictured) said ahead of a virtual meeting with his Chinese counterpart Wang Yi.

"In all these three dimensions we need strong, sustainable communication channels with Beijing. De-coupling is the wrong way to go."

Berlin's warning against de-coupling is in line with Beijing's long-held position against disengagement among nations, including with China, despite mutual differences.

Last month, China was hit by a round of coordinated sanctions from the United States, European Union, Britain and Canada over reports of forced labour in the far western Chinese region of Xinjiang, accusations that Beijing rejects.

Ties between China and Germany have generally remained stable since last year, Chinese State Councilor and Foreign Minister Wang Yi said later in his meeting with Maas.

Wang also said major economies like China and Germany should jointly resist any de-coupling, and instead seek to uphold the stability of global industrial and supply chains, according to a statement from the Chinese foreign ministry.

At the same time, China does not approve of any re-drawing of ideological lines, and is even more opposed to engaging in “small cliques”, and even arbitrarily imposing unilateral sanctions based on false information, Wang said.

Last week, U.S. President Joe Biden met with Japanese Prime Minister Yoshihide Suga in his first face-to-face White House summit since taking office, where both leaders said they shared serious concerns about the human rights situation in Hong Kong and Xinjiang.

In a show of economic cooperation to the exclusion of China, Biden said Japan and the United States would jointly invest in the tech sector including semiconductor supply chains.

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