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China Woos Europe: Next moves on the Eurasian Chessboard

- 14th February 2011

Introduction

The rise of China has catalysed several shifts in the geopolitical order, one of the key ones being the nascent US and European Resets with Russia and the Russia-NATO rapprochement. Many see in China’s ascent the reason for the renewed Western interest in improving ties with Russia, with the fade-out of the unipolar moment and the retreat from Neocon inspired, Bush-era containment policies proving beneficial to Russia.

But China is proving even this narrative to be overly simplistic. As the West and Russia move tentatively towards partnership, China has leapfrogged over Russia into Europe, while fortifying its position in Eurasia. China is visualizing the geopolitical landscape of the future, and it sees itself as having accreted enough power to be a co-equal in deciding Eurasia’s destiny. China has accordingly started strengthening its presence in Europe now. The ongoing economic crisis has provided China a timely opportunity to garner goodwill in the periphery countries and acquire strategic beachheads in the European economies. Over the last few months, Chinese leaders have visited many of the “periphery” countries with well-timed messages of support, a strategy that has caused some Europeans unease, since it implies a strategy of divide and rule (1). And in nearly every European capital visited by the Chinese leadership in recent months, China has pressed its demand for grant of market economy status and removal of the arms embargo and restrictions on high-tech exports. Since, apart from trade, China does not have a sizable European presence, China has also pitched for facilitation of Chinese investment and greater access to markets and technology, which will contribute in its quest to become a technological superpower.

The First Move: the Russia-West Reset

China could not have remained indifferent to the game-changing rapprochement between the United States and Russia, which offset the improvement in its own relations with Russia. President Obama had launched a “Reset" in U.S. foreign policy, while President Medvedev called for modernisation partnerships with the West to overcome Russia’s relative economic backwardness. Europe also had its Reset with Russia with even Poland coming closer. Germany, France and Russia held a summit after several years and Russia held summits with Germany, Italy, Belgium and the EU with a focus on modernisation partnerships.

But critics questioned the premises of the Reset, raising doubts over Russia’s commitment to democratisation. Others wondered where Russia’s priorities lay, in view of its strategic partnership with China. Robert Kagan for example believed Russia belonged in the autocratic camp (2).

Relations between Russia and China no doubt look close. The first major power President Medvedev visited after he was elected in 2008 was China (after Kazakhstan), a choice perhaps dictated by the pressure exerted by NATO expansion and stationing of BMDs at Russia’s doorstep. Russia received Chinese support on missile defence, NATO expansion, and on the Kurile Islands issue (3).

The two massive Eurasian powers show their capacity to coordinate military action through annual joint military exercises – the ‘Peace Mission’ series. Russia will soon export 15 million tonnes of oil annually through the China spur of the East Siberian Pacific Ocean Pipeline (ESPO), built in record time with Chinese assistance(4). It is planning to export gas to China through pipelines built with Chinese loans. Cooperation extends to many other areas, including currency exchange and the civilian nuclear energy sector.

However, there are major issues in the relationship. Russia cannot but be concerned at the growing power differential between itself and China. Russia’s declining military exports to China and China’s copying of and exporting clones of Russian weapons systems to Russia’s traditional markets are also troubling for Russia. Russia’s economic decline into a mere exporter of raw materials explains President Medvedev’s drive to forge modernisation partnerships with the West. What appeared to be a genuine internal Foreign Ministry strategy paper, leaked in May 2010, reportedly indicated that relations with the West would get priority in Russian foreign policy (5). In the Russian Foreign Minister’s briefing on 13 January 2011, Russia’s relations with the US and the EU were highlighted first and then all of Asia, Latin America and Africa were mentioned in one breath, in that order, in Lavrov’s introductory statement (6). China didn’t figure separately, except much later, together with India.

As regards popular sentiment, Russians do not regard China as a natural ally and have no wish to revert to their authoritarian past, even though the transition from it is perceived to have been mismanaged. Russian culture is part of the European tradition, in terms of its brilliant literature, music, theatre and ballet. Its young President has affirmed that Russia wishes to join the European mainstream, is committed to democracy and has finally “come in from the cold”, which indicates that by choice and not only by necessity, Russians prefer a closer partnership with the West (7).

