Global Courant
Western countries and multinational companies, hit hard by Covid-19 restrictions and supply chain disruptions, are reconsidering their approach to China. Although many Western companies view China as a vital market, there is significant uncertainty about the potential recovery of the Chinese economy.
Against the backdrop of uncertain economic trends in China and globally, the interactions between the world’s two largest economies, China and the United States, are of great importance. Relations continue to deteriorate. Chinese President Xi Jinping even accused prevent the United States from hindering China’s technological progress by March 2023.
Geopolitical tensions also exist, especially over the Taiwan issue. While a military solution to this issue remains largely hypothetical, business dynamics show that political tensions tend to take a back seat to economic considerations.
Since China lifted restrictive Covid-19 measures in late 2022, the country has reopened to foreign visitors and business people. But despite political criticism of Beijing’s assertive stance in the South China Sea and Taiwan, Western companies recognize the importance of the Chinese market for their businesses or for the accumulation of personal wealth.
If they ever have to take definitive action, they prefer to reduce risks rather than cut ties with China completely.
The CEOs of leading US companies such as Apple, Pfizer and BHP attended the China Development Forum in Beijing in April 2023. Elon Musk, founder of Tesla and currently the richest person on earth, visited China two months later.
China belongs to Tesla second largest sales market after the United States, accounting for about a quarter of total sales. In June, Microsoft CEO Bill Gates said held a meeting with Xi in Beijing, where the Chinese leader called Gates the first “American friend” he has met in recent times.
One of Xi’s few American friends these days. Image: Twitter
Bad economic data indicates that even Chinese consumers harbor doubts about the future trajectory of Chinese economic development. Statistics reveal challenges in the real estate sector, traditionally a major driver of Chinese GDP.
Despite recent efforts by Chinese banks, such as cutting interest rates to stimulate consumption and investment, the outlook for the Chinese economy remains bleak.
Such as the relationship between Washington and Beijing worsensMember States of the European Union are adopting different strategies in their interactions with China. These strategies are influenced by multiple factors, including each country’s economic interests, historical experiences with authoritarian regimes during the Cold War, and values such as freedom and democracy.
Lithuania, for example, has a clear and principled policy towards China. Lithuania actively defends the fundamental values and democratic principles of the European Union.
The country openly maintains political relations with Taiwan and does not shy away from criticizing human rights violations in authoritarian regimes. After Lithuania agreed to exchange diplomatic offices with Taiwan, China effectively imposed an unofficial blockade on Lithuanian imports.
France – the European Union’s second-largest economy – is taking a more cautious approach when it comes to dealing with China. During French President Emmanuel Macron’s speech visit to China in April he led a delegation of business leaders to sign new agreements. While this does not imply indifference to human rights issues, France recognizes the crucial importance of its business ties with China.
There is also a difference in the political approach to China within individual countries. In Germany, there is a faction characterized by a “business first” approach, exemplified by both individuals and German manufacturers with business operations in China.
On the other hand, there is a group of EU advocates who closely align with the US position on China, including German Foreign Minister Annalena Baerbock.
This group advocates reduced dependence on Chinese exports, more intensive supervision of Chinese investments within the European Union and stricter regulations for outward investments in China. The Netherlands’ export ban of ASML chip machines to China in June 2023 is in line with this policy.
Many European officials are increasingly aligned with America’s views on China while safeguarding their economic interests. For example, the Italian government has indicated that it plans to withdraw from China’s Belt and Road Initiative.
European Commission President Ursula von der Leyen is calling for export controls on sensitive technologies. Hungary and Poland are both intensifying their economic cooperation with China. For the seventh year in a row, China is Germany’s country largest trading partnerwith bilateral trade reaching $322 billion by 2022.
Such as the total trade deficit with China is rising to unprecedented levelsthe European Union is becoming more pragmatic about future economic cooperation with China. This is leading many multinational companies to de-emphasize China and calling for ‘decoupling’.
Germany latest China strategy confirms the urgent need to create effective frameworks for future relations with Beijing.
German Foreign Minister Annalena Baerbock sees China through an American lens. Image: Twitter / Screengrab
Despite undeniable evidence of deteriorating relations between the United States and China, Western companies continue to cultivate ties with China. But even within the European Union, member states have differing approaches when it comes to dealing with China.
While China is seen as a competitor at the EU level, at the national level each country possesses a unique set of business interests regarding China that shape their official policies.
Finding a balance between accommodating these interests and upholding the EU approach is a tough task for any country.
Marian Seliga is Head of the China Desk and Advisor to the Board of J&T Banka, Czech Republic.
This article was originally published by East Asia Forum and has been republished under a Creative Commons license.
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