Merkel, technology transfer and that China-EU deal

Controversy has swirled around the European Union’s investment deal with China. The agreement signed last year still has to be ratified by the European Parliament with the devil in the detail.

At face value, the EU appears to have secured improved access to major sectors such as electric vehicles or NEVs, cloud computing, financial services and health care. But again, detailed clauses have yet to be made public.

The contentious issue of forced technology transfers has also been addressed along with commitments to work toward the ratification of International Labor Organisation standards. 

“In addition to rules against the forced transfer of technologies, CAI [the EU-China Comprehensive Agreement on Investment] will also be the first agreement to deliver on obligations for the behavior of state-owned enterprises,” the European Commission stated.

For Beijing and the ruling Communist Party, the deal is seen as a “foreign policy success” as it drives a hole through the EU-US partnership that President Joe Biden is trying to rebuild after the Donald Trump era. It also underlines President Xi Jinping’s economic clout.

Below are edited excerpts from an essay that appeared on Echowall by Zhu Yi entitled The CAI under the Chinese Lens: “Win-win” for Whom? It looks at how the agreement is being “framed” in China.

China’s lavish gift to Merkel

“The news [of] the investment deal [by state-run news agency] Xinhua began with these words: ‘President Xi Jinping held a video call with German Chancellor Angela Merkel, French President Emmanuel Macron, European Council President [Charles] Michel and European Commission President [Ursula] von der Leyen in Beijing on the evening of January 30, 2020.’ The strict order was adopted by all official media and news portals.

“The prominence of the German chancellor in the CAI narrative is illustrated in the title of an online article about the CCTV program Rise China. ‘While Europe is in trouble, China sends a lavish gift and Angela Merkel radiates with joy’ reads the headline.

“[Merkel’s] unconventional career has long attracted great interest from the Chinese public. Depending on the political climate of the time, the scenario tends to change somewhat.

“[But] since the trade war between the US and China, she has been painted as [a] determined opponent [of] Trump – fighting shoulder-to-shoulder with the Chinese leadership against bullying [by Washington].

“[Last month], the respected [Chinese] newspaper, The Economic Observer, devoted a lengthy article to Merkel. [It said] the establishment of CAI was her revenge on Donald Trump [after he] refused to shake [her] hand during a meeting in 2017.”

So, who has been taken for a ride?

“Skeptical opinions [about] the China Comprehensive Agreement are regularly described as ‘interference’ and dismissed as trivial.

“Cui Hongjian, the director of the European Institute of the China Institute of International Students, has criticized [those that felt] China had been too lenient in negotiations. Social media provides clues about why the agreement might not be [viewed in] a positive [light].

“Popular online commentator Lu Kewen wrote: ‘German car manufacturers are bursting with joy as their dreams have all come true.’ Indeed, Volkswagen and Audi celebrated the signing of an agreement for the Audi-FAW new energy vehicle joint venture in Changchun [last month]. Audi has a majority share of 60% in the project for the first time. 

“In the future, the German automotive industry is also likely to increase its shares in joint ventures with Chinese partners at other locations in [the country].

“But is this a result of the agreement? Many Chinese commentaries point out that the relaxation of joint venture restrictions was already announced in 2018 and will be gradually implemented by 2022. Given that CAI is unlikely to be ratified before the first quarter of [this year], the agreement cannot possibly have had a direct impact on the [decision.]

“[Still,] Chinese commentators on social media [took the air out of the tires of] German car manufacturers: ‘VW may control the technologies, but the distribution channels are in the hands of the Chinese companies!’

“Overwhelmingly, China [has been] presented as the ‘winner’ of the investment agreement. In a similar vein, authors argue that Chinese cars have primarily been exported to developing countries. Through the agreement, access to Europe will become easier.”

China aims to plug into EU power grids

“One of the most popular economic experts, Lang Xianping, explained on his talk show on Guangdong TV how China [will strike the] CAI [jackpot]. The prospect of good business in China makes politicians in Europe immune to US efforts to win over the EU, [he pointed out].

“The second big win, Lang said, is access to European energy markets and power grids. Chinese companies will capture this sector, he added. Ultimately, the investment deal ‘means a green light for Chinese 5G providers [such as Hauwei] in the European market,’ Lang said.

“Online commentator Lu Kewen argued that thanks to CAI, China will obtain ‘technology by investing [in Europe].’ Lu said: ‘We [China] have tried in vain for many years to obtain technology in exchange for market access.

“‘In the future, China can penetrate the most advanced fields of European steel, pharmaceuticals, aerospace, machinery, military, microelectronics, environmental science, robotics and engineering, and use their technology to upgrade Chinese enterprises.’

“Critical voices have become louder in recent years [about] German car manufacturers that make large profits from China’s market [but refuse] to transfer technology. As a result, many are calling for this policy to be discarded altogether and for national industries to be strengthened.”

Who cares about forced labor?

“Caixin is the only Chinese media worth mentioning that deals with the topic of forced labor, as well as ILO [International Labor Organisation] conventions. In January, the magazine published an interview with EU Ambassador Nicolas Chapuis. In it, he talked about the risks for EU politicians who gave [Beijing] the benefit of the doubt and [agreed a deal] without seeing China’s roadmap toward ILO ratifications.

“Online, one young [Chinese] lawyer wrote in his blog: ‘China’s economic miracle over the past 40 years has not been conjured by investment. It is due, rather, to the extremely high labor input with low rewards of several generations.’ He expressed hope that the existence of ‘sweat and blood’ philosophy will come to an end with the EU investment agreement.

“Yet, unfortunately, the EU deal might [end up] disappointing the lawyer. 

“Professor Wang Yiwei, the director of the European Institute of the Renmin University, quoted Jorg Wuttke, the president of the EU Chamber of Commerce in China, as saying: ‘Why should the EU force the Chinese to adopt a ‘European way of life’ at the expense of EU jobs?’ Wuttke’s original quote came from a Financial Times article in December, shortly before the CAI agreement.”

Zhu Yi is a researcher at the Institute of China Studies at the University of Heidelberg.

The full article first appeared on Echowall. To read the original and unedited version click on this link.

Echowall is a collaborative research platform based at the University of Heidelberg’s Institute of Chinese Studies in Germany.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of China Factor.