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MERICS China Essentials
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China policy – Europe is moving towards doing it its way

TOP STORY: China policy – Europe is moving towards doing it its way

China is currently front and centre of foreign-policy discussions within the European Union and between the EU and the USA. Despite the postponement of September’s EU-China Summit in Leipzig, Germany signalled that China remains a priority under Berlin’s rotating presidency of the EU. In a draft of a strategy paper for its six months at the helm of the EU, Germany said China would have to show more “reciprocity” – presumably in areas like market access – and the EU better pursue its “interests and values” – bold words after China’s moves to quell the protests in Hong Kong.  

Germany’s move followed a High-Level EU-China Strategic Dialogue, which took place on 9 June and during which – according to EU foreign affairs chief Josep Borrell – Brussels and Beijing made progress on the Agenda 2025, which is meant to codify strategic cooperation between the EU and China. European Commission president Ursula von der Leyen and European Council President Charles Michel will meet Chinese Premier Li Keqiang for an online summit on Monday, 22 June.  

EU Foreign Ministers met US Secretary of State Mike Pompeo by video on 15 June. China and its growing assertiveness were high on the agenda. Borrell suggested the EU and US launch a “distinct, bilateral dialogue focussing on China.” In parallel, the EU made progress on the action plan set out in the 2019 strategic outlook on EU-China relations. It announced new steps to fight disinformation and to address the distortive effects of foreign subsidies on the single market, which will, for example, stop Chinese companies operating in third countries from circumventing EU duties on Chinese goods.  

The EU is expanding its toolbox to address the challenges posed by China in a number of policy areas, following through on some of the action points set out in the March 2019 strategic outlook. These developments should be seen in the context of a reassessment of EU-China relations that became clearer in spring 2019 but have intensified with the Covid-19 pandemic over the last few months. Nonetheless, European leaders have been unwilling to let differences derail diplomatic relations with China, and so far, the EU’s sharpening of its approach – especially to trade – has not expanded to equally concrete proposals to deal with growing political tensions.  

MERICS analysis: With the cracks in transatlantic relations growing and tensions between Washington and Beijing rising, Europe is looking to stake out its own China policy. It is unlikely that the EU will follow the more antagonistic approach of the US – only last week, Borrell published a post in which he put forward the idea of a “Sinatra Doctrine” with which Europe could find its own way. Despite this signal that the EU won’t pick sides as tensions between Washington and Beijing escalate, the idea of a transatlantic dialogue on China would help Europe and US understand each other’s views and fine tune approaches in areas where they have similar interests – the need for structural economic reforms in China, the possibility of bringing together the EU’s connectivity strategy and the US Blue Dot Network as an alternative to China’s Belt and Road Initiative, to name but two, says MERICS expert Lucrezia Poggetti. 

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600 million

Some 600 million Chinese citizens live off a monthly income of 1,000 yuan, around 140 US dollars, according to Chinese Premier Li Keqiang. That means 43 percent of China’s 1.4 billion population survive on less than five US dollars a day. The World Bank expects poverty to rise after the Covid-19 pandemic. (Source: SCMP and World Bank)

Xi Jinping and Li Keqiang clash over support of street vendors

The facts: China’s president Xi Jinping and premier Li Keqiang seem to disagree over the role and treatment of street vendors in reviving the Chinese economy in the aftermath of the coronavirus epidemic. During a trip to Shandong province at the beginning of June, Li openly addressed employment concerns and praised street vendors for creating jobs. The term “street stall economy” (地摊经济) soon became a popular buzzword. Xi’s regime, however, has previously cracked down on street stalls – especially in Beijing – and Li’s remarks were swiftly rebutted by official state media. 

What to watch for: Mixed signals from China’s leadership have left citizens and local-government officials confused about what – if any – level of state support for street vendors is deemed appropriate. The shape of any post-Covid-19 economic stimulus and policies will not only be important indicators for the speed and scope of China’s economic recovery. The inclusion or exclusion of major support packages for street vendors will serve as an important sign as to who is gaining the upper hand in the perceived factional struggles between Xi and Li.  

MERICS analysis: This episode feeds into a larger disagreement between Xi and Li on how to put China’s economy back on track. Discord already became apparent in the wake of this year’s government work report at the National People’s Congress in May. Li for the first time did not set a growth target for this year’s gross domestic product (GDP). He also expressed concern about job losses – in stark contrast to the more optimistic narrative pushed by the Xi camp. Small and medium-sized enterprises (SMEs), including street stalls, account for 80 percent of jobs and 60 percent of GDP in China. Their survival is crucial for China’s economic, social and political stability.  

