Articles & News

Orientedworld is committed to developing innovative connections and broader understanding of the opportunities and challenges the current power shift to the East entails. In this section, we make available short articles on select events and news related to our mission and advisory work.

Apr 2018

Why stability in the South China Sea matters

China’s territorial and maritime claims in the South China Sea are putting Europe’s economic interests in the area at risk. More than one third of Europe’s external trade takes place with the Indo-Pacific region and any escalation of tensions in this area will undoubtedly have a direct impact on Europe.

China has recently stepped up claims over large swaths of the South China Sea. These claims are not only based on economic and security considerations, but also on national identity and the renewal of China’s past grandeur. President Xi Jinping’s reiteration of his vision of a “Chinese dream”, as most recently outlined during the 13th National People’s Congress held in Beijing in March 2018, reflects these efforts to rebrand China’s image and polish its credentials as a global actor. Xi’s closing speech at the 2018 National People’s Congress chimed with an increasingly assertive foreign policy, in particular when he cited China’s island-building campaign in the South China Sea as one of the key accomplishments of his presidency. This implicitly linked his vision of a Chinese dream and the rejuvenation of the country with the idea of restoring the glory of the ancient times, when China presided over a Sino-centric order in East Asia.

China is now building artificial islands, installing military facilities, drilling for oil and gas, and chasing off vessels belonging to its Southeast Asian neighbours from waters that international organizations – such as the United Nations Convention on the Law of the Sea (UNCLOS) and the Hague Tribunal – say they can operate in.

Militarisation of islands in the South China Sea

Militarisation of islands in the South China Sea

There appears to be a glaring division between the West and China when it comes to the application of international law to sovereignty disputes in the South China Sea. In July 2016, after more than three years of deliberation, the Permanent Court of Arbitration in The Hague rendered its award in the Arbitration between the Philippines and China, making it clear that China’s extensive claims to maritime areas within the so-called “nine-dash line” are incompatible with UNCLOS and therefore illegitimate. The tribunal also underscored that none of the land features claimed by China qualify as “islands” – something that would in turn warrant the claiming of an exclusive economic zone under the United Nations Convention on the Law of the Sea (UNCLOS). China strongly condemned the ruling, declaring it “null and void” and questioned the legitimacy of the tribunal itself, prompting other claimants to reinforce their actions and the US to intensify its freedom of navigation operations to deter Beijing from adopting more confrontational policies in the future.

At the 31st ASEAN summit in Manila in November 2017, China agreed to begin talks with the regional body on details of a code of conduct for the South China Sea. Yet, no timeframe has been given for an agreement and many in the region are sceptical about Chinese intentions. It is hoped that a compromise – including joint exploitation of ressources – will be eventually found between China and the other claimant nations. Also the West has a strategic interest in the maintenance of a stable regional environment which would allow economic growth and prosperity to continue.

An earlier and expanded version of this article was published in the ISNblog

Nov 2017

Why we are entering a new era in China-Europe relations

US President Donald Trump’s ‘America first’ announcements and policies are alienating his Western allies. This coincides with the United Kingdom beginning its departure from the EU, now set for 29 March 2019 at 23:00. In these circumstances, China has been quietly reaching out to Western nations. Both Beijing and Brussels hope to move ahead with economic globalization, and during the annual EU-China Summit held in Brussels on June 1–2, 2017, the two sides forged a new green alliance to combat global warming, a clear nose thumbing at Trump. With the EU and the United States increasingly divided, this moment may mark the beginning of a new China-EU axis in global politics.

One of the areas in which China and the EU have developed strong ties is in the monetary field. Beijing has traditionally supported the euro, which is the only serious alternative to the dollar, and has diversified its foreign exchange reserves—the world’s largest—so that it now holds over one-third in euros and just slightly more than half in dollars, a decrease of around 30 percent since 1999, when the European common currency came into circulation. What this means is that in the last several years, Beijing has swapped dollars for euros, a trend that is likely to continue in future.