Meanwhile, Europe’s reaching out to Russia shows a willingness to take concrete measures to make the vision of One Europe come true. It isn’t only about oil. The future of the democratic world may be at stake if Russia is allowed to drift back into an authoritarian embrace.

The qualitative change in East-West relations has been demonstrated most vividly in the defence and strategic spheres. NATO and Russia agreed at their Summit on 20 November 2010 that their security was intertwined and that they no longer constituted a threat to each other. They also agreed to examine cooperation in establishing a joint missile defence system (8). In a brilliant analysis in August 2010, Dmitry Trenin, the Director of the Moscow Carnegie Centre, explained why collaboration on missile defences could be a game-changer, even more so than the START agreements, because “Cooperation on missile defense makes it impossible to regard the other party as a potential military adversary” and “would be the functional equivalent of NATO membership for Russia.”(9)

The Russian Foreign Minister clearly agreed with this assessment. The Russian Foreign Minister stated at a briefing on 13 January 2011 that a joint European missile defence system including Russia and NATO would constitute an unprecedented breakthrough and would be the key test of Western commitment to the principle of indivisible security (10). He added that further discussions on nuclear armaments reductions could take place if the ambit of countries was expanded, a reference which clearly included a rapidly re-arming China.

Then, within weeks of the NATO-Russia Summit, the US Senate ratified the new START treaty by a 71-26 margin, even though many Senators bemoaned that Russia’s numerical superiority in tactical nuclear weapons had been left intact. Clearly a major shift had taken place. China was the elephant in the Senate room. Both Russia and the United States had China in mind as Russia would be unable to deter a threat from the East, for example, a demographic invasion, if it was deprived of its tactical nukes. Russia’s military doctrine also purported to have lowered the threshold for use of nuclear weapons and was interpreted as having dropped No First Use in its nuclear doctrine.

So far NATO and the US have indicated that they are ready only to undertake some information exchange and not marry the two systems in a joint missile defence system. While mistrust may stymie substantive progress for some time, it would be in the interest of both sides to forge unity on an important strategic issue.

China’s Geopolitical response to this historic shift

China had extended support to Russia’s position on missile defence and NATO expansion. As noted in an earlier paper, China’s reaction to the NATO-Russia Council agreement is of utmost significance (11). On this China didn’t keep the world guessing for long. China’s response to the nascent Russian-European-American entente shift was to take advantage of the economic crisis to strengthen its presence in Europe, while projecting this as part of its Eurasian policy. China Daily referred to its leaders’ tours to Eurasia (12). China is positioning itself as a Eurasian Power. China is even planning transportation links to Europe so that this conceptual leap can be given concrete grounding.

There are sound reasons why China should want to intensify engagement with Europe, though doing so during a crisis may seem counterintuitive. The EU is China’s biggest export market and source of high technology, and so early stabilization of its economy and currency is in China’s interest (13). China’s strategy of diversification of its foreign exchange reserves would also be counter-productive if the Euro loses its value. According to a WSJ estimate China may currently “hold as much as €700 billion in euro-zone government bonds” (14). China’s options for investing its surplus capital are limited and it needs new investment avenues. In 2009, Chinese FDI in the EU was only €0.3 billion as per some EU statistics, although it spiked in 2010 due to some major acquisitions like Geely’s purchase of Volvo. By pressing EU countries to accept more Chinese FDI, China aims to replicate the Japanese strategy of locating production in the EU/ Europe. As an insider, China will have greater access to western marketing networks, brand names and high technology, a central plank of Chinese strategy to achieve superpower status. It can also more easily circumvent the protectionist tide which will rise as these economies deflate during restructuring.

Between them Prime Minister Wen Jiabao, President Hu Jintao and Vice Premier Li Keqiang visited the following countries in the last few months: Greece, Belgium (for the 8th Asia-Europe Meeting and the EU-China summit), Germany, Italy and Turkey in October 2010; France and Portugal in November 2010 and Britain, Spain and Germany in January 2011. China’s outreach to Turkey is an extremely significant part of its larger Eurasian strategy. It includes military cooperation and other key elements such as building railway links between Istanbul and Beijing and within Turkey, but is not dealt with here.

