EU-China News Brief - 4 May 2020

Written By GS

YOUR WEEKLY SHOT OF EU-CHINA NEWS

BY FLAVIAN BERNEAGĂ AND GRZEGORZ STEC

Click & Read:

  1. EEAS Report - Diplomacy as Usual or Power Games?

  2. Investigating COVID-19 - International Consensus, International Divides

  3. COVID-19 and Europe-China Relations - 19 National Case Studies

  4. Calling Their Bluff? China’s Economic Leverage Examined

  5. Two Sessions Date Announced - Is China Back?

 

1. EEAS Report - Diplomacy as Usual or Power Games?

► HR Josep Borrell appeared before the foreign affairs committee of the European Parliament (AFET);

► He acknowledged there were requests from Beijing to make an EEAS EUvsDisInfo report less critical of China’s role in spreading disinformation;

► He stated the EEAS did not water down the report as a result of Chinese pressures;

► The statement and the subsequent grilling session led to a plethora of remarks from various media.

The Facts, Chronologically

  • On April 20, “Brussels’ Playbook”, Politico’s main correspondent in the EU, announced the coming publication of an EEAS StratCom report on disinformation in the EU, with specific mentions of China’s role in spreading disinformation.

  • By April 22, the report had not been released and the EEAS provided no reply on the publication date to the Playbook.

  • On April 23, the BBC reported European officials are wary of challenging China directly over disinformation regarding the number of COVID-19 cases. As a result, the report was allegedly pulled from publication.

  • On April 24, the report was finally published by the EEAS. On the same day, the New York Times announced EU officials delayed then rewrote the report, to dilute the focus on China.

  • On April 25, Politico announced the two most striking elements missing from the report were references to China running a “global disinformation” campaign and the Chinese criticisms of France’s reaction to the pandemic.

  • Also on April 25, EEAS Spokesperson Peter Stano tweeted he was disappointed in the New York Times’ inaccurate reporting on the subject: “If you read with open eyes and no hidden agenda, you see: we don’t bow to any foreign pressure and do our job in exposing disinformation and its actors”. He later told Süddeutsche Zeitung that Politico’s reporting was based on an unauthorized leak from an internal report.

  • On April 26, Financial Times announced Chinese diplomats made three attempts to stop the publication of the report. Wang Lutong, director-general for Europe at the Chinese MFA, and Yang Xiaoguang, Europe specialist at the Chinese MFA, were credited with having made the complaints.

Check out our last brief for more info.

The report is linked in the “Read More” section below. We strongly recommend you consult it for yourself for a better picture before making up your own mind.

Borrell’s Grilling

On April 30, Josep Borrell was questioned by MEP’s regarding the allegations that the EEAS report had been watered down at Beijing’s request.

  • Borrell admitted there was pressure from Beijing:

    • “It was clear and evident that China expressed their concerns when they knew the document that was leaked. They expressed their concerns through the diplomatic channels [...] I'm not going to reveal how it was done because we don't explain this kind of diplomacy”

  • Borrell also denied allegations that the report had been diluted as a result: 

    • “I can assure you that no changes had been introduced to the report published last week to align the concerns of a third party, in this case, China,”

    • “There is no watering down of our findings. We have not bowed to anyone.”

    • “Those that are currently fanning the idea that the European Union may be giving up on its interests or principles under pressure by third countries should read attentively the report we published on disinformation. They should read it, and then they will acknowledge that we are among the very few to dare refer to such facts and publicise them.”

  • Instead, he said there were two documents, very similar, but one was for internal circulation and one was for public consumption.

  • He further mentioned he did not order or know about the NYT’s reporting on the matter, due to the fact that April 24th was his birthday and he had a free afternoon.

  • He defended the EEAS targeting the staff member behind the leak:

    • [I] cannot accept that the personal belief or feeling of a member of the staff leaking mails — maybe being written to be leaked — created damage to the credibility of the institution.”

  • MEP’s had varied reactions, but those with serious savoir-faire in external relations gave positive reviews:

    • Reinhard Bütikofer (German/Greens), the chair of the Delegation for relations with the PRC of the European Parliament, was convinced by Borrell’s explanation, but criticised the EEAS for lying to the media.

    • "I believe you're an honourable man and I accept your explanation," Radek Sikorski (Polish/EPP), Polish former foreign minister.

    • "I was also in the diplomatic service for years and it's perfectly normal," Nathalie Loiseau (French/Renew), a French former EU affairs minister.