China’s diversification strategy signals that the dollar is no longer the world’s only reserve currency, and this is important to Beijing, which is trying to internationalize its currency as it weans itself off of its dependency on the United States’ economic cycle and monetary policy. Europe has, in turn, supported many of China’s monetary ambitions. The Europeans unanimously backed the decision by the International Monetary Fund (IMF) in December 2015 to include the renminbi in the basket of currencies making up the Special Drawing Right (SDR), an international reserve currency that includes the U.S. dollar, the euro, the British pound, and the Japanese yen. The decision was clearly political. The EU wanted to send a friendly message to China, the world’s second-largest economy, as well as to recognize what Beijing had done to support the euro during the euro crisis of 2009–11, when the European common currency became the target of speculative attacks mainly stemming from Wall Street–based banks and hedge funds. At the time, Chinese leaders intervened on various occasions to reassure the financial markets by buying eurozone bonds.

Today, the old continent is home to the largest number of renminbi bank clearings or offshore hubs where the Chinese currency can be traded. The fact that offshore renminbi hubs have also emerged in Budapest, Frankfurt, Luxembourg City, Madrid, Milan, Paris, and Prague indicates Europe’s willingness to promote the use of the Chinese currency. In the same vein, most of Europe’s central banks have accepted—or are considering accepting—China’s currency as a viable reserve. Although London is currently the most important offshore market for renminbi trading, once the United Kingdom leaves EU, significant shares of renminbi trading in London will most likely move to the continent, in places such as Paris, Frankfurt, and Luxembourg, thus strengthening the China-EU monetary axis even more.

When it comes to trade, relations between China and the EU are more rocky, although Trump’s derision of global trade certainly provides an opening. Between 2002 and 2016, total EU-China trade has risen dramatically, from 125 billion euros to roughly 515 billion euros. Today, China and the EU trade more than 1.5 billion euros in goods each day, and total bilateral trade in 2016 was 514.6 billion euros according to the European Commission—nearly equivalent to what China exchanges with the United States. In fact, the EU is now China’s most important trading partner, although China ranks number two for the EU, after the United States.

In addition to buoyant commercial relations, Beijing is trying to charm Europe through investments. Europe is now the top destination for Chinese foreign investments, surpassing the United States. According to the China Global Investment Tracker, a joint project of the American Enterprise Institute and the Heritage Foundation, China invested nearly $164 billion in Europe between 2005 and 2016. During that same period, it invested $103 billion in the United States.

These dynamics indicate that Europe-China relations are entering a new phase. Make no mistake, however. A China-EU alliance would be more a marriage of convenience than a solid partnership—one that is facilitated by Brexit and that revolves around a shared antagonism for Trump. We must wait and see whether the new dynamics within both the United Kingdom and the United States transform this axis into a more permanent one as new possibilities for China-EU relations open up, unthinkable only a few years ago.

An earlier and expanded version of this article was published in Foreign Affairs.

May 2017

How Trump is reconnecting Europe with China

China is on a charm offensive in Europe, a move facilitated by U.S. President Donald Trump’s policies and his declarations since taking office. Beijing is eager to find allies willing to stand up for open trade amid fears Trump could undermine it with his protectionist, so-called America First measures. Sensing a low tide in Transatlantic relations, Chinese leaders are reaching out to the European Union — China’s leading trading partner and an important source of investment and technology. Beijing seems willing to set aside differences over bilateral trade and investment in order to draw the Europeans to its side.

In recent months, Beijing has toned down its public campaign to obtain EU recognition of market economy status for China. The case is now being dealt with at the World Trade Organization in Geneva, a move that allows the European Union and China to avoid giving the question too much publicity. If China obtains its coveted prize, it will be more difficult to adopt anti-dumping measures against Chinese companies. Neither the European Union nor the United States has yet recognized China as a market economy, and Western unity on this issue has so far prevailed.