China’s interest in European opportunities is not new. In 2007 the Chinese firm Link Global Logistics bought the tiny Parchim Airport in Mecklenburg-West Pomerania, the home state of Chancellor Merkel, to run direct air cargo services between China and Germany. Parchim had been the fall back option for the VVIP aircraft of G-5 delegations invited for the G8 Summit in Heiligendamm, June 2007. Also in June 2010, China signed a currency swap agreement for approximately $500 million with crisis-hit Iceland (15). Iceland possesses significant strategic value, situated as it is close to the Arctic. The German Committee on Eastern European Economic Relations found a growing Chinese presence in Eastern Europe.

Goodwill, sovereign debt and the periphery: The VVIP visits to the countries on the itinerary followed more or less a similar script. China sought goodwill and announced support for the Euro, affirmed its intentions to increase holdings of the sovereign debt of the periphery countries, and of imports from the host countries, bought infrastructure assets, and initiated proposals to use its ties with EU countries to strengthen contacts with other regions (16). Prime Minister Wen Jiabao confirmed during his visit to Greece in October 2010, that China was holding and would continue to purchase Greek treasury bonds (17). But this expression of support came several months after the May 2010 Euro 110 billion bailout by the IMF and the EU countries, and did not entail a commitment of funds (18). Similarly, on the eve of his Spanish tour, Li Keqiang wrote in a Spanish newspaper that China was a responsible long-term investor, adding that "China has confidence in Spain's financial market. It has purchased Spanish Treasury bonds and will buy still more". But only Spanish and Portuguese papers mentioned specific figures committed by China, reports that were not confirmed by official sources.

Such periodic expressions of Chinese support for the Euro, something which China was called upon to do in early 2010 too, had a calming effect on markets, even though it was difficult to say precisely how much additional sovereign debt China had bought (19). Yu Yongding, a distinguished senior former member of the monetary policy committee of the Peoples' Bank of China, and former director of the Chinese Academy of Social Sciences, had given an indication of Chinese thinking in China Daily, cautioning against buying sovereign debt of the periphery countries without obtaining assurances against debt restructuring (20).

China was in fact not the most weighty actor in the currency stabilisation saga. As the Russian Foreign Minister wryly observed in answer to a question at his 13 January press conference as to why Russia hadn’t stepped in more forcefully to assist its beleaguered Greek ally, while China had, it was the EU which was providing the bulk of assistance to Greece (and not China), adding that nearly 50% of Russia’s reserves were held in Euros.

As a quid pro quo, during their European sojourns Chinese leaders demanded that the EU recognize China's full market economy status (MES), ease restrictions on the export of high-tech products and arms to China and reject trade protectionism. A call was also given to ease pressure for currency revaluation. China simultaneously pursued its agenda of seeking encouragement to its investments on the continent(21).

Visits to Germany and France: The tactic of issuing a soothing opinion piece in a major national newspaper to prepare the ground for the visit, was repeated during Li Keqiang’s German tour, but the focus was predictably different. In his article in Sueddeutsche Zeitung, he pledged that China would continue to open up its economy, strengthen intellectual-property protection and improve the business environment for foreign firms (22). Li also raised the issue of lifting restrictions on high-tech exports to China and on Chinese investment in Germany. The Chinese side is impatient to gain greater access to German technology, and has complained about Germany’s visa requirements.

Germany ceded the number one global exporter position to China only in 2009. As with many other advanced countries, and with Russian military technology, China has reproduced their high-tech goods at lower cost and entered their export markets with cloned products. Given China’s increasing competitiveness in high-tech products, such as high-speed rail, Der Spiegel has wondered “whether the supposedly lucrative China connection will turn out in a few years' time to have been a pact with the devil” (23). Concerns over IPR theft, restrictions on rare earth minerals exports vital for the German high-tech sector, and Chinese regulations mandating (i) preferences in government procurement for indigenously innovated products and (ii) technology transfer as a condition for doing business in China, are thus a major issue with German and with all Western industry (24). Chancellor Merkel has publicly voiced her concerns over this issue, while welcoming “China's efforts to accede to the WTO Government Procurement Agreement” (25).