More on the subject: MERICS analysts Anna Holzmann and Maximilian Kärnfelt argue in a blogpost that state support for China’s SMEs in the wake of the Covid-19 crisis “is crucial to avoid a socioeconomic disaster”.  

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China’s economy on the long road to recovery

The facts: China appears to be on the road to recovery after the economic slump caused by the coronavirus crisis. Data for May from the National Bureau of Statistics of China released on Monday showed signs of improvement: on a year-to-date basis the contraction of fixed-asset investments eased from 10.3 percent in the first four months to 6.3 percent in May; retail sales were down only 13.5 percent in yearly comparison after slumping 16.2 percent in the previous four months. Exports fell by 7.7 percent in the first five months after falling 9 percent between January and April. The official unemployment rate fell to 5.9 percent in May, down from 6.0 percent in April. 

What to watch: Despite the cautious optimism, weak demand underlines the damage caused by the coronavirus outbreak and indicates China's economy is still far from normal. A coronavirus outbreak in Beijing has seen new lockdown measures introduced in the capital. There is a real risk that a wider lockdown would obliterate the progress made over the past months. Financial damage would follow the economic damage, making it clear China is not yet out of the woods. 

MERICS Analysis: Recent data shows that stimulus and currency depreciation have helped investment and exports, respectively. But China is not over the hump. The economic recovery remains gradual. Financial damage suffered by individuals and companies will be harsh for a long time. 

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China’s underwhelming support for Black Lives Matter movement

The facts: Support for the Black Lives Matter movement is surging around the world, but China seems happy to stay on the sidelines. After the death of George Floyd in police custody in the US three weeks ago and the protests it unleashed, China’s state media have focused on depicting “riots” in the US and on criticizing the country’s social and political injustices. A foreign ministry spokesperson tweeted a support message for “African friends”, with the startling relativization that “all lives matter”. At the same time, discussions on Chinese social media are interspersed with criticism of the conduct of Africans in China. As more and more migrants come to China, discrimination of people of color is picking up – as African residents in Guangzhou found out during the coronavirus outbreak.  

What to watch: Xi Jinping has hosted an “extraordinary China-Africa summit on solidarity against Covid-19” on June 17. But his charm offensive will hardly be enough to resolve tensions stemming from the mistreatment of Africans in China. Chinese society is still largely homogeneous and already struggles to relate to its ethnic minorities. This raises the question how race relations will evolve as China opens its doors to immigrants. Beijing advocates a “community of a shared future for mankind”. But it will find this difficult to achieve in a society that is not used to exploring identities and imbued with often politicized concepts of ethnicity and nationality.  

MERICS analysis: “The views of China’s official media and elements of the public are deeply worrying. Also, there is a remarkable discrepancy between China’s friendly diplomatic relations with African countries and some attitudes in Chinese society,” says MERICS analyst Yishu Mao. 

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REVIEW: The Food of Sichuan by Fuchsia Dunlop (Bloomsbury, 2019)

At a time of rising tensions between the West and China, Fuchsia Dunlop’s prize-winning and best-selling “The Food of Sichuan” builds a culinary bridge. It reminds us that the divisions of high politics are ultimately powerless against the unanimity created by good food. The cookbook is the result of decades of appreciation for Sichuan and its historically fragrant, flavorsome and often fiery cuisine. 

Instructions like “smack the ginger with the flat of a cleaver” and glossaries of essentials like chilies make the book a staple. And it’s a great read – experience, for example, Dunlop’s efforts to get Mr. Xie’s Dan Dan noodle recipe: Visits over years and finally tips from Xie and a peek into his kitchen. Simple ingredients paired with complex flavors – a very authentic and shamelessly spicy classic.  

There is a Chinese saying that goes, 吃在中国,味在四川 – go to China for the food, but Sichuan for the flavors. Dunlop did just that, spending a postgraduate year in Sichuan in 1994 – a time when the region’s cuisine was becoming popular in China and attracting initial attention in the West. “The Food of Sichuan” is an updated and expanded version of the resulting cookbook, “Land of Plenty” (2001). 

The land of plenty did not take long to return the affection. Dunlop has been translated into Chinese, featured by Chinese media, praised by Chinese experts. Xinhua news in 2018 quoted the director of a TV cooking show as saying her work had “opened up a magical discovery of flavors in China [...], one even locals […] benefit from.” Few things bring people together like Mr. Xie’s Dan Dan noodles.  

Review by Fiona Bewley, assistant to the MERICS Executive Team  

VIS-À-VIS: Kevin Kerrigan

The network Young China Watchers (YCW) recently published a poll of more than 200 members in Asia, North America and Europe about their attitudes towards China. It shows that the young professionals that make up YCW are becoming more polarized: moderate views are giving way to growing anti-China perceptions and also hardening pro-China sentiment. We put three questions to Kevin Kerrigan, who was in charge of the 2019 Pulse Survey Report for the Young China Watchers. 