    • Hilde Vautmans (Belgian/Renew) said Borrell’s explanation did not fully convince her.

    • Markéta Gregorová (Czech/Pirates) said that, regardless of the report’s handling, the EU’s reputation had taken a hit.

  • We are expecting a Chinese reaction on Monday, May 4. Until then, Chinese MFA Spokesperson Geng Shuang iterated on April 27 (before Borrell’s speech) that “China is a victim rather than a source of disinformation.”

Post-Grilling Reactions

  • On May 1, in an interview with CNN, Commission President Ursula von der Leyen backed Borrell and confirmed the existence of two documents. Two days before, on April 29, von der Leyen had a phone call with Chinese Premier Li Keqiang where they discussed “tackling the disease and revitalizing economic growth.”

  • Reinhard Bütikofer on Twitter:
    “At the end of the hearing, @JosepBorrellF pushes back against those MEPs, who - implying that the EEAS bowed - say: "the damage has been done". Indeed, the damage that I see, is on the #Chinese side. By trying to pressure the EU, they have effectively shot themselves in the foot.”

  • Florian Eder, a.k.a. Brussels’ Playbook of Politico:
    “Borrell’s the boss you dream of, really. Far from acknowledging any mishandling or wrongdoing, let alone lying, by his service, he put the blame for any harm that may have been done to his institution, the EU, or the state of global affairs, on one email written by a young StratCom analyst to colleagues, which the NYT story quoted as saying ‘self-censorship’ had taken place.”

  • On May 2, Josep Borrell spoke to Le Journal du Dimanche and acknowledged Europe had been a “little naive” on China, but said the relationship was becoming more realistic.

TAKEAWAYS

 

► THE BLAME IS IN THE EYE OF THE BEHOLDER
In his speech, Borrell presented the fact that the Chinese raised concerns as a natural part of diplomatic conduct. He described the adjustments made in similar logic as “refining” of the final document. He has a point that China does get mentioned in the report and that the EU is one of the few actors to explicitly call out China’s disinformation efforts in materials aimed at the wider public. However, even knowing the exact changes between the versions —and even if they prove insubstantial—may not solve the issue for those who would simply argue that the EU should not respond to such pressures/requests. But a whole separate issue is how the situation has been handled, with spokespeople lying and Borrell not acknowledging the mishandling.

► PUSH-BACK EFFECT
We may see some changes as a result of this controversy. On the EU’s side, we are less likely to see “two reports” situations from now on. This means more transparency and more info fed to the public or improved control of spread of the “internal” version. The Chinese side is not faring much better and in the future, it will likely have to calculate the image cost of pressuring the EEAS on this sort of subject. In their call, Li Keqiang and Ursula von der Leyen have likely discussed the controversy and the fact that she would mention China in the CNN interview, which we talk about more in the next news bite. The overall tone of the call’s account was focused on cooperation.

► BORRELL STRIKES BACK
A few days after the grilling by MEPs, Borrell used an interview with Le Journal du Dimanche to show he is open to taking a tougher stance on China saying:

"We Europeans support effective multilateralism with the United Nations at the centre [...]. China, on the other hand, has a selective multilateralism that wants, and is based on, a different understanding of the international order."

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READ MORE

 
 

2. Investigating COVID-19 - International Consensus, International Divide

► Multiple world leaders are backing an international investigation into the origin of the coronavirus;

► On May 1st European Commission President Ursula von der Leyen joined the chorus;

► China argues that it opposes any investigation that presumes its guilt.

Investigation is Loading

Multiple world leaders called for an international investigation team to research the origin of the coronavirus.

  • On May 1, Ursula von der Leyen said in an interview with CNBC that she backs the creation of a transparent, international body that could trace the origin of the virus and help establish a more robust data system and an early warning system for future health crises.

  • She dismissed worries that such an investigation would worsen relations with China, but the EU’s togher response is believed to be the result of more aggressive stances from Chinese diplomats.

  • This came amidst a multitude of world leaders calling for the establishment of such an investigation team:

    • On April 29, US Secretary of State Mike Pompeo said the Chinese Communist Party “has a responsibility to tell the world how this pandemic got out of China and all across the world, causing such global economic devastation.”

    • On April 30, Lord Chris Patten, the former British governor to Hong Kong, said there is an “overwhelming case” to send an investigation team, due to the CCP’s initial cover-up. He also highlighted his concern about the anti-democracy measures it has taken in Hong Kong in the context of the pandemic.