So while Greece and France conceded China’s demand to acknowledge China’s MES and call for lifting the EU arms embargo, Germany seemed to have been more reticent over the issue of MES (26). While Xinhua was reporting in July 2010 that Chancellor Merkel and the Chinese leadership had agreed that Germany would actively push the European Union to recognize China's full MES, the Chancellor’s official website said the following on the issue:

“In the opinion of the Federal Chancellor, China does not yet completely meet these conditions. According to the Chancellor, the issue of protecting intellectual property has not yet been solved. At present, foreign companies have no assurance that their product will not be counterfeited. It was also not yet clear whether foreign companies will have access to Chinese markets without being disadvantaged, Merkel said.” (27)

According to Deutsche Welle, Germany gave assurances to facilitate China’s MES during Wen’s visit to Germany in October but only by 2016 (28).

But buoyant German exports to China have helped Germany weather the financial crisis. China is now Germany’s top trading partner outside the EU and German car firms have invested heavily in China (all the while complaining that China has copied their IPR and produced clones of their products). $8.7 billion worth of business was done during Vice-Premier Li Keqiang's visit to Germany. Germany also values China’s continued support to the Euro, and is therefore attentive to Chinese sensitivities.

During President Hu Jintao's state visit to France in November 2010, China contracted deals worth 16 billion euros including purchases of 102 aircraft from Airbus, telecom equipment and 20,000 tons of uranium from France's Areva to China's Guangdong Nuclear Power Corp. Progress on the business district in Chateauroux where China would set up manufacturing cum assembly units was also reported (a similar project has been agreed with Ireland). As per the China Daily report, France and China also share the goal of diversifying global currency reserves away from the US dollar (29). As noted above, France endorsed the demand to lift the EU arms embargo on China in the joint statement issued with the Chinese.

Other gains of the visits

While China garnered goodwill with its professions of support to the crisis hit countries, there were other strategic gains from the visits. China had earlier bought the lease to operate terminals at the Greek port Piraeus and now offered multibillion dollar funding for Greek purchases of Chinese ships. Deutsche Welle said China was looking to make Greece “the centre for its exports in south-east and Eastern Europe” (30). According to the Wall Street Journal, during Li Keqiang’s visit to Spain, Sinopec acquired the oil firm Repsol’s Brazilian assets for $7.1 billion (31). The Spanish bank Banco Bilbao Vizcaya Argentaria SA signed a co-operation agreement for Latin America with China Development Bank. This was apart from other major contracts.

In Portugal, which in 2011 is a non-permanent United Nations Security Council member, President Hu said that “China is ready to explore with Lisbon ways to upgrade China's economic and trade cooperation with other Portuguese-speaking nations” (32). An economic forum on trade between China and Portuguese-speaking countries was scheduled in Macao in mid-November. Both Portugal and Spain have historical ties with their former colonies in Latin America and Africa. China could avail of their networks to further strengthen its presence in these countries which are of key importance in the Chinese quest for influence, raw materials and oil. Conversely, drawing Spain and Portugal into an exclusive trans-regional cooperation framework, is a good strategy to increase Chinese contacts with Spain and Portugal away from the EU core.

Assessments

Today the power that stands poised to dominate Eurasia is not Russia, at which containment strategies were aimed by the United States in the 20th and early 21st century, but China. China has expanded its hold over the energy resources, raw materials, pipelines and transportation networks of the Eurasian landmass, reducing its dependence on sea-routed energy supplies. Increased energy imports from Russia and Central Asia – in a sense the classical “Heartland” – enables China to reduce transactions in US dollars, part of its strategy to edge it out as the dominant international reserve currency.

China has now turned its attention to Europe, where the economic crisis has whittled down reservations over its growing presence as in more normal times it faced perennial censure over trade deficits and human rights (33).

Realizing that technological superiority is the key to world power China has parallely and systematically been copying and indigenising high technology, obtained by fair means and foul, from the advanced economies and from Russia.

Thus on the geopolitical stage, China is playing by its own rules in order to reach the pinnacles of power, whether it is in ‘borrowing’ R&D to churn out competitive clones of Western products, in its disproportionate contribution to climate change, or in confronting ‘challenges’ to its writ in unilaterally designated zones of core interests. Chinese advances in technology are beginning to bite as Chinese exports of weapons systems, high-speed rail, telecommunications equipment and IT hardware eat into the country of origin’s market shares.

