The grim prospect of Europe without China

By Jeremy Garlick Source:Global Times Published: 2017/1/15 19:43:39

Illustration: Luo Xuan/GT

Illustration: Luo Xuan/GT



 

As Chinese President Xi Jinping flies into Switzerland for the World Economic Forum in Davos, he is sure to be concerned about a wide range of pressing issues for the year ahead.

Two of which are connected to the conference's main agenda: how to restore global economic growth and how to reform market capitalism.

There is a growing feeling worldwide that globalization has somehow lost its way. Wealth gaps are widening, and not just in China. The pressure is on leaders to provide a roadmap to the future.

Dissatisfaction with inequality has led to a wave of anti-globalization sentiment in many countries. The results of this shift can be seen in Brexit in the UK and a political swing to the right in a number of European countries, as well as in the US where Republican Donald Trump has been elected president.

Many people seem to think the solution to economic woe lies in disconnecting from global trade and business and concentrating on local solutions. They believe jobs and prosperity will return to disadvantaged areas only if interfering foreigners are removed from the equation.

In Europe and the US, this would mean attempting to detach from China. In fact, restoring the American jobs he sees as lost to China was one of Trump's most enticing election promises.

Shutting China out is a possibility in the US, but could this happen in an increasingly fragmented Europe as well?

It seems unlikely. After all, China is one of the EU's two main trading partners (the other is the US). Eliminating China from the economic equation would be like cutting off an arm: painful, counter-productive and ultimately harmful to Europe's own prospects.

Yet, let's imagine a Europe without China, if only to paint a picture of the consequences. Would there be a return to prosperity as manufacturing jobs came back, or increased hardship due to the loss of interconnectivity with a major global player?

I would argue that the latter scenario would be far more likely.

Here's a clear example. Europe's economic powerhouse, Germany, is dependent on exports for growth. Many of these, such as cars and other industrial products, go to China. Without China, Germany's economy would face a nasty downturn. And the same goes, to a greater or lesser extent, for most other European countries.

In fact, it's strange to think of Europe without China, because Europe has never really been with China. Arguably, Europe has never really understood China, or even attempted to understand it.

By perceiving China as distant, alien and somehow malignant, Europeans, I would argue, misconstrue the impact of China on their lives. They refer to Chinese products as cheap and low-quality, yet seem to forget that most of their beloved smartphones and computers are made in China.

They see Chinese workers as low-paid drones, but forget how the rapid growth of China's export-led economy has lifted 400 million out of poverty, an unprecedented event in human history.

If China's economy were to tank (and let us sincerely hope it does not), this would undoubtedly have dramatic effects on Europe and on the whole world.

Globalization means that the economies of nations are now inextricably interlinked. Separating them is close to impossible, as the British are discovering as they attempt to detach from the EU.

A Chinese economic downturn would have severe consequences for European countries, for most of whom trade with China constitutes a large chunk of their economic activity. A rapidly slowing China would also lead to a deep and lasting global recession which would hit Europe as hard as everybody else, perhaps even harder given the extent to which trade with China is propping up low European GDP growth rates.

Chinese investment in Europe is also increasing, with plenty more likely to come in the next few years. A slowing Chinese economy would mean that these funds would never arrive, and European jobs could not be created.

Chinese tourism, one of the fastest growing sectors in countries such as France and Britain, would also be curtailed. Luxury goods in European department stores would sit on shelves and brands would struggle to find customers, further pulling down European economies.

In other words, China is under-appreciated in Europe, its growing economic activity in the old world undersold as a stimulus to economic growth.

As Xi Jinping arrives in Davos, Europeans would be well-advised to take the time to reflect on just what China really means for them and their economies. They would also be well served by contemplating, just as the Chinese president will be, how to improve upon existing models of trade and global capitalism, and how to increase beneficial ties with China, rather than seeing Chinese commercial activity as harmful to Europe.

The author is a lecturer in international relations with the Jan Masaryk Centre for International Studies at the University of Economics in Prague. bizopinion@globaltimes.com.cn



Posted in: INSIDER'S EYE

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