    • On April 30, Swedish Health Minister Lena Hallengren said Sweden was planning to ask the European Commission to launch an investigation to gain knowledge about the origin and spread of the virus.

    • Other leaders backing such a proposition include Australia’s Prime Minister Scott Morrisson and Germany’s Chancellor Angela Merkel (who has argued for an investigation since April 21).

  • On May 1, the World Health Organization asked to be made part of the Chinese investigation into the “animal origins” of the pandemic.

Error 404: China is not on Board

  • On April 29, Lu Yucheng, one of China’s vice-foreign ministers, said China “resolutely opposes” any international inquiry into the pandemic that presumes its guilt.

  • On May 1, Doctor Gauden Galea of WHO stated China has repeatedly denied requests of the WHO’s health commission to join its national investigation.

  • After Scott Morrisson had backed the creation of an investigation team, on May 1 China issued a series of threats warning Australia of trade repercussions. State-run tabloid Global Times called Australia a “chewing gum stuck on the sole of China's shoes."

  • In press briefs on April 27 and 28 responding to Reuters and The Australian, Chinese MFA Spokesperson Geng Shuang denied China is ground zero for COVID-19, stated that calls for investigations are a form of political manipulation, and insisted instead that investigations should be pursued by scientists.

TAKEAWAYS

 

► TRUST ISSUES
As much as China’s denial fuels conspiracy theories, it is unlikely that international investigation would validate any of them. Instead, it would likely create a very strong fact-based narrative, which would in many regards contradict China’s official line. Given the “global battle of narratives,” it is not surprising that Beijing doesn’t want to risk an investigation, which may paint a very unfavourable picture or come with an agenda of painting facts in a specific light following a logic of China-bashing. So as much as everyone would benefit from development of an early response mechanism described by President von der Leyen, trust remains a key issue preventing progress on the matter.

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3. COVID-19 and Europe-China Relations - 19 National Case Studies

► The European Think-Tank Network on China (ETNC) published a report on April 29th that:

► Looks at bilateral relations between China and 19 European countries amid the COVID-19 pandemic; 

► Assesses the impact of mask and wolf warrior diplomacy, as well as internal discord within countries and within Europe;

► Argues future relations will be driven by the necessity of post-pandemic multilateralism, rather than a genuine trust in China.

Hard Facts of Mask Diplomacy

The report finds that medical assistance between European countries and China has been:

  • Mutual - more than 50 tonnes of medical supplies were sent from Europe to China in January, aid that was largely muted due to Chinese requests to keep a low profile.

  • Political - for example, a decision by Beijing to organise a video conference aimed at sharing best medical practices with the countries of the 17+1 format (and Malta) a week before any other European partners or on an EU level. This could have been an attempt to make the cooperation in the format look more relevant amid criticism from CEE about the lack of benefits from participation.

  • Commercial - medical aid is far outnumbered by commercial deliveries of medical supplies from China.

 Diplomatic Overdrive

China’s diplomats have been consistent in messaging but varied in methods.

  • Messages fall into four categories:

    • Highlighting solidarity and aid

    • Calling for international unity

    • Promoting China’s fight against COVID-19 while simultaneously blaming Western democracies

    • Countering narratives critical of China, including applying  wolf warrior diplomacy

  • Methods varied: 

    • In some countries diplomats have kept low profiles (Latvia, Romania)

    • In others, they attempted charm offensives (Poland, Portugal, Italy, Spain)

    • In yet others, they have been combative (Sweden, Germany, France)

The Discord Within

  • The pandemic highlighted internal divisions within some European countries, as well as on the continent on the whole.

    • In some countries, relations with China became an even more divisive topic of debate (e.g. Italy, Czech Republic).

    • In other cases, the pandemic further highlighted the North-South divide (e.g. Portugal, Italy).

    • And sometimes it has driven xenophobia, anti-Chinese sentiment, and a broader right-wing populist narrative (e.g. Italy, Spain).

  • The outbreak of COVID-19 and China’s activity highlighted pre-existing divides on the continent, and the post-pandemic economic situation may further exacerbate them.

TAKEAWAYS

 

► The Relations of Tomorrow
The pandemic has clearly outlined important dividing lines within the EU and acrossEurope. It also pushed many European governments to give their relations with China another look, which may result in developing a more clear-eyed approach in building a relationship with Beijing. Realistically, no EU country can pursue a multilateral solution without China and this will keep having weight as the economic recovery is sketched out better. On the other hand, the experience surrounding COVID-19 seems to validate the assessment of the complex relationship between the EU and China outlined by the Commission in March of last year: China is at the same time a “cooperation partner, a negotiating partner, an economic competitor and a systemic rival”. The dynamics of EU-China relations are and will continue to be very complex.