China’s increasing influence in Europe and in the Eurasian heartland, and super-fast ascent on the technology ladder, should alarm US strategic thinkers who have ever warned that control of the Heartland would pose a strategic danger to the United States.

Conclusions

It is imperative for the West to acknowledge the challenge and calibrate an intelligent response which extends to the economic, technological and geopolitical arenas. The symbiotic interdependence of the major economies means that military options including the oxymoronic nuclear option are precluded for the time being for either side. The West should instead focus on maintaining its unity in defence of fundamental values and should also meet China’s challenge to its technological and economic primacy, the real, long-term foundations of global preeminence (34).

While America seems to be aware and ready (President Obama’s 2011 State of the Union address focused on technology, with the President stating: “Maintaining our leadership in research and technology is crucial to America’s success”), Europe needs to gear up and tackle the related issues of sovereign debt, the Euro crisis, and declining competitiveness of its periphery. This is a devilishly complex task (35). Reversion to national currencies is considered extremely disruptive, with Chancellor Merkel herself ruling out going back to the Deutschemark, and the alternatives seeming equally controversial (36). In fact, many experts believe that the Euro has masked the widening disparities in competitiveness within the Eurozone, encouraged the weaker economies to avail excessively of cheap credit, and led to the development of substantial trade imbalances and budget deficits within the Union.

The EU also needs to simultaneously focus on maintaining/regaining international competitiveness, and tackling the issue of IPR piracy, which the US and EU Chambers of Commerce have highlighted in their respective reports, as the ceaseless hemorrhage of high technology to China directly undercuts their technological lead (37). This is easier said than done, as China is relentlessly pursuing technological supremacy by openly advocating systematic and institutionalized assimilation of “imported” technologies (38).

On the economic front, the EU should ensure that the engagement does not result in lop-sided benefits and contribute to long-term Western decline. The Chinese acquisition of assets in Europe has not as yet gathered any game-changing momentum. But it is a trend that needs to be watched. The EU needs to have its own equivalent of the US-China Economic and Security Review Commission and the Committee on Foreign Investment in the United States (CFIUS) to monitor the acquisition by external entities of strategic stakes in the EU economy. The EU industry commissioner, Antonio Tajani, has already made a beginning by questioning takeover attempts and expressing a desire to have a regulatory body to look at these issues.

Finally the EU has to address its own lack of leadership (39). This too is fiendishly complicated, with Germany’s candidature ruled out because of its past, and the fact that its position on Iraq, Georgia and NATO expansion did not tally with American preferences, which makes the US wary of German leadership. Germany’s candidature for permanent membership of the UN Security Council has also not been endorsed by the US for several reasons. Germany’s imprint on the EU however is arguably the strongest, with the Lisbon Treaty ratification process yielding progress on streamlining EU decision making structures. Germany clearly desires that the EU should stake a more dynamic geopolitical personality, under its and like-minded countries’ proxy direction.

China has no doubt factored these trends into its approach to Europe. The Chinese leadership may share some parts of an analysis by Chinese commentators on the May 2010 Euro crisis, in which they “competed to outdo each other in pessimistic pronouncements about the future of the eurozone”, hinting at Europe’s decline and other turbulence (40).

Indian analogies may appear far-fetched, but in some ways Europe resembles enormously prosperous but disunited 16th century India, vulnerable to the predatory designs of external powers. In addition, being the modern world’s first genuinely post-war and anti-war civilisation, Emperor Ashok’s famous renunciation of war and violence in 3rd century BC India being the only known historical precedent, the EU as an entity has avowedly turned its back on military options. The other characteristic of the EU is a “Back to Methuselah” syndrome, which reinforces its pacifist image as an ageing and prosperous population (41). These attitudes contrast with China’s determination to expand its influence and control in the world.

The EU should reinforce its strategic partnership with the United States and assist in the irreversible consolidation of Russia’s fragile democracy. Fortunately the trans-Atlantic rupture caused by loss of American credibility in Europe and pursuit of Neocon policies has started to heal since President Obama took charge. Never since the end of the Cold War has the necessity for coordination between the US and EU been greater. “Bringing in Russia from the cold” by moving forward on the Reset agenda should also be a priority.

