CHINA’S ECONOMIC STATECRAFT IN EUROPE DURING THE PANDEMIC

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CHINA’S ECONOMIC STATECRAFT IN EUROPE DURING THE PANDEMIC

The novel coronavirus pandemic has unleashed an immense shock to the global economy. In Europe, the gross domestic product among the countries that use the euro has dropped by over 12 percent while unemployment rates have risen to nearly 8 percent. Many countries are unlikely to reach pre-pandemic levels of gross domestic product until 2022 or later.To get more Shanghai economy news, you can visit shine news official website.

China may take advantage of the crisis — just as it did in the wake of the global financial crisis of 2007 to 2008 — to advance its geopolitical and economic interests in Europe. While the European Union put together a 750 million euros ($878 million) pandemic recovery package this July — demonstrating more advanced crisis management capabilities than it has during past Eurozone crises — the continent is still struggling. Beijing may use its sovereign wealth fund as well as nominally private Chinese companies to act as lenders of last resort in Europe, building Beijing’s soft power at Washington’s expense. Given China’s assertive turn in its foreign policy, it may use this influence to splinter Western solidarity on issues like Taiwan, Hong Kong, and the South China Sea. Additionally, China is likely to use its economic statecraft to acquire sensitive dual-use technologies through the purchase of AI or robotics firms, and purchase infrastructure that is important to U.S. and allied military forces operating in or through Europe.
To be clear, much of the Chinese-origin foreign direct investment in Europe is not of national security concern. By one estimate though, as much as half of China’s foreign direct investment in Europe could be considered to pose a security risk. Whether Europe is prepared and able to parry Beijing’s moves is somewhat unclear, given varied attitudes toward China and the patchwork of investment screening mechanisms across the continent. Regardless, the outcomes will have significant implications for U.S. security.

In the wake of the global financial crisis over a decade ago, Chinese investment in Europe exploded. In 2008, Chinese outward foreign direct investment in Europe was valued at just 700 million euros — by 2016, that amount had grown to 37.3 billion euros. These investments brought much needed capital to the cash-strapped continent.

Chinese investors — both public and private — were drawn to Europe for several reasons, including the undervaluation of European assets and the friendlier investment climate relative to the United States. Chinese investments were mostly concentrated in a few key countries, with the United Kingdom (30 percent), France (18 percent), Germany (13 percent), and Italy (11 percent) receiving the lion’s share.

Most of these investments were made by Chinese state-owned enterprises or its sovereign wealth fund, which are directly tied to the central government and hence to the Chinese Communist Party. Ostensibly, private Chinese firms have increasingly invested in Europe as well, but China’s 2017 national security law effectively blurred the line between private entities and the Chinese state.

There is some evidence that China’s investment boom in Europe paid geopolitical dividends. Beijing might now again take advantage of Europe’s economic position in the aftermath of the novel coronavirus to build soft power, obtain sensitive technologies, or acquire militarily significant infrastructure. The question confronting Europe, as well as the United States, is whether it is prepared to respond any differently to Beijing’s use of economic statecraft than it did in the wake of the last economic crisis.