The scare-mongering against a "Chinese invasion" has already begun. China is doomed if it does, doomed if it doesn't.
China 'buying up Europe' claims study - Public Service Europe
China is "buying up Europe" by purchasing government debts, investing in European companies and taking advantage of the open market for public procurement – but despite the immediate benefits there could be damaging longer-term effects, a new study claims.
In a paper for the European Council on Foreign Relations, François Godement and Jonas Parello-Plesner argue that China should not be blamed for taking advantage of the opportunities Europe presents. But while the European Union might be grateful for the investment as it struggles to deal with the ongoing sovereign debt crisis, in the medium-term its reliance on China could fracture relationships between member states.
By competing against each other for Chinese business, European governments are reducing their collective ability to strike a better deal with China to gain access to the same sectors in its protected markets. Godement and Parello-Plesner said: "Five years ago the story was European companies establishing bases in China. Now the story is that China is strategically acquiring European companies – giving it ownership of vital infrastructure, access to cutting-edge technologies and allowing it to play some European countries off against others."
The report describes how China's "automobile manufacturers have bought MG and Volvo and taken a life-saving stake in Saab. Its transportation firms are acquiring, leasing or managing harbours, airports, and logistical and assembly bases across the continent. Its development bank is financing projects in Europe's periphery much like it does in Africa. Its purchases of public debt are anxiously sought by deficit-ridden EU member states. In fact, it uses the prospect of these bond purchases as part of its own public diplomacy".
China bought Greek bonds "as a quid pro quo for a 35-year-lease on Piraeus harbour and a deal to finance the purchase of Chinese ships" in June 2010. The next month it promised to buy €1bn of Spanish bonds, boosting market confidence in the country. In the end China bought only €400m but similar promises were made to Portugal and Ireland, the report says. Portugal, Italy, Greece and Spain now represent 30 per cent of Chinese investments in Europe, with central and eastern Europe accounting for another 10 per cent. "The danger for Europe is that there is will be a kind of 'China lobby' of smaller member states," according to the report.
Between October 2010 and March 2011, Chinese firms and banks committed $64bn on European contracts, representing more than half of the total investment and trade facilitation flows in Europe since 2008. Although there is no way of knowing for sure, it is thought that China owns 25 per cent of its currency reserves in euros. And China's growing influence in Europe is not purely financial. The report details how there are now 100 Chinese state-run Confucius Institutes on the continent, to promote China's culture and, for example, teach language skills to workers. Meanwhile the China Daily newspaper has launched a European edition.
The report recommends that Europe creates a system to vet direct investment in its defence, media, education and technology industries, and introduce fair competition for public procurement – allowing European businesses to compete for Chinese contracts. There should also be a clear statistical system to monitor Chinese bond purchases, the study's authors claim.
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http://www.reuters.com/article/2011/10/30/us-eurozone-china-germany-industry-idUSTRE79T2EP20111030
(Reuters) - German industry group BDI has warned Europe not to make political concessions if it seeks Chinese help in solving the euro zone debt crisis, Spiegel magazine wrote in its online edition.
"If we in Europe organize the stabilization of the euro such that we allow political influence from abroad, then we are making a massive error," BDI head Hans-Peter Keitel told Spiegel Online.
European leaders agreed a plan last week to restore financial market confidence and end a two-year crisis started by Greece, with a contribution from Beijing if possible.
Klaus Regling, who heads Europe's bailout fund, visited China on Friday and Saturday to encourage Beijing to invest in it.
But the appeal for Chinese help has come under fierce criticism for potentially weakening Europe's negotiating position in political and economic disputes with Beijing.
"We have crossed a boundary if euro states say, 'we will offer you a political concession in order for you to give us money'," Keitel said. "For example, we could not offer China compromises in intellectual property law in return for money for the rescue fund."
In France in particular, criticism of the plea for Chinese help is fierce. The opposition Socialists accused President Nicolas Sarkozy of making Europe appear weak.
The BDI's Keitel said the decisions made at last week's European summit marked good progress but the crisis would not be over for a long while yet.
Keitel added that Europe could not offer the same aid to Italy as to Greece, saying Rome "can and must resolve its structural problems itself".
(Writing by Sarah Marsh; Editing by Dale Hudson)