The way Europe handles the Euro crisis and the structural issues of long term competitiveness, which include the task of retaining technological primacy, will be the first step in determining whether it will retain a leadership role in the 21st century as a viable democratic bulwark.

Otherwise, declining competitiveness and indecisive political and economic direction will reinforce a downward spiral, which the Chinese analysis quoted above seems to predict. Economic crisis, growing inter-dependence and the seductive appeal of large Chinese investments and cheaper goods will override distaste for authoritarianism, and ensure that European responses to any geopolitical transgression by China are muted. If China manages to successfully insinuate itself into Europe’s DNA, it will constitute potentially the biggest test for the post-Cold War order. Europe will lose its claim to moral leadership and accept accommodation with China, while Russia’s democratisation process will probably stall. The US will cease to carry on the burden alone, also settling for mutual accommodation as a more “harmonious” alternative. The world will resemble an Orwellian condominium of China, the US, and the EU in a value-less, mercenary, and totally different version of the End of History than the one envisaged by Francis Fukuyama. Parag Khanna stated in his “Second World” that these three already possess most of the total power in the world (42). But today there is a balance between them which ensures an open international system. Disruption of this balance would mean not just a perverse End of History, but the end of Hope for countries which still look up to the advanced democracies, despite all the latter’s failures, mistakes and colonial pasts.

India should be prepared for both scenarios by building up its own national strengths and working towards good relations with each entity, while not giving way on its territorial integrity. It is in India’s interest to have good relations with China, in view of the huge power differential and also potential economic benefits. It is even in India’s interest to invite Chinese investment in, on the same terms as recommended for the EU. India fears being left alone amongst a handful of countries with which China persists in raking up territorial disputes, while the rest kiss and make up. That is what animates its insecurity and reluctance to take sides openly. India should also hope that European unity is strengthened so that the democracies continue to constitute the dominant geopolitical space in the world.

 

JS (MEA) on loan to the Institute for Defence Studies & Analyses, the views expressed are the author's own.

 

 

References:

1. “China Respects European Unity”, by Jonas Parello-Plesner, Senior Policy Fellow at the European Council on Foreign Relations. http://csis.org/files/publication/pac1062.pdf.

2. “The Return of History and the End of Dreams”, by Robert Kagan, Publisher Alfred A. Knopf. 2008.

3. http://www.idsa.in/specialfeature/RussiaandJapanClashovertheKurilesintheNorthPacific_spurushottam_031110.

4. The progress of the pipeline, completed in record time, was reported in several Chinese and other media commentaries. It was inaugurated during the September 2010 Summit between President Medvedev and President Hu Jintao, “Russia, China fete completion of oil pipeline”, AFP/File, 27 September, 2010, http://www.france24.com/en/20100927-russia-china-fete-completion-oil-pipeline. As late as December 2008, Bobo Lo had implied that talk of Russia diversifying its export markets was just that – talk, stating : “There is no genuine ‘China card’ in Moscow’s energy relations with the EU. The threat to divert Russian gas eastwards is bogus.” [“Ten things everyone should know about the Sino-Russian relationship” by Bobo Lo; http://www.cer.org.uk/pdf/pb_china_bl_dec08.pdf].

5. “Is Russia making a great leap West?” http://nato-russia.org/?p=154

6. “Выступление и ответы Министра иностранных дел России С.Ð’.Лаврова на вопросы СМИ на пресс-конференции по итогам деятельности российской дипломатии в 2010 году, 13 января 2011 года”. (translation: Presentation and answers by Russian Foreign Minister Sergey Lavrov to Questions by the media on results of Russian diplomacy at a press conference in 2010, 13 January, 2011). http://embrus-az.com/vneshnaya-politika/948-vystuplenie-i-otvety-ministra-inostrannyx-del.html

7. Speech at Meeting with German Political, Parliamentary and Civic Leaders, June 5, 2008, Berlin: http://archive.kremlin.ru/eng/speeches/2008/06/05/2203_type82912type82914type84779_202153.shtml

8. NATO-Russia Council Joint Statement, November 20, 2010.

9. From “Q & A: The Modernization of Russia's Foreign Policy”; Dmitri Trenin, AUGUST 02, 2010; http://carnegie-mec.org/publications/?fa=41322.

