Jiang Shixue on China-EU Relations and　the European Debt Crisis

Jiang Shixue is Professor and Deputy Director of the Institute of European Studies, Chinese Academy of Social Sciences.

Q：From one angle, we can say that China-EU relations are so good, with growing amount of two-way trade and rising investment, as well as exchanges and interactions in the political and other areas. From another angle, however, it is not wrong to point out that the bilateral relationship between China and the EU is faced with many obstacles.  How would you characterize the China-EU ties?

A：Indeed, as the Chinese proverb goes, when you look at the mountain from different sides, you will get different views.  I read a paper by a Chinese scholar on the China-EU relations.  He only depicts the negative sides of the relationship, such as the EU’s reluctance of granting the market economy status to China, its failure to lift the arms embargo, different views and perceptions about human rights and political democracy, anti-dumping practice against Chinese exports, etc.  Therefore, his conclusion is quite negative.

However, if we want to prove that China-EU relations are the best of all bilateral ties in the world, we can also find enough evidence.  Isn’t this tantamount to cherry-picking? As scholars, we cannot prove one thing by relying on one-sided facts.

My view is that China-EU relations have both nice things and unhappy stories.  But on the whole, the two sides are on very good terms in the past several years.

Q：Then what are the problems for China-EU relations?

A：It seems to me that we really face the challenge to pinpoint the real, major obstacles for China-EU relations. If you ask ten Chinese about the question, you might have eleven answers.  My argument is this: in the economic filed, with increased exchanges, both sides are blaming each other, leading to repeated tensions such as anti-dumping, etc; in the non-economic area, both sides are criticizing each other for the lack of understanding of the other sides’ unique characteristics.

Some people would like to point out that a lack of understanding between China and the EU is also a problem.  But we can also say that it is also a root cause of all the problems. In any case, increased mutual understanding is important.

Q：Now, let’s turn to the European debt crisis.  What do the Chinese people think about the crisis?

A：It is really not easy to summarize the opinions of the Chinese people. Based on my knowledge, however, there are two kinds of major views about this issue: one is to look at the crisis in economic terms, and the other is to analyze it in political or ideological perspectives.

Those with the economic standing points in their minds tend to believe that the crisis is the result of lax fiscal disciple, shortcomings from the single currency system, over-indebtedness, loss of competitiveness, etc.

It is important to point out that when we say European debt crisis, its nature is actually different from one country to another.  That is to say, Greece’s problem is not the same as that in Ireland or Portugal.  But many Chinese people as well as the Chinese media often generalize the differences.  Indeed, we cannot find two identical leaves in the world.

Q：A few Chinese scholars believe that the euro will collapse during the European debt crisis? Do you agree with this prediction?

A：No. The current debt crisis in Europe has something to do with the inherent short-comings of the single currency.  But we cannot say that these short-comings will lead to the collapse of the euro.

The euro is the result of remarkable integration in Europe.  Regarding integration, no matter it is in Europe or Asia-Pacific, Latin America or Africa, political willingness is extremely important. So far we have seen that political determination in Europe to defend the single currency is powerful. With this determination, we can be sure that the euro will live in the world along with the US dollar and other hard currencies.

Q：Is the existence of the euro good for China?

A：Yes. I am sure that China is happy to see that the euro would stand firmly on the world economic stage so as to challenge the dominance of the US dollar. If there were no euro today, it could be predicted that the US dollar would be a bigger problem for other countries. As you know, I am referring to John Connally’s famous words.  Shortly after taking the treasury post, he was reportedly saying to a group of European finance ministers worried about the export of American inflation that the dollar "is our currency, but your problem."

Q：The debt crisis at present in Europe also creates an opportunity for China to invest there.  Don’t agree with this observation?

A：Yes, indeed. Greece and other “problem countries” have to carry out privatization programs to cut fiscal deficits.  This is a nice chance for other countries to purchase these state assets. China’s economic strength has been growing rapidly and its “going global” strategy is just a kind of encouragement for the public and private investors to make green-field investment or M&A there.

Sadly, some people in Europe are concerned about the Chinese investment. They are occupied by the mentality of “fear of China” or “China threat”.

As a matter of fact, Chinese investment in Europe is a win-win scenario.  It can help Europe generate more employment at a time of austerity. Why care about the color of the cat if it can catches mouse?  Why care about the origin of the investment if it can help Europe overcome the economic distress?

Q：What do the Chinese scholars think of the future of Europe?

A：Well, as far as I know, most of my colleagues are optimistic. Indeed, some Chinese are quite pessimistic. They tend to look down upon Europe’s capacity of recovering from the crisis. I am sure they are influenced by the media’s not-so-correct coverage of the economic situation there.

Q：When will the debt crisis in Europe be resolved?

A：This is one of the most difficult questions surrounding the debt crisis. As far as I know, we don’t have a clear-cut definition about “resolving a crisis”. The following conditions seem to be important: positive growth; bringing down debt and deficit to 60% and 3%; returning to capital market; lowering down 10-year bond spread below 6% or 5%; no more assistance from the troika; calm and peaceful streets without protest; no more headlines news coverage about the debt crisis by the international media, etc. 

Now, when we say that the debt crisis is over, do we need one condition or more than one? Ireland is witnessing positive growth rate, albeit quite low. Can we say its crisis is over? I guess we can only say Ireland is starting to overcome the crisis.  But how can we know when it will totally overcome the crisis?