Why Europe Needs To Embrace A Rising China
Rather than fear the so-called Middle Kingdom, European companies should recognize its rapid ascent as an opportunity.
MUNICH — Since the reform and opening-up policy began in 1978, China has achieved impressive economic development. Around 800 million people have emerged from bitter poverty, and in the coming decade, China's GDP is expected to surpass that of the United States. But such a rapid rise also sparks fears. Will a new superpower emerge here, threatening us Europeans? Will our companies be replaced as market leaders? Will Chine buy up German medium-sized firms and seek worldwide supremacy politically?
China is off to a dynamic start, and the Chinese are well aware of the global significance of their huge market. They are tech-savvy. And they will dominate in many areas. But as much as we depend on China, they too need Europe still. I strongly oppose, therefore, a short-term, fear-driven relationship between our continent and the Middle Kingdom, a nation of culture with more than 5,000 years of heritage.
Here are 10 theses about China that Europe should consider.
1. China thinks long term and follows centenary cycles
The Chinese are history-conscious and think in long cycles that seem rather alien to us. They describe their destiny as a sequence of different phases, either positive or challenging. Right now they see their country as being in the final phase of a 100-year recovery (1930-2030). Before that stood a century of humiliation (1830-1930). Starting in 2030, the Chinese expect a golden age. This long-term and deterministic view of history is also the benchmark for the government's five-year plans.
2. China strives for stability
China is a multi-ethnic state with almost 60 different nationalities. In the 18th century, its territory was significantly larger than it is today. In 1820 it had about 380 million inhabitants — over a third of the world's population at that time. In the centuries before, the Qing Dynasty had united the land and brought it to prosperity. Then came the Chinese trauma of the Opium Wars. Until the deposition of the last emperor, China experienced a painful decline: Imperialist Japan and European colonial politics ended a millennia-old social order. Peace only found its way back with the founding of the People's Republic. These hard times explain why the Chinese accept a strong central government that provides stability.
3. China's development model rests on three pillars: "Spirit, land, energy"
I got to know the unique culture of the Chinese directly in the country. The Chinese strive for a philosophical triad: First, a good order ("spirit" or "mind") shaped by Taoism and Confucianism. In addition, there is always correct behavior towards one's own society and the "country." This is a top priority in the Chinese mentality. The third aspect is "energy," which means entrepreneurial spirit. Note that even in the entrepreneurial world, the group always has priority over the individual.
4. China doesn't want to conquer the world, because it sees itself as the Middle Kingdom
The new Silk Road, or Belt and Road Initiative, is often seen in Europe as a tool of Chinese expansion and power. In fact, for China, it is about its place on the world map: It wants to be positioned as a Middle Kingdom in global trade routes. The initiative is about new sales markets and international growth incentives for the Chinese economy. China's infrastructure expansion can also benefit us. Duisburg is today the end point of a 10,000-kilometer railway line that begins in Chongqing. Germany's trade balance with China is almost balanced anyway: In 2018, both countries exchanged goods worth nearly 200 billion euros.
Chinese President Xi Jinping welcoming Jean-Claude Juncker, President of the European Commission at the G20 summit in Hangzhou in September 2016 – Photo: Bernd Von Jutrczenka/DPA via ZUMA Press
5. China has other visions for the future
The Wandering Earth, a Chinese science-fiction movie, has achieved global blockbuster status and Netflix has just secured film rights in 28 languages. This is a paradigm shift. In the global world, visions of the future no longer come exclusively from American culture. In the Chinese film, people save our earth — threatened by the sun's extinction — by moving it through space rather than colonizing a new planet. And it's not a lonely hero who saves humanity, but a collective effort. Such visions of the future also influence Chinese politics, such as the "China 2049" program.
6. China is investing in Artificial Intelligence (AI), and Europe must hurry up
China is hugely shaking up the U.S. global technology monopoly. In the AI field, the People's Republic registered 30,000 patents last year — nearly three times as many as the United States. Europe is therefore under pressure. We should launch European initiatives and seek exchanges with China, because this is how we can learn from the world's leading digital marketplace, especially in key technologies such as AI.
Let's not forget: China has an interest in the EU's large digital single market. Our data protection and ethical standards are becoming increasingly important globally. Similar to the internet, AI represents the next technological revolution that will change our lives.
7. Europe must position itself clearly vis-à-vis top Chinese technology
High-tech companies such as Tencent or Alibaba are far ahead of European suppliers. Nevertheless, we should trust partnerships with them. In Germany, we are currently discussing Huawei. At the same time, since 2006, around 20 German universities and research institutions have carried out more than 120 projects with the Chinese company. There are two options: Either we cooperate and enforce our standards of cooperation, as well as a technology transfer from China to Europe. Or maybe we don't want Huawei as a 5G partner. In my opinion, the latter would be short-sighted and means we would have to make massive investments in order to obtain the necessary know-how.
8. China's strategic investments in Africa should also interest us Europeans
China invests in Africa more than any other country. The global distribution struggle for raw materials has long begun. However, based on traditional trading mechanisms (debt and interest payments), China's investment policy will soon reach its limits on the still largely underdeveloped continent. The average debt of African countries today is 60% of GDP — and China is the main creditor. I am convinced that many African countries will soon be looking for other cooperation partners. This offers an opportunity for Europe to establish long-term and mutually beneficial trade relations with Africa.
9. China can become a reliable partner in world politics for Europe
As a result of U.S. protectionism, Brussels today has the opportunity to build a strong economic partnership with China. In terms of world politics, Beijing has become the most important partner for the EU in multilateral agreements. Common interests include preserving the Paris Climate Agreement, promoting sustainable technologies or holding on to the nuclear deal with Iran. Even with the reform of the World Trade Organization, we are working with China. Since President Xi Jinping"s speech at the World Economic Forum in Davos in 2017, we have been aware of China's strong interest in a stable economic system. Multilateralism is a cornerstone of Chinese politics.
10. Europe must end its asymmetrical openness towards China
Regardless of whether it was right, Brussels described China as a "systemic rival" earlier this year. Chinese companies are allowed to bid in public tenders in Europe. It's almost impossible to do so the other way around. That is why we Europeans should openly formulate our interests in Beijing. China will continue to open under this pressure. This will benefit German companies, for example. BMW will take over the majority of its Chinese joint venture by 2022. BASF is the first foreign-invested company to invest in the country without compulsory domestic partners.
Against the background of my 10 theses, I consider the results of the negotiations of the recent EU-China summit as a breakthrough. Fair competition in trade, mutual market access and rules on subsidies provide a solid foundation for Europe's renewed partnership with the Middle Kingdom. If both sides clearly articulate their interests, this can become a model for success.
*Charles-Edouard Bouée is CEO of global consulting company Roland Berger and also responsible for the firm's Asia business. He is the author of several books on China and modern management.