10. Same as for reference 6 above.

11. http://www.idsa.in/idsacomments/PresidentMedvedevsVisittoIndia_spurushottam_201210

12. “Wen's Eurasian visit deepens China-Europe co-op: FM”; China Daily, Xinhua, dated: 2010-10-10. http://www.chinadaily.com.cn/china/2010-10/10/content_11391054.htm

13. “EU goods exports to China 2009: €81.7 billion
EU goods imports from China 2009: €214.7 billion”
Source: EC website http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/countries/china/

14. EU Aims to Seal Deal With Beijing” By Marcus Walker and Jason Dean, http://online.wsj.com/article/SB10001424052748704739504576067152484003010.html. In a China Daily article accessed around June last year, euro debt holdings were estimated at 630 billion: http://www.chinadaily.com.cn/hkedition/2010-06/01/content_9914071.htm. At the same time, China’s timetable to elevate the renminbi to international reserve status may be accelerated if the euro’s troubles persist.

15. “Iceland signs currency swap agreement with China” The Associated Press June 9, 2010. LONDON; http://www.businessweek.com/ap/financialnews/D9G7MIT81.htm and many other web reports. China had also entered into loan agreements and currency swap deals with Serbia, Moldova and Belarus, Russia and many other countries.

16. “Sino-EU ties to warm in 2011” by Li Xiaokun and Ai Yang (China Daily) dated 2011-01-04. http://www.chinadaily.com.cn/china/2011-1/04/content_11790939.htm. There are several such reports which cannot all be listed, another being: “Wen makes five-point proposal on China-Greece ties” (Xinhua). 2010-10-03. http://www.chinadaily.com.cn/china/2010-10/03/content_11375283.htm

17. http://www.chinadaily.com.cn/china/2010-0/03/content_11375283.htm.

18. “China backing euro, says Premier Wen” By Su Qiang (China Daily) 2010-10-04: http://www.chinadaily.com.cn/china/2010WenEU/2010-10/04/content_11375734.htm

19. In May 2010 China’s reiteration of support for the Euro had a positive effect on sentiment: “An Unusual Rebuttal From China’s Forex Regulator”, by Andrew Batson, May 27, 2010, WSJ; http://blogs.wsj.com/chinarealtime/2010/05/27/an-unusual-rebuttal-from-china%E2%80%99s-forex-regulator; “The smart euro-debt strategy for China” By Wang Guanyi (HK Edition) 2010-06-01; http://www.chinadaily.cn/hkedition/2010-06/01/content_9914071.htm

20. “China's role in the world”; By Yu Yongding (China Daily) 2011-01-25 http://www.chinadaily.com.cn/usa/opinion/2011-01/25/content_11911075.htm;

21. All this can be followed in China Daily reports on these visits which read like official press releases.

22. “China to be more open to world”: Vice Premier English.news.cn 2011-01-05 by Li Keqiang; http://news.xinhuanet.com/english2010/china/2011-01/05/c_13677621.htm

23. “Beijing's High-Tech Ambitions: The Dangers of Germany's Dependence on China”, by Spiegel Staff, Der Spiegel, dated 27th August, 2010; http://www.spiegel.de/international/world/0,1518,713478,00.html

24. Several reports on this issue were analysed in “China goes hi-tech, IPR infringements and all”, by Smita Purushottam / October 03, 2010, http://www.business-standard.com/india/news/smita-purushottam-china-goes-hi-tech-ipr-infringementsall/409971/. Concerns regarding a better business environment and addressing IPR theft were also addressed by Wen Jiabao during his visit to Italy: “Wen pledges to protect intellectual property” By Su Qiang (China Daily), dated: 2010-10-08; http://www.chinadaily.com.cn/china/2010-10/08/content_11382187.htm. 60% of Italy’s exports to China are machinery exports.