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READ MORE

 
 

4. Calling Their Bluff? China’s Economic Leverage Examined

As lockdowns are lifted and factories reopened, China’s economy appears to be:

► Dependent on a pool of international talent that is now barred from entering the country;

► Dependent on trade and investment coming from developed countries;

► Largely unwelcoming and limiting to European and other foreign investors (true even before the pandemic started), making economic bullying a weak leverage instrument.

Foreign Talent Needed

  • As factories in China move to re-open production, many realize they are missing an important element: experts from countries outside China, who now struggle to enter the country due to new travel bans and restrictions for foreigners

  • Some examples of companies finding themselves in need of foreign talent:

    • BOE Technology Group, China’s leading LCD panel maker, could not pursue the planned expansion of its plant without expertise from Japanese technology advisers. If the situation continues, the plant’s production could be slashed by a third.

    • Samsung cannot complete the building of its new memory chip plant in Xi’an, because it requires help from Japanese experts to install the equipment.

    • Dutch company ASML, the world’s largest manufacturer of semiconductor etching systems, has delayed shipments due to travel restrictions and logistical issues.

  • At the same time, the controversial “Thousand Talents” programme, launched in 2008 to attract foreign experts that could develop cutting-edge science and tech, was surprisingly removed from the Chinese internet, with no results showing on Baidu. 

Demand is in High Demand

China’s economic recovery, much like its economic growth until the pandemic, rests on trade and investment, preponderantly linked to Europe and North America. But a global demand shock may make the recovery challenging.

  • China’s economy shrank by 6.8% in Q1 as a result of the pandemic. Retail sales declined by 20.5% and fixed asset investments outside rural households dropped as well.

  • Nonetheless, the economies that typically generated this demand are themselves attempting to make sense of the virus’ economic impact. The IMF’s grim predictions indicate the worst global recession since the Great Depression of the 1930’s. The Euro area’s GDP is expected to drop by 7.5% and GDP of the US’ will drop by 5.9% in 2020.

  • This poses serious challenges to China’s economic recovery, since both the EU and the US each bought around ⅓ of China’s total exports in 2019.

  • In Q1, exports from China to the US plunged by 25.2% and those to the EU dropped by 16%. Declining exports are among the key issues Beijing faces, since they accounted for 20% of Chinese GDP in 2018.

  • Yu Chunhai, deputy dean of Renmin University’s School of Economics stated “The major developed countries are showing inward-looking policy making to fight the pandemic, all suggesting a far bigger blow to Chinese exporters than the first quarter decline.”

Overstated Leverage?

China represents a big chunk of global economic growth in the 21st century and has a very attractive emerging consumer market, which allows it to have a substantial amount of economic leverage. And it doesn’t shy away from using it as means of inflicting pressure (as discussed in the previous brief).

  • This week, on April 28, Global Times, a Chinese nationalistic outlet controlled by the CCP, published an article denouncing the name change of the Netherlands’ representation in Taiwan. The representation used to be called “The Netherlands Trade and Investment Office”, which was changed to “The Netherlands Office Taipei”. The article mentioned a potential boycott of Dutch products and halting of medical exports.

  • Another prime example came in December last year, when the Chinese Ambassador to Germany remarked that “if Germany were to take a decision that leads to Huawei’s exclusion from the German market, there will be consequences”, hinting at German automotive exports to China.

  • In 2010, Norway’s salmon exports to China were halted after Liu Xiaobo received a Nobel Peace Prize.

Nonetheless, China’s economic muscle should not be overstated.

  • The EU has long encouraged China to open up more sectors to foreign investment (lifting official and unofficial limitations), but the progress on this has been viewed as too slow by the Europeans. An example of this is the challenge provided by the negotiations on the EU-China Comprehensive Agreement on Investments (CAI).

  • Europe’s dependence on trade with China is significantly overstated - in reality only 5.5% of total trade of EU member states in 2018 was with China. On average, ⅔ of total trade for each member state is done with other EU member states.

  • China indeed plays a critical role in global supply chains, amassing ⅓ of global intermediate product manufacturing. In fact, an asymmetrical relationship has formed, where China exports high-value products (albeit in many cases from the perspective of the assembling country) to the EU, but imports fewer goods in return.