The issue of market economy status marred Sino-European relations throughout 2016 and could have tainted relations this year too, had the election of Trump not changed priorities for Brussels and Beijing. Both stand united against protectionism, and on March 10, the European Council issued a conclusion document underlining that “trade relations with China should be strengthened.”

China-EU-US trade

EU policymakers have accepted Beijing’s request to bump up the annual China-EU summit from its usual July date to June. This is intended to send a unified message President Trump. Brussels and Beijing want to press ahead with economic globalization and free and fair trade in order to better tackle domestic problems. China is rebalancing its economy from one based on exports to one focused on domestic consumption, while the European Union is trying to recover from a long recession. However, it is not only the economic dimension that is bringing China and the European Union closer, but also their support for multilateralism and international organizations — in contrast with Trump’s preference for power-based bilateral relations.

China stands to gain from divisions among Western allies — even at a moment such as this, when there are a number of frictions in Sino-European relations, including the question of growing Chinese investments in the old Continent. A report by the Rhodium Group, a research firm, and the Mercator Institute for China Studies, a think tank in Berlin, found that Chinese direct investment in the European Union surged 76 percent to around €35 billion in 2016. Chinese purchases are growing rapidly in sectors that remain restricted to foreign investors in China, and this inflames debate about growing imbalances between the two sides. Those imbalances draw particular concern from Germany, where Chinese acquisitions soared to 11 billion euros in 2016, surpassing for the first time German mergers and acquisitions in China.

In February, France, Germany, and Italy asked the European Commission to rethink rules on foreign investment in the European Union. This was a message to Beijing to enforce reciprocity in market access, and at a time when the two sides are negotiating a bilateral investment treaty. It is unlikely, however, that a pan-European screening mechanism similar to the Committee on Foreign Investment in the United States will see light in the near future. Europe is now the top destination of Chinese investments abroad, surpassing the United States. According to the China Global Investment Tracker, a joint project of the American Enterprise Institute and the Heritage Foundation, between 2005 and 2016 China invested nearly $164 billion in Europe. During that same period, it invested $103 billion in the United States.

With negotiations on the Transatlantic Trade and Investment Partnership in limbo, and the Trump administration’s focus on America First, Europeans feel they have been left alone to deal with an increasingly powerful China. The latter is luring EU members with the prospect of increased investments in their countries. Should President Trump not change course, the European Union and China are bound to get closer, despite their differences.

An earlier and expanded version of this article was published in RealClearWorld

Feb 2017

China’s claims in the South China Sea: Implications for the West

In the last years there have been a number of semi-official declarations by Chinese policymakers and senior officials of the People’s Liberation Army which have asserted that the islands, shoals and waters in the South China Sea are now a “core national interest”, alongside Tibet and Taiwan. This is much more than a Chinese version of the United States’ nineteenth century’s Monroe Doctrine since it touches to the very heart of China’s national identity. For instance, in geography classes across the country, Chinese schoolchildren study maps of China’s territory including the entire South China Sea, where the nine-dash line is clearly marked out.

The so-called nine-dash lines indicate the area that China considers it has sovereignty over. It includes the islands, banks and shoals as well as the surrounding waters of the Paracels, the Spratlys, Scarborough Shoal and Macclesfield Bank, and the Pratas – known in China as the Xisha, Nansha, Zongsha and Dongsha archipelagos respectively – all the way down to James Shoal – also known as Zengmu Ansha reef – as its southernmost tip, 1,800 miles away from mainland China.

Competing claims in the South China Sea

Competing claims in the South China Sea

In Chinese eyes, the hundreds of islands, islets, sandbanks, rocks, and shoals – also referred to as “maritime features” – throughout the South China Sea region constitute an indivisible part of China’s historical territory. It follows that the overlapping claims, and alternative interpretations, by other countries in the region – in particular Brunei, Malaysia, the Philippines, Taiwan and Vietnam – are not recognised by the Chinese authorities. The hardline approach taken by the Chinese Communist Party finds support among Chinese public opinion, which has come to view Beijing’s construction of artificial islands as perfectly within its rights since it occurs within Chinese territory. The overwhelming view in China is that these are “our islands”.

