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Europe's crisis is China's opportunity. No wonder nice Mr Wen is on his way|
Timothy Garton Ash
Wednesday 22 June 2011 22.00 BST
Once upon a time, Europe colonised bits of China. Today, China colonises bits of Europe. Informally, of course, and much more politely than when the boot was on the other foot. China's rise both illuminates and exploits Europe's relative decline.
When prime minister Wen Jiabao comes to Europe at the end of this week, he will visit Germany, Britain and Hungary. Why Hungary? Partly because it holds the rotating presidency of the EU but also because China has large investments there and aims to make more – as it does elsewhere in south-eastern and southern Europe. For example, it holds a 35-year lease on the largest container port in Piraeus, Greece (shall we call it a Greek Shanghai?) A forthcoming study by François Godement and Jonas Parello-Plesner of the European Council on Foreign Relations (ECFR) estimates that 40% of Chinese investment in the EU is in Portugal, Spain, Italy, Greece and eastern Europe. Over the last year, Chinese political leaders have also visited Spain, Portugal and Greece.
Illustration by Matt Kenyon Why pay so much attention to the periphery? Well, there are promising investments to be made there and these smaller, peripheral economies are an easy way in to a single European market of 500 million consumers. The EU market is far more open to Chinese investors than the Chinese one is to Europeans.
Investing heavily in these countries also has a political pay-off. The more dependent they become on Chinese investment and trade, the less likely they are to support common EU actions which China regards as inimical to its vital interests. It is not too cynical to see Beijing building up a kind of China lobby inside the decision-making structures of the EU, where the smallest state is at least notionally equal to the biggest.
With the eurozone in intensive care, countries like Greece, Spain and Portugal would also love China to buy some of their forlorn government bonds. While we don't know the exact figures for Chinese bond purchases, we do know that China's sovereign wealth managers have been quietly diversifying out of US treasury bonds. Its political leaders are making sympathetic noises about helping the eurozone. Plainly, the Chinese economy would suffer if the European economy went into a tailspin.
With the world's largest foreign reserves – currently around ? trillion – China could buy half of Greece's privatisable public assets at the drop of a hat. Should Greeks beware of Chinese bearing gifts? Well, beggars can't be choosers. As a leading Chinese geostrategist told one of the authors of the forthcoming ECFR report, with exquisite delicacy: "You need our money."
One must not be too paranoid about this. If we believe in free trade and markets, then we must practice what we preach. (I'll soon be driving a Chinese car. It's called a Saab.) The problem is not that it's too easy for the Chinese to invest here but that it's too difficult for outsiders to invest there. There is, however, no doubt that Chinese economic power is already reaching deep into Europe – and translating into political influence.
Some of China's Asian neighbours have felt a much harder edge to China's rise. As China stakes its expansive claim to control the South China Sea, defining this as one of its "core interests", Chinese naval boats have in recent weeks twice cut the cables of Vietnamese oil exploration ships. While some in Europe still dream of a postmodern world of shared sovereignty, in which the EU becomes a model for global governance, the geopolitics of Asia increasingly resemble those of late 19th-century – rather than late 20th-century – Europe. Restless sovereign powers vie for supremacy, building up navies and armies, disputing control of land (such as Kashmir) and sea. National interests and passions trump economic interdependence.
I will never forget my first conversation, a few years back, with one of China's leading writers on international relations, Yan Xuetong. Discussing the rise of China, I observed that the transfer of global supremacy from Britain to the United States after 1945 was the only example I knew of a major hegemonic transfer not being accompanied by war. "What do you mean?" Yan interrrupted, waving his hands. "There was a war! It's just that it was with someone else …"
He was right. The war with Nazi Germany did catalyse the hegemonic transfer from London to Washington. Let's trust that history does not repeat itself. But it would be very surprising – on all historical precedent – if China's rise were not accompanied, at some point over the next decade or two, by armed conflict with one of its smaller neighbours. It might be Vietnam, for example, raising the question of how the US would react.
Beside the economic and military dimensions of China's emerging power there is a third dimension: political, cultural or "soft" power. Yan Xuetong has just produced a fascinating new book called Ancient Chinese Thought, Modern Chinese Power. It is devoted to exploring lessons from pre-Qin – that is, pre-221 BCE – political thought for China's role in today's world. Yan argues that two contrasting ideas of state power can be discerned in those ancient Chinese thinkers: hegemony, or what they called "humane authority". With "humane authority", the wisdom, virtue and beneficence of the rulers not only satisfy their own people but also attract others, thereby spreading their ways of doing things beyond their borders.
Although he does not seem entirely averse to mere hegemony, Yan argues that China should aspire to this more ambitious kind of political power – by, among other things, "constantly renovating the political system". While his wording is a bit elliptical at this point, he also suggests that "China must make the moral principle of democracy one of those it promotes".
China in 2011 is, it must be said, a long way from such "humane authority". Starting with the great reformer Deng Xiaoping, it can stake a moral claim to have lifted hundreds of millions of people out of poverty. In the eyes of developing countries around the world, its model of state-managed capitalism is an ideological challenge to the now crisis-torn model of liberal free-market capitalism. In the man coming to Europe, Wen Jiabao, it has a genuinely attractive, thoughtful number two, remarkably open to debating foreigners' critical questions and popular even with highly critical young Chinese back home. But in the last couple of years, a nervous Communist party, in the runup to its 2012 leadership transition, has reverted to a form that is anything but humane – from the treatment of the country's ethnic minorities to the detention of the artist Ai Weiwei (released yesterday, but only on bail). Its reaction to the spectre of the Arab spring has been more anxious than most observers believe it had cause to be.
None of the three faces of Chinese power – economic, military and political – can be separated from the others. All are changing. Critical engagement of the kind that David Cameron and Angela Merkel hope to have with the admirable Mr Wen is desirable. The hard truth, however, is that outsiders' influence on the development of this emerging superpower will be limited. So we need to put our own houses in order, watch closely, and hope.