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Changing Perceptions Of China In Europe
By: John Ross   Saturday, March 10, 2012 1:14 PM
The most famous case was China's National Offshore Oil Corp being prevented from purchasing Californian oil company Unocal. But China's Huawei, the world's second-largest telecommunications equipment manufacturer, has effectively been blocked from bidding for US contracts.

There are are of course still some in Europe opposing better relations with China. Britain's Daily Telegraph, for example, carried a headline regarding Vice-President Xi's visit to the US that ‘China's upcoming leader Xi Jinping has been wined, dined... and warned.' But in contrast, the UK's Guardian newspaper carried an editorial headlined, ‘Chinese economy: headaches to die for', arguing: ‘Any appraisal of China's prospects must begin by admitting that the Middle Kingdom is the most astonishing development success story in the world today.' Even a tabloid newspaper, such as the UK's Daily Mirror, carried a major story emphasizing the positive role of UK trade relations with China.

It is clear that the political atmosphere for China's trade and investment in Europe is currently more favourable, and enjoys far wider support, than in US politics.

This situation is significant not only for China but for Europe and the US themselves. Trade growth between both the US and China and between the EU and China is larger than between the US and EU.

Comparing the latest available data, for the 4th quarter of 2011, with the 4th quarter of 2007, before the financial crisis, U.S. exports to the EU increased by an annualized $21 billion and EU exports to the US by an annualized $8 billion. US exports to China, however, increased by an annualized $47 billion, while EU exports to China grew by an annualized $83 billion. Growth of US exports to China, therefore was more than twice those to the EU, and EU exports to China grew by more than 10-fold those to the US. This data also shows the EU gained more from increased exports to China than the US.

A parallel investment pattern exists. Europe is now the largest destination for Chinese companies' foreign investment. It also accounted for 34 per cent of China's outward investment in mergers and acquisitions in 2011. In contrast, China's investment in the US fell from $4.2 billion in 2010 to $3.2 billion last year.

Naturally there are downs as well as ups in Europe's economic relations with China – a current down is the row over the EU's airline tax. But overall the current types of deals being done are well founded because they are mutually beneficial. The Economist magazine noted: ‘In welcoming China, Europe is swimming with the tide of history; America is struggling against it.'

The reason that at present the EU is gaining more from trade and investment with China than the US is certainly not due to China's political bias – China's government must consider its relations with the US as the world's most important bilateral one. But, in addition to the different scale of openings being offered them, China's companies have to evaluate ‘political risk' just as much as Western ones do. ‘Political risk' is clearly now lower in Europe.

Good relations between Europe and China are evidently capable of generating what China characterises as 'win-win' outcomes. China is a huge market for technologically advanced and high-value exports from the EU, as Germany's export success shows, which improves China's industry, while the EU also gains from China's continued support for the euro.

The change in the perception of China in Europe is not merely a success for China's diplomacy but has economic foundations.


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