While in Western eyes these activities are a form of “territorial occupation”, for the Chinese authorities they are pieces of a long-term plan aimed at strategic positioning. They can be seen as an application in the South China Sea of the basic precepts of China’s strategy board game wei qi (also known in the West by its Japanese name, go).

Wei qi is a game of surrounding pieces. It implies a concept of strategic encirclement through protracted “campaigns“ and “initiatives”. The wei qi player seeks relative advantage which requires a constant re-assessment of not only the pieces on the board, but also the reinforcements that the adversary is in a position to deploy. To be able to win, a wei qi player needs thus to move into “empty” spaces on the board – i.e. unoccupied islands and reefs in the South China Sea – to gradually mitigate the strategic potential of his opponent’s pieces – i.e. the United States and its Asian allies.

In conclusion, the West should not put too many hopes on international law, including UNCLOS. Instead, it should learn more about Chinese strategic thinking so as to be able to better deal with these issues. A wei qi contest is currently underway in the South China Sea. This is a game where Western rules do not apply.

An earlier and expanded version of this article was published in Global Challenges

Oct 2016

The EU-China-US triangle – priorities for the next U.S. administration

China is possibly the EU’s most ominous economic and trade challenge. At the same time, Beijing represents a formidable opportunity for many European companies as well as for EU aspirations to emerge as a global actor. The country continues to be viewed with suspicion across Europe due to the non-democratic nature of the Chinese regime, raising questions as to what use Chinese leaders will make of their country’s increased capabilities. Yet, it is precisely this authoritarian Communist China, informed by values and principles quite different from those of the EU and its member states, that has come to support the EU’s integration process – including key initiatives such as the European common currency. This dual significance of China for the EU – as both a daunting challenge and a formidable opportunity – has implications for the transatlantic relationship. There is great scope for joint EU-US cooperation on advancing a set of rules and principles in China and the surrounding region dear to Western public opinion. At the same time, the role that China plays in Europe – through the New Silk Road and the growing investments attached to this grandiose project – has the potential to drive a wedge between the transatlantic allies.


There are three trade and security issues that, according to our research, are likely to become top priorities for the next U.S. administration.

1) The next U.S. administration may need to find a compromise with the EU and China to avoid the emergence of competing trade blocs. This will be particularly pressing if the U.S. Congress fails to pass the TPP, and the United States and EU do not succeed in finding a compromise on the TTIP. Then, the China-led RCEP [Regional Comprehensive Economic Partnership] will get a boost, but also plans for an EU-East Asia trade agreement will be resurrected, increasing the prospect of a Eurasian trade deal which will exclude the United States.

2) The next U.S. administration may seek to avoid a transatlantic rift over market economy status (MES) to China. Washington has already declared that it will not grant Beijing the coveted MES. The EU, instead, is working on a compromise, which will entail recognition of market economy to Beijing, while reinforcing the existing trade defence measures to protect some European sectors considered of strategic significance. The compromise has three aims: avoid retaliation from Beijing; increase market access for European companies in the Chinese market; and send the message that Europe is more open than the United States – something that will undoubtedly attract more Chinese investments into the Old Continent.

3) The next U.S. administration may want to discuss security in Eurasia with China and Europe. The United States is disentangling itself from Central Asia and the Middle East, while China makes inroads into these regions through its Belt and Road initiative. Europe has strong security ties with Washington, but Brussels is also tempted to push forward security cooperation with Beijing, particularly in the Mediterranean and along the Arabian coasts, given the economic significance of Southern European ports and the Suez Canal for China’s maritime Silk Road and future Sino-European trade relations.