  • Over-reliance on the Chinese market proved a mistake during the pandemic, meaning the diversification of supply chains to Southeast Asia and even Eastern Europe is both feasible and desirable (as mentioned in our last news brief)

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TAKEAWAYS

 

► It’s Not Just the Cards You Hold, It’s How You Play Them
Both the EU and China have economic leverage towards one another, but China is more inclined to politicise its leverage. This may be related to simply how intertwined politics and economy are in China, where the Party navigates both. But China should also be mindful of the case of Russia, which believed that it had the upper hand controlling the access to energy resources for Europe. This did not stop the sanctions after the invasion of Crimea.
China’s leverage is not to be disregarded, but it should not be treated as inconceivable for the EU to push back. After all, recent EU decisions to beef up investment screening and to diversify the supply chains show that the EU is ready to limit the growth of China’s leverage.

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5. Two Sessions Date Announced - Is China Back?

► China announced the Two Sessions will be held on May 21-22, more than two months later than initially scheduled;

► This may be a sign that the country is back to normal, including in Beijing, where safety measures have been the tightest for obvious political reasons;

► However, uncertainty looms, as the format and agenda is not known;

► Other sectors of society indicate China is not yet fully back to normal, but signs of progress are visible.

What are the Two Sessions?

  • The ‘Two Sessions’ are China’s most important annual political event.

  • It refers to the National People’s Congress, China’s top legislature, (May 22) and Chinese People’s Political Consultative Conference (May 21). While numerically large and symbolically important, they are essentially a rubber stamp parliament.

  • Every year, 3000 deputies and thousands more officials, advisers, and journalists come to Beijing for two weeks for this annual parliamentary session.

Why are They Especially Important this Year?

  • Chinese media has stressed there is a connection between the announced dates and the symbolic reopening of the country, a feat celebrated as China’s success in defeating COVID-19.

  • In spite of the triumphant rhetoric, much is unknown about the Two Sessions, as the Chinese MFA said they will be “somewhat different” this year. This may mean deputy discussions will go virtual (the Standing Committee has already done this). It may also mean that deputies will come to Beijing earlier and be placed in quarantine.

  • More importantly, 2020 was meant to be the year when China’s GDP doubled. The NPC was usually the place where the Premier announced new economic growth targets, the key event of the Two Sessions.

  • As China’s growth projections have taken a hit, this year’s announcement is particularly important.

Other Coordinates

  • Other variables offer a measure of how China’s return to normal is going.

  • In education, high schools have reopened in Beijing and Shanghai, key cities where the party would not risk another outbreak. Measures were taken to maintain control over the potential spread of the virus: smaller classes, distancing between students, shorter days, parental pick up at the school, and continued strict controls. Similarly, the extremely competitive university entrance exam called the ‘gaokao’ (高考) was postponed for July 7-8, one month later than planned. This hasn’t happened since the Cultural Revolution.

  • In terms of finance economics, the Purchasing Managers’ Index (PMI) for April dropped in both China’s National Bureau of Statistics (from 52.0 to 50.8) and Caixin (from 50.1 to 49.4). For reference, anything above 50 represents expected improvement, while scores lower than 50 indicate decreased optimism.

  • On the other hand, Beijing lowered its public health emergency response rating on April 29 from Level 1 to Level 2 for the first time since January. This means people coming to Beijing from low risk areas in China will no longer be subject to quarantine. Outbound plane tickets from Beijing skyrocketed fifteen-fold within the first half hour.

  • According to Trivium China, the National Business Activity Index increased only slightly (from 78.3% in early April to 82.8% in early May). This indicates resumption of business is happening, but at a very slow pace.

TAKEAWAYS

 

► Just How Good Is it, Really?
The announcement of the Two Sessions is without a doubt a signal that the situation is coming under control. Beijing is the political center of the country, so utmost importance was given to safety measures within it. An announcement of this sort shows the country is on the road to normality. However, much of the coordinates for the Two Sessions are still unknown, which shows that officials are still wary of a new potential outbreak. Long story short, China has started its return to normal, but it is far from having accomplished it.

► Targeting Xi Jinping
Another “instability” surrounding the pandemic has been that of potential intra-party dissent against Xi Jinping. Nonetheless, the recent graft investigation of Sun Lijun, the deputy public security minister, shows Xi retains power within party ranks. Also, a video is making rounds on the Chinese internet of Xi speaking at Xi’an Jiaotong University. Pundits noted he appears relaxed and delivers the talk without a pre-written speech.

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GS
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