EU vote will elevate Sino-EU cooperation

Emma Jelley holding her Two year-old Beatrice as they take part in 'The Big In' event at Hyde Park in London to promote an in vote at this week's EU membership referendum.[Photo/IC]

EU countries need Chinese investment capital

The European economy has remained mired in the aftermath of the financial crisis. The market is starved of investment capital. Individual European counties, in particular, are openly ‘cash hungry’. In contrast, China is already the world’s largest trading nation and the second largest economy, and likely to emerge in the next few years as the world’s largest net creditor. China’s reserve peaked at about $4 trillion at the end of 2014. In recent years, the commercial outflow of capital from China has been maintained at a high level. It is estimated that the net private capital outflow from China is $676 billion in 2015. In a nutshell, the investment capital from China is so attractive for European countries that they must seize the opportunities to cooperate with China.

European countries are competing for Chinese capital. On the list of the top ten destinations for China’s overseas direct investment, there are the UK, France and Germany. In addition, EU countries, including Austria, Denmark, France, Germany, Italy, Luxembourg, Netherlands, Spain, the UK, Sweden, Finland, Portugal, Poland, and Malta are all founding members of the Asian Infrastructure Investment Bank proposed by China. Also, China is promoting cooperation with Central Europe and Eastern Europe. President Xi Jinping is in Poland now. Three months ago, during his state visit to Czech Republic, Beijing and Prague secured deals worth about €4 billion. China, thus, became Czech Republic’s largest trading partner outside the EU. Apart from Czech Republic and Poland, many Central European and Eastern European countries, including Slovakia, Romania, Bulgaria, Hungary have declared themselves interested in developing stronger economic ties with China. They are eager to do business with China, especially in the field of building infrastructure networks.

Sino-EU Cooperation: seize the opportunities and face the challenges

In recent years, China’s international investment interests have shifted from Africa, Asia and Latin America to Europe and the US. In 2015, Chinese investment in Europe has been unprecedentedly €20 billion, increased by 44 percent compared with that of 2014. Moreover, the figure is expected to continue to grow in the following years.

China has created new partnerships with EU countriesby expanding its power through finance, infrastructure and technology. For instance, China has already been successful in Greece. In the financial crisis, when markets had lost faith in the euro, China offered to buy euro bonds and helped the indebted Greece. This move not only paved the way for Chinese investment in the Greek infrastructure sector, especially in the port of Piraeus, but also enabled China to use Athens as a base to connect Central Europe, the Balkans and the Mediterranean Sea.

Although barriers still exist in the way of Sino-EU cooperation, we should realize that the EU is not a monolithic picture. Due to member states’ different capacities and demands, it’s almost impossible for the EU to satisfy all of them with unitary criterion. Furthermore, as the EU is declining, those differences are increasingly significant, and it is the differences that enable Chinese investment capital to penetrate the European market.

Conclusion

The UK’s EU referendum has mirrored the current predicaments of the EU. Under this circumstance, in-depth Sino-EU cooperation will be mutually beneficial. More important, it will greatly contribute to maintaining regional peace and stability, and promoting world prosperity and development.

Xinxian Zhu, assistant researcher at The Centre for British Studies, Shanghai International Studies University.