To read the full story, please see the interview to Dr. Casarini by Mercy A. Kuo, published in The Diplomat

Jul 2016

Asia and Europe inching closer to each other

Cooperation between Asia and Europe in the last 20 years has enhanced the relations of the two continents in all fields, from international trade to global economic recovery, infrastructure and migration. Asia and Europe have signed many bilateral trade agreements and discussions are ongoing on regional deals.

These achievements were in full display at the 11th Asia-Europe Meeting (ASEM) Summit held on 15-16 July 2016 in Ulaanbaatar, Mongolia where 53 Heads of State and Government – 30 European and 21 Asian countries, as well as the ASEAN Secretariat and the European Union – got together under the overarching theme of ‘20 Years of ASEM: Partnership for the Future through Connectivity’.

Leaders at the ASEM 11 Summit, 15-16 July 2016, Ulaanbaatar (Mongolia). Source:

Leaders at the ASEM 11 Summit, 15-16 July 2016, Ulaanbaatar (Mongolia). Source:

The ASEM dialogue process was first launched on 1 March 1996 in Bangkok, Thailand, to enhance relations and various forms of cooperation between the then 15 members of the European Union and its Commission, the then 7 members of the Association of Southeast Asian Nations (ASEAN), and the individual countries of China, Japan, and South Korea which would form the so-called ASEAN+3 grouping. A series of enlargements saw additional EU members join as well as India, Mongolia, Pakistan, and the ASEAN Secretariat in 2008, Australia, New Zealand and the Russian Federation in 2010, Bangladesh, Norway, and Switzerland in 2012, Croatia and Kazakhstan in 2014.

When the ASEM was inaugurated in 1996, it was conceived as an instrument for bridging the missing link between the EU and East Asia. At the time of the first ASEM in 1996, North America and East Asia had already established an institutional mechanism (the Asia-Pacific Economic Cooperation) for deepening inter-regional cooperation and North America and the EU had further bolstered their transatlantic ties. In this context, it was perceived that there was a glaring missing link as far as relationship between the EU and East Asia was concerned and that the ASEM process would serve to fill this missing link in the triangular relationship: North America-EU-East Asia.

ASEM paramount objective has always been the enhancement of economic relations between the two regions. The ASEM process allows the EU to avoid the risk of being isolated by too close a collaboration among the Asia-Pacific countries while also giving East Asia the opportunity to counterbalance US presence by opening up to Europe.

Europe’s economic presence in Asia is felt particularly in the areas of trade and monetary policy. For instance, Brussels is Beijing’s most important commercial partner—the two trade more than one billion euros a day. The EU is ASEAN’s third-largest trading partner, after China and Japan, but ahead of the United States. Overall, Asian markets are the destination for almost one third of EU exports and offer rapidly expanding market opportunities for European firms, which are also among the biggest contributors of FDIs in the region

Following the surge of trade relations, Asia has become the largest buyer of euro-denominated assets. The share of euros in the foreign exchange portfolio of Asia’s major central banks’ accounts is, on average, for around 25-27 percent of the holdings of Asia’s major economies, reaching 30% and above in China (the world’s largest holder). This makes the euro the second-most-important reserve currency in Asia – after the dollar, but ahead of the yen.

Europe’s economic rebalance toward Asia is rooted, as in the case of the United States, in the realisation that Asia has become central to global prosperity and to the Western powers’ own growth prospects. Since 2011, the EU has signed free-trade agreements with South Korea and Singapore; it is negotiating one with Japan, Vietnam, Malaysia and Thailand; and has opened discussion on a trade and investment agreement with the whole of ASEAN.

At the last ASEM summit, leaders from the two regions explored plans for an inter-regional investment and trade agreement that would counterbalance the US-led Trans-Pacific Partnership (TPP). Such dynamics deserve to be followed closely by European and Asian companies for the potential that they could have for trade, investment and jobs creation on the Eurasian continent.

More on this in the interview to Dr. Casarini by Xinhua News.