How do the viewpoints of Europe-based young professionals engaged with China differ from their peers in the United States and Asia? 

European viewpoints tended to be more moderate than those in Asia-Pacific, which were more positive, or North America, which were more negative. 38 percent of respondents were European. They diverged most from peers in the other regions by demonstrating openness to the idea of other countries adopting aspects of China’s economic model. 50 percent of respondents in Europe thought this was worth considering, against 38  percent in Asia-Pacific and 43 percent in North America. This could be a reflection of the debate about strengthening Europe’s economic competitiveness, or an acknowledgment of the effectiveness of state-led economic development for developing countries. European respondents were also more likely to acknowledge China’s effectiveness at projecting hard power overseas – some 79 percent agreed – and less likely to see China as a responsible stakeholder in global affairs – only 20 percent thought it was. The survey closed early January, just before Covid-19 became a global issue. European respondents were the most critical about China’s impact on global health. Our next survey should be able to show if and how this view changed.  

Younger China watchers are increasingly negative about China – are there regional differences in the degree to which sentiment has changed? 

All regions are more negative than last year about China’s impact on global affairs. Nearly all ten chapters signalled a decline in positive sentiment towards China – only our respondents in Singapore marked an increase. Overall, the biggest decline from the 2018 to 2019 survey was seen in Europe, where positive sentiment dropped by 15 percentage points, rather than the nine points seen globally. Awareness appears to be rising in Europe that Chinese inward investment will affect national security, even if opinions seem to diverge as to how: 46 percent of respondents from London believed Chinese investments will have more positive economic impact, only 16 percent worried about a significant security impact; in Berlin, 41 percent worried about the security impact, while only 17 percent expected more economic benefits. Brussels, as ever, was somewhere between these two camps. This appears to align with the ongoing debate across Europe over the national security implications of Chinese investments, despite the recent shift away from Huawei by the UK government. 

Questions about China’s role in the world and in global developments have become more urgent – what lessons can we draw from your survey? 

YCW draws on over 6000 young professionals from across the world and all walks of life. Younger generations use Chinese products and services like Huawei phones and the TikTok app, so they are the drivers of the global expansion of Chinese business. At the same time, the next generation of policy makers and business leaders are already influencing the policies that deal with competing with or even confronting China. Surveys by the Pew Research Centre and others show young people tend to view China more positively than older generations, but that negative sentiments are increasing. Our report presents a more nuanced view. For example, our respondents voice no support for a US-China-style trade war, suggesting support for a less confrontational approach towards China.  

PROFILE: Geng Shuang

Telling China’s story in a softer tone  

China´s foreign ministry spokesman Geng Shuang (耿爽) last week announced that he was quitting the job after close to four years in office. Since he made his debut in 2016 as the youngest-ever public face of the ministry, aged 43, he has hosted nearly 400 press briefings. He used his last press briefing to say goodbye with a solemn tone and make one promise to the world: “As a Chinese diplomat, no matter where I go, I will continue to tell China’s story well […] and to make my efforts and contribution to promoting mutual understanding between China and the world.” Promoting positive narratives about China has become a major preoccupation for its diplomats since president Xi Jinping launched a global propaganda campaign to encourage foreign audiences to think well of the Chinese state.  

Geng´s new post could not be more central to that task – that of deputy permanent representative at the Chinese mission to the United Nations. The UN is a key forum for Xi´s China as it tirelessly works to win influence over global governance norms and institutions and build alliances with countries supportive of its policies. In New York, Geng will hold the rank of ambassador and oversee public outreach and press strategies – roles that were previously carried out by more lowly diplomats. The upgrade is said to reflect the importance Beijing now attaches to the post and the challenges that entails. There is little doubt that Geng´s new job will be challenging: China´s reputation has been battered by human-rights abuses in Xinjiang and initial attempts to cover up the COVID-19 crisis.  

Still young for a diplomat, Geng combines public-diplomacy expertise with international experience. Beijing-born, he was educated in Boston, where he received an MA in International Relations. Geng is not new to the UN, having served as Attaché and Third Secretary at China’s permanent mission between 1999 and 2003. He was also a counselor at the Chinese embassy in Washington between 2011 and 2015. As a spokesperson, Geng used to strike a softer tone than his more combative colleagues, Hua Chunying and Zhao Lijian. They, unlike Geng, have a particular reputation for sharing abrasive Tweets. The state-run Global Times says that Geng’s “fans” describe him as “elegant and thoughtful”. Xi is known to like more hawkish diplomats. But for some roles a combative streak might not provide a good fit. 

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