August 19, 2022

Chinese Prime Minister’s Visit to Europe Shows Concern Over Euro

BERLIN — Before Prime Minister Wen Jiabao of China began a four-day official tour on Friday of Hungary, Britain and Germany, his trip had received little coverage by the Chinese media.

One reason for the weak interest is that China’s consuming interest in the United States as a superpower has historically taken precedence over its ties with Europe, despite the fact that China does more trade with the European Union than with the United States.

Over 12 percent of Chinese imports come from the European Union, compared with 7.3 percent from the United States, according to Eurostat, the Union’s statistical information service. The Union imports nearly a fifth of Chinese goods, compared with the United States’ 18 percent. And last year, trade between the Union and China amounted to €363.2 billion, or $515.4 billion, while that between the United States and China amounted to €292 billion.

But this importance of Europe as a trading partner is not lost on the Chinese leadership, particularly because China is increasingly concerned about the euro crisis.

“The E.U. is China’s most important trading partner; therefore China has an interest in supporting the stability of the euro,” said Thomas Paulsen, a China expert at the independent Körber Foundation in Berlin. “To support the euro, China has invested substantially in government bonds of E.U. member states, such as Greece, Ireland, Portugal and Spain.”

When Mr. Wen recently visited France, Portugal and Spain, he offered to help European economies overcome their debt-driven crises by investing in euro-denominated assets. He had made the same offer to Greece, which he visited last year.

Of China’s $3 trillion or more in foreign exchange reserves, bankers estimate that a quarter is invested in euro-denominated assets.

In Hungary, much of the focus will be on strengthening China’s foothold in Eastern Europe. Over the years, Chinese companies backed by state-owned Chinese banks have been investing, buying real estate and winning government construction contracts, according to the Hungarian Economy Ministry.

Trade and investment opportunities will dominate Mr. Wen’s talks during the weekend with Prime Minister David Cameron of Britain.

And in Germany, China’s most important trading partner in Europe but also its competitor as the world’s leading export-driven economy, Mr. Wen will lead a delegation of 10 ministers and dozens of business executives.

Last week, the Chinese central bank showed its concern for the euro as it urged European governments to contain debt levels.

Hong Lei, a Foreign Ministry spokesman, said this week that China held euro-denominated debt to promote cooperation with the Union and to help euro zone countries overcome the current crisis. “China is willing to continue cooperation with the countries concerned, to help European countries to achieve steady economic growth,” he added.

The burgeoning trade between the Union and China, and China’s eagerness to buy debt, however, has not led the Union, or the individual member states, to develop a long-term political strategy for dealing with China, analysts say.

“Here is China, an emerging superpower. On every global issue, the role of China is critical,” said Eberhard Sandschneider, Asia expert at the German Council on Foreign Relations.

“But the E.U. has no long-term strategy toward China,” Mr. Sandschneider said. “It has 27 different policies,” a reference to the 27 member states of the Union.

Feng Zhongping, the director of the Center of European Studies at the China Institutes of Contemporary International Relations, said during a recent seminar organized by the European Council on Foreign Relations that the E.U. member states had their own interests. Even though Europe was important to China, Europe has no common foreign policy strategy.

Yet other analysts say that China does want Europe to have a common foreign policy, not just for China but for strategic reasons.

“China does not want a bipolar world dominated by China and the U.S.” Mr. Paulsen said. “It supports a multipolar world, which would give China more flexibility. China would like to see Europe as one pole in this multipolar world.”

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