May 2016

Chinese firms investment spree favours Europe over America

Chinese companies made record bids for foreign acquisitions in the first quarter of 2016, focusing especially on agriculture, manufacturing and tourism. But while such investments have been met with open arms in Europe, regulatory resistance is stiff in the United States. With Chinese firms eager to gain Western technology, brands and customer bases, the European Union is likely to benefit.

Chinese investment abroad was almost nonexistent. Today, China is one of the world’s top three sources of foreign investment. According to financial data provider Dealogic, Chinese firms put up some $102 billion to buy foreign companies between the beginning of the year and mid-March 2016. This includes the mega-bids for Swiss agrochemical firm Syngenta by China National Chemical Corporation (ChemChina) and for Starwood Hotels & Resorts by a consortium led by Chinese insurer Anbang. Anbang’s $13 billion bid ultimately failed, but the numbers are still eye-popping. For comparison, Chinese companies spent $106 billion overseas throughout the whole of 2015.

The value of Chinese firms’ offshore assets is set to triple from about $6.4 trillion in 2015 to nearly $20 trillion by 2020, according to a joint report by the Rhodium Group, a research company, and the Mercator Institute for China Studies. A growing share of these offshore assets will be in Western countries. China’s global stock of investment abroad, which includes corporate mergers, acquisitions and spending on start-ups, is expected to grow from $744 billion to $2 trillion by 2020. There is plenty of room to grow. Today China’s stock of outbound investment represents only about 7 percent of gross domestic product. In Germany, the proportion is 47 percent, in the US it is 38 percent and in Japan it is 20 percent.

Chinese companies undertake cross-border deals for many reasons, including access to resources, expertise, technology and brands, as well as to move up the value chain. A classic example is Lenovo’s acquisition of IBM’s personal computer business, which allowed the Chinese firm to gain global distribution, operational expertise and brand value. Chinese companies are increasingly eager to learn from their global competitors and absorb best practices in areas such as risk management, quality control and information technology.

Chinese firms

After having relied on investment from other countries for years, China has begun encouraging domestic companies to invest and operate overseas. This is all the more important for the Chinese firms saddled with debt, overcapacity and losses – the so-called “zombie companies” – many of them SOEs. Their situation is partly the result of huge investments Chinese authorities required them to make to stimulate the economy after the 2008 global financial crisis crimped international demand. Acquisitions abroad address these problems by offering a better return on capital – which is declining inside China – and by allowing firms to offload some of their debt onto newly purchased companies. The People’s Bank of China (PBOC) has designed loan schemes to support companies that invest overseas.

There is, however, risk of a backlash from regulators, especially in the US, where the Committee on Foreign Investment could block deals – such as the recent Syngenta mega-bid – if it is deemed to endanger the country’s food supply, and thereby its national security. In February, Fairchild Semiconductor International rejected a $2.5 billion takeover offer from a Chinese-led group, opting instead for a smaller offer from an American rival. The company cited concerns that US regulators could block the deal with the Chinese. The unsuccessful offer was one of at least 10 failed Chinese bids in the last year, according to the New York Times.

The winner in the battle between American regulators and Beijing-backed companies will be Europe, which has clearly become the preferred destination for Chinese investors. According to the China Global Investment Tracker, a joint project of the American Enterprise Institute and the Heritage Foundation, between 2005 and 2016, China invested nearly $164 billion in Europe (including non-European Union countries). During the same period, it invested $103 billion in the U.S.

The Rhodium Group found that between 2000 and 2014, Chinese companies spent 46 billion euros ($52 billion) on 1,047 direct investments (greenfield projects and acquisitions) in the EU-28 countries, with the vast majority of the transactions coming after 2009. The United Kingdom received the biggest share of that amount, with a total of 12.2 billion euros ($13.8 billion), followed by Germany with 6.9 billion euros ($7.8 billion) and France with 5.9 billion euros ($6.7 billion). In 2015, however, ChemChina’s acquisition of Pirelli put Italy in the top position.