25. “Germany to push EU to recognize China's market economy status: Communique” (Xinhua) 2010-07-16; http://news.xinhuanet.com/english2010/china/2010-07/16/c_13401366_2.htm

26. Joint Statement: “Les deux parties estiment que l'Union européenne doit lever l'embargo sur les ventes d'armes à la Chine et reconnaître, dès que possible, son statut d'économie de marché à part entire”: Translation “Both parties believe that the EU should lift the embargo on arms sales to China and recognize, as soon as possible, its market economy status in itself”. http://www.elysee.fr/president/les-actualites/declarations/2010/declaration-conjointe-m-hu-jintao-president-de.9978.html

27. “Germany to push EU to recognize China's market economy status: Communique”, (Xinhua) 2010-07-16: http://www.chinadaily.com.cn/china/2010-07/16/content_10118453.htm; “Germany and China strengthen their strategic partnership”; Fri, 16.07.2010. http://www.bundesregierung.de/Content/EN/Artikel/2010/07/2010-07-16-merkel-china__en.html

28. http://www.dw-world.de/dw/article/0,,6081889,00.html

29. “China, France ink massive deals amid Hu's visit”, By Wu Jiao, Li Xiaokun (China Daily), dated: 2010-11-06 http://www.chinadaily.com.cn/china/2010-11/06/content_11510686.htm

30. “China offers Greece cash injection to tackle debt crisis”, Deutsche Welle, 04.10.2010; http://www.dw-world.de/dw/article/0,,6069926,00.html

31. “China, Spain to Sign $7.3 Billion in Deals” by Jean Yung, Wall Street Journal, January 6, 2011,

32. “China, Portugal to boost bilateral ties” (Xinhua) dated: 2010-11-07; http://www.chinadaily.com.cn/china/2010-11/07/content_11512472.htm

33. According to the Wall Street Journal (“EU Aims to Seal Deal With Beijing” By Marcus Walker in Berlin and Jason Dean in Beijing, dated January 7, 2011. http://online.wsj.com/article/SB10001424052748704739504576067152484003010.html), Der Spiegel (“Capitalizing on the Euro Crisis: China Expands Its Influence in Europe” By Wieland Wagner, 14 December, 2010; http://www.spiegel.de/international/world/0,1518,734323,00.html) and doubtless many other authoritative publications - the Chinese diplomatic blitzkrieg received a better reception than ever before because of the economic crisis. At the public perception level however, the Pew Research Centre polls show that more Germans are unfavourably disposed towards China (61%) than Americans (36%): Pew Global Attitudes Project: Opinion of China. http://pewglobal.org/database/?indicator=24&survey=12&response=Unfavorable&mode=chart

34. This point is too obvious to need bolstering/referencing but Paul Kennedy did a persuasive job in his “Rise and Fall of the Great Powers”.

35. “Can Europe Be Saved?” By Paul Krugman, New York Times, January 12, 2011. http://www.nytimes.com/2011/01/16/magazine/16Europe-t.html

36. “Keeping the Euro: Merkel Rules Out Return to Deutsche Mark”, Der Spiegel; 01/19/2011
http://www.spiegel.de/international/germany/0,1518,740336,00.html

37. US COC CHINA INNOVATION REPORT” China’s Drive for ‘Indigenous Innovation’ A Web of Industrial Policies” By James McGregor, http://www.apcoworldwide.com/content/PDFs/Chinas_Drive_for_Indigenous_Innovation.pdf. “European Business in China Position Paper 2010/2011”; http://europeanchamber.com.cn/view/static/?sid=7479

38. Number two priority of Chapter (VIII) in the PRC’s “Guidelines for the Medium- and Long-Term National Science and Technology Development Programme” state: “We must perfect and adjust the country's industrial technology policies and enhance the absorption, assimilation, and re-innovation of imported technologies”.

39. “China Respects European Unity” by Jonas Parello-Plesner Senior Policy Fellow at the European Council on Foreign Relations. http://csis.org/files/publication/pac1062.pdf.

40. “Redbacks for Greenbacks: The Internationalisation of the Renminbi; Europessimism in the Chinese Press” by François Godement, CHINA ANALYSIS, Asia Centre, European Council on Foreign Relations, November 2010 issue. http://www.ecfr.eu/uploads/files/china_analysis_redbacks_for_greenbacks_the_internationalisation_of_the_renmimbi_november2010.pdf

41. In George Bernard Shaw’s futuristic play, human beings had skipped to the next stage of evolution, by prolonging their life spans and vastly increasing their mental powers. They had also learnt to value life more and not fritter it away in dispute, war and violence.

42. Second World”, by Parag Khanna, Random House, 2008.