Brussels has branded China a “systemic rival” and threatened tighter rules on its investments in Europe as some of the largest EU countries push back on Beijing’s contentious Belt and Road Initiative. The Financial Times reports in its article Brussels ramps up criticism of China’s investment strategy in EU that in a paper released on Tuesday, the European Commission and the EU’s diplomatic unit called on China to stop unfair treatment of European companies and investment practices that threatened the rule of law in recipient countries and risked plunging them into debt.
“There is a growing appreciation in Europe that the balance of challenges and opportunities presented by China has shifted,” the document reads. “China’s publicly stated reform ambitions should translate into policies or actions commensurate with its role and responsibility.”
The wide-ranging criticism reflects growing pressure from EU countries including Germany to adopt a tougher response to China’s ambitions. Beijing is simultaneously a co-operation and negotiating partner, an “economic competitor” and a “systemic rival promoting alternative models of governance,” the paper warns.
Brussels’ policy document sets the tone for more defiant discussions with Beijing in the next few weeks as bloc leaders prepare for a bilateral summit next month and Italy plans to become become the first G7 country to endorse China’s Belt and Road global investment drive.
The EU’s document urges a “more balanced and reciprocal economic relationship,” saying that China “preserves its domestic markets for its champions” by restricting foreign companies’ access to its market, subsidising local competitors and failing to protect intellectual property rights.
Chinese investments overseas have contributed to economic growth but often “neglect socio-economic and financial sustainability”, because they seize control of strategic assets, undermine the rule of law and benefit from Beijing-backed financing that puts foreign rivals at a disadvantage, the paper says.
The EU should build a new arsenal to fight takeovers by state-subsidised firms and other aggressive Chinese trade tactics, it adds, picking up on recent proposals from the German business federation for the EU to restrict market access for non-EU companies receiving extensive subsidies and to block their ability to buy European technology firms.
European businesses have complained that while they face strict EU limits on state aid, foreign competitors are not bound by the same rules. The document says the commission will now look at ways to “fill existing gaps in EU law” to tackle the “distortive effects of foreign state ownership and state financing in the internal market.” The commission will come up with options by the end of this year, it says.
Brussels also seeks to reignite longstanding plans to prevent companies winning public procurement contracts in the EU if they are based in countries that discriminate against European suppliers. Berlin has recently signalled support for the approach, raising hope for an EU-wide accord on the matter. EU officials, however, cautioned that the plans were unlikely to be adopted this year.
Brussels’ policy tacitly acknowledges disagreements over China among EU member states, highlighted by Italy’s talks to join several other countries including Hungary in backing Beijing’s Belt and Road infrastructure initiative. Li Keqiang, China’s premier, is due to travel straight from the EU summit on April 9 to a meeting in Croatia of the 16+1 grouping, that includes 11 EU members and is seen by some in Brussels as China’s Trojan horse.
Beijing has denied it wants to hobble the EU, arguing that a stable Europe is in the interests of China and international trade and security. It has also rebutted criticism of Belt and Road plans, pointing out that more than 150 countries and international organisations have endorsed it.
In the policy document, Brussels also pledges measures in response to growing fears over security risks in using Chinese technology from companies such as Huawei in 5G mobile communication networks — concerns that both the company and Beijing say are groundless. Brussels plans to push for a common EU approach to 5G security risks, including information exchange, risk assessment and risk-management measures.
The document chides Beijing over its claims to most of the South China Sea and its failure to honour a 2016 UN court ruling against it. The paper nods to “China’s progress in economic and social rights”, but criticises crackdown on human rights lawyers and defenders as well as mass internment of Uighur Muslims in the western province of Xinjiang.