Chinese companies show no sign of slowing their investment push. More big deals can be expected in coming years. If the American politicians and regulators continue their stiff resistance to Chinese investment, Europe will see even more money flowing in.

An earlier and expanded version of this article was published by the: austriancenter.

Apr 2016

Europe bats its lashes for the Chinese currency

The central parity rate of the Chinese currency has weakened in recent weeks against the world’s major currencies. HSBC currency analysts suggest further depreciation of the currency against the US dollar by the end of the year. However, this has not prevented the West – and Europe in particular – from doubling down on the currency.

Behind Europe’s investment in the renminbi there is a clear strategy of support for the Chinese currency. When the International Monetary Fund announced in December that the renminbi would join the US dollar, the British pound, the euro, and the Japanese yen in the currency basket underlying its unit of account, the Special Drawing Rights (SDR) basket, the decision was clearly political.

Even though the currency performs well and its internationalization is sustaining, its inclusion in the SDR owes much to the decision by the US to defer to Europe. The US had in fact argued for years that the renminbi should be included in the SDR only if China opened its capital account, let its currency float freely, and had a more independent central bank. None of this has happened. But after China established the Asian Infrastructure Investment Bank with the support of Europe, the US agreed to drop its objections. After all, the SDR basket plays a minor role in global finance, and admitting the renminbi was seen as a small price to pay to keep China embedded in the Bretton Woods institutions.

renminbi stash

The currency’s inclusion in the SDR, it is hoped, will encourage China to liberalize its capital account further. Europe would also like to welcome the country to the core group of world powers that decide global monetary affairs. British Chancellor George Osborne has made it clear that he would like the City of London to be the most important offshore market for renminbi trading and services. It was no coincidence that during President Xi Jinping’s state visit to the United Kingdom in October 2015, China chose London to issue its first overseas renminbi sovereign debt.

The rest of Europe is equally enthusiastic. Today, the continent is home to the largest number of renminbi bank clearings. Offshore renminbi hubs have emerged in Frankfurt, Paris, Milan, Luxemburg, Prague, and Zurich, and most of Europe’s central banks have added – or are considering adding – China’s currency to their portfolios. Europe’s efforts could succeed; but unless China makes its currency even more widely accessible and opens its market further, they are almost sure to fail.

An earlier version of this article was published in project syndicate

Feb 2016

Issues shaping agenda of Sino-European relations

In 2015, Sino-European relations continued to improve. Yet, the two sides tend to focus on different issues. China has continued its policy of ‘upgrading’ (shengji) relations with the EU, initiated after the landmark visit by Xi Jinping to EU institutions in Brussels in April 2014. Beijing has committed itself to increasing the political and security elements of the partnership with Brussels, while continuing to foster economic and trade relations.

Europe has responded to this by stepping up its relations with Beijing in the monetary and financial fields of policy. Such upgrading was best epitomised by the decision by Europe’s four biggest economies – Germany, France, the United Kingdom and Italy – to join the China-led Asian Infrastructure Investment Bank (AIIB) as founding members in March 2015 – despite opposition from Washington. In 2015 we also witnessed a trend towards the re-nationalisation of the political and security elements of the partnership with Beijing. Away from Brussels, it is the most important capitals, in particular Berlin and – to a lesser extent – Paris, that are now driving forward the politico-security dimension with China.

Jean-Claude Juncker and Xi Jinping

Jean-Claude Juncker and Xi Jinping

The most important issues of the common agenda are: (i) China’s initiative called ‘One Belt, One Road’ and its possible synergies with Jean-Claude Juncker’s European Fund for Strategic Investments (EFSI); (ii) The bilateral investment treaty currently under discussion; and (iii) The decision by the EU as to whether – and how – grant China market economy status in 2016. There are also political and security elements of the partnership under discussion, including the prospect of joint peacekeeping operations, the stability in Africa and the Mediterranean, the fight against terrorism, cooperation in nuclear non-proliferation.

