The visit to Europe by Chinese Premier Li Keqiang travels from north to south, and from high growth in one economy to another still struggling with low growth and the aftermath of a very serious economic crisis that almost brought the Eurozone project to an end. The UK and Greece, however, have something in common. Both are keen to attract more Chinese investment into their economies, and both see this as an important part of their development strategy. How they are going about it, however, is rather different.
For the UK, their relationship with China has changed 180 degrees. 8 months ago, there had been no ministerial visit for over a year because of the meeting between the British Prime Minister David Cameron and the Dalai Lama in the middle of 2012 in London. But last December Cameron made a visit to Beijing where he insisted that the core of the UK China relationship should be trade relations with China. He took with him the largest trade delegation ever arranged to go to China. Premier Li's visit back is his first since coming to power last year. He has reciprocated, with a delegation which in total comes to 200 official and unofficial members. In this sense, relations between the two countries are back on track.
But there are challenges. Before his visit to the UK the Chinese Ambassador to Britain, Liu Xiaoming, briefed journalists and made some pointed criticisms of the UK China relations. He said that UK visa policy towards China was out of line with that of much of the rest of the EU, and that the UK had now slipped down the table of priorities within Europe from being one of the key countries to one that is now very much outranked by Germany, the main player, and France. In terms of trade, this is true. Germany exports seven times more goods to China, and France over double those of the UK. It is also true that the UK remains outside the Shengen arrangement where Chinese visitors and others can get a common visa for most EU countries. One of the outcomes during Li's visit was an agreement for streamlining and making it easier for Chinese visitors to get visas for the UK. Even so, only 10 per cent of the Chinese that come to Europe go during their time here to the UK.
In terms of being a finance and investment partner, the UK has been more successful, and this was reflected in Li's visit. Shell and BP signed major new deals, and several billion pounds worth of new investment was contracted. Perhaps the most significant agreement was that for direct RMB trading in London, progressing a deal which was done late in 2013. The UK as a finance centre ranks high and matters to Chinese banks and companies, and in the past many Chinese companies have listed on the various exchanges in London, and located their European headquarters here. Chinese investment has been made in utility companies, in Heathrow Airport, in food and automotive companies. The UK sits within the general EU interest for China as a provider of technology, and finance and investment play a key role in that.
The UK has always sought to change its image in China, and has launched campaigns over the last 15 years since the return of Hong Kong to Chinese sovereignty to revise the picture most Chinese have of a conservative, very formal and old fashioned place. Government supported campaigns in the early 2000s and during the 2012 London Olympics attempted to portray the UK as a place of innovation, new fashion and interesting culture. This sense of the UK as being somewhat old fashioned however has been hard to shift. Surprisingly, for the visit by Premier Li, one of the most noted elements was a meeting with the Queen, Elizabeth. Many commented that this was highly significant because the Queen, as Head of State, very rarely meets with Heads of Government. The pictures of Li in Windsor Palace meeting the Queen figured in news reports inside and outside China. But they present an image of the UK which largely fulfils people's stereotypes in China of an very historic, backward looking country. It is hard to see how these contribute to changing perceptions amongst Chinese of the UK being an innovative and modern place.
The UK struggles with the meaning it makes of China's economic and political rise, and is searching for a new way to view China which breaks free from the historical framework which is dominated by colonialism and the UK's interests in Hong Kong. Perhaps symbolically the Chinese central government only a few days before the visit by the Premier to the UK issued a new State Council White Paper on Hong Kong which asserted very strongly that Hong Kong was part of China's sovereign territory, and that all decisions about the Special Autonomous Region were the matter only of people in Hong Kong and the People's Republic within the framework of decision making set out in the Basic Law. Only on the day that Premier Li departed the UK for Greece, a newspaper in China described the UK as a declining, colonial power and one that was dominated by its own history and memories. It is clear that changing this perception for the UK will be a massive, but urgent task. The UK is a place of extraordinary dynamism and creativity. It is important to get this message across much more. At the moment, amongst significant parts of the all important Chinese urban middle class it seems not to be being heard.
For Greece, the matter is different. Perhaps more by accident than design, they have engaged with Chinese investment most deeply and in more sectors than many other EU countries, for the simple fact that during the economic crisis of 2009 onwards they had to seek investment and support wherever they could find it. That meant finding a Chinese investor in one of their ports. Greece has hosted key leaders over the last few years from China, and each time have promoted Greece as a major potential destination for Chinese money. Delegations visited in 2010 and 2012. Premier Li's visit comes at a crucial time, because Greece is just about emerging from its worst economic crisis of modern times.
It might be emerging, but Greece is still beset by high unemployment and a highly disaffected population. Its elections in 2013 returned some extremist parties, and its government has still to implement tough structural reforms to continue reducing government expenditure. While Chinese investors here might find some interesting strategic investments, they will not be huge. The Greek economy is too small, and has very little in terms of finance or services. But it is likely Greece will figure as a launch pad into Europe for some state and non state companies in China.
What Li's visit shows overall is a Europe which is in the midst of a recovery after five hard years, where the levels of growth in different countries and the opportunities they offer to China are very varied. The EU remains a diverse and often bewildering area, and while there is a clear common market in terms of goods, people flows and, in some cases, regulation in the region, there are big differences between working in a place like Greece and that like the UK. Language, economic structure, wealth levels and society remain very different in each place.
But it is clear from what the Premier said while in Europe that despite these differences he does see opportunity. As a trading partner, the EU is hugely important to China, and China critically important to the EU. Despite the trade clash about solar panels in 2013, the two were able to find a pragmatic way to move forward and sort out their differences. A free trade agreement is not likely at the moment, but countries like Greece and the UK which have proved themselves some of the most open towards China would certainly support whatever means can be introduced to raise Chinese investment within the EU, and in particular within their own countries.
Professor Kerry Brown
Kerry Brown is Professor of Chinese Politics and Director of the China Studies Centre, University of Sydney and Team Leader of the Europe China Research and Advice Network (ECRAN) funded by the European Union. He is an Associate Fellow of Chatham House, London and author of `Struggling Giant: China in the 21st Century' (2007), `The Rise of the Dragon: Chinese Inward and Outward Investment in the Reform Era' (2008), `Friends and Enemies: The Past, Present and Future of the Communist Party of China' (2009), `Ballot Box China' (2011), `China 2020' (2011), `Hu Jintao: China's Silent Leader'(forthcoming).