An expanded version of this interview was published in

Jan 2016

China’s stick and carrot approach toward Taiwan

Taiwan will hold presidential and legislative elections on 16 January 2016. Opinion polls show the Democratic Progressive Party (DPP) is set to defeat the country’s ruling party, the Kuomintang (KMT). Beijing has been following developments in Taiwan closely. It is concerned that a victory for the DPP candidate, party chairwoman Tsai Ing-wen, could put cross-strait relations back in a confrontational stance.

In recent months, China has adopted a carrot and stick approach toward Taiwan. On the one hand, Chinese President Xi Jinping met Taiwan’s President Ma Ying-jeou at a historic summit in Singapore on November 7, hoping to boost the KMT’s chances. On the other hand, China’s People’s Liberation Army (PLA) has intensified its military drills targeted at Taiwan, simulating an invasion of the island and sending a powerful message to the pro-independence DPP.

Chinese President Xi Jinping and Taiwan’s President Ma Ying-jeou met at a historic summit in Singapore on 7 November 2015.

Chinese President Xi Jinping and Taiwan’s President Ma Ying-jeou met at a historic summit in Singapore on 7 November 2015.

Ms. Tsai retains a big lead ahead of the elections, despite the much-heralded Ma-Xi summit. An opinion poll by Taiwan’s Cross-Strait Policy Association released one day after the meeting showed Ms. Tsai held a lead over the KMT presidential candidate Eric Chu of 48.6 percent to 21.4 percent – virtually unchanged from a poll a month earlier.

The Ma-Xi meeting was the first opportunity for the two sides to consult as equals since Taiwan split with mainland China in 1949. While Ms. Tsai did not oppose the meeting, she criticized President Ma for not defending Taiwan’s position strongly enough. A significant portion of the Taiwanese public share her view. The Ma-Xi summit therefore does not seem to have benefited the KMT in any significant way. However, the meeting re-emphasized cross-strait ties as an election issue.

Beijing has clearly put its weight behind the KMT, while the Chinese army is preparing for a DPP victory. In an editorial published after the Ma-Xi summit, the Global Times wrote that “if Tsai takes office, her ‘Taiwan Independence’ policy will be responded to by powerful countermoves from the mainland, including military force.”

According to a report from Taiwan’s Ministry of National Defense (MND), senior leaders in Beijing have met to reevaluate China’s cross-strait policies. Due to Beijing’s concerns over the outcome of the upcoming elections, the Chinese army has conducted a series of military drills simulating an invasion of Taiwan, the report found. In 2005 China passed the “Anti-Secession Law,” which made it clear that Beijing would use “non-peaceful means” if Taiwan moves toward declaring independence. The law also allows for the use of force against Taiwan if “possibilities for a peaceful re-unification should be completely exhausted.”

The MND said that, under the worst scenario, the mainland would first attempt to intimidate Taipei with a combination of military threats and a blockade. Thereafter, it could use some of the 1,500 missiles that the PLA’s Second Artillery Corps has deployed against Taiwan on political and military targets. The PLA would then mount an invasion using aircraft and amphibious vehicles. All this comes as Beijing militarizes various reefs and islands in the South China Sea. China can make use of troops, artillery, radar and communication equipment and an airstrip in the area in the case of hostilities with Taiwan. It will be able to patrol the waters surrounding the island, monitor its activities and enforce any eventual blockade.

Hopefully, nothing of the above will occur and the two sides will be able to devise a positive course of action after Taiwan’s presidential and legislative elections on 16 January 2016, continuing to improve their bilateral relations as during the period of KMT rule under former President Ma Ying-jeou (2008-2016). Yet, companies with business interests in the area would be advised to closely monitor the development of cross-strait ties since the worsening of political relations between the mainland and the island could have an impact on their operations and profits.

An earlier version of this article was published in World Review