Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This week, top European Union leaders are traveling to Beijing
Speaker 2: for a high level summit where they'll address everything from
Speaker 2: climate change to trade. The meeting coincides with the fiftieth
Speaker 2: anniversary of diplomatic ties between the EU and China and
Speaker 2: could signal a turning point in what's often been a
Speaker 2: turbulent relationship.
Speaker 1: The US, UK and EU sanctioned China for human rights
Speaker 1: abuses in Shinjung. Beijing retaliates, immediately, putting its relations with
Speaker 1: Western nations on course for a further so China is
Speaker 1: prepared to live some sanctions on EU officials in a
Speaker 1: bid to work towards a dayton.
Speaker 2: The EU and China often find themselves at odds on
Speaker 2: a number of geopolitical and economic issues, but lately they
Speaker 2: can agree on one thing, the need to counter President
Speaker 2: Donald Trump's terra.
Speaker 3: EU nations buy and large do want to de risk
Speaker 3: from the US market because they see it as unpredictable.
Speaker 2: Alan Crawford is a senior editor at Bloomberg. He's been
Speaker 2: covering international relations from Berlin for nearly two decades, and
Speaker 2: he says by distancing itself from the US. The EU
Speaker 2: is putting itself in a position to recalibrate its relationship
Speaker 2: with China, its second largest trading partner.
Speaker 3: There are different voices in Europe advocating different paths as
Speaker 3: regards relations with China, and there is an official skepticism,
Speaker 3: if you like. The official line from the European Commission
Speaker 3: Chief or Shulaf underline is to d risk as regards China,
Speaker 3: but that is not quite reflected in some of the
Speaker 3: individual EU member states, the governments and the government leaders.
Speaker 2: Alan says, you don't have to look too hard to
Speaker 2: see signs that European country are warming up to China.
Speaker 2: The presidents of Spain and France have publicly endorsed deeper ties,
Speaker 2: and companies like Chinese EV manufacturer BYD have expanded operations
Speaker 2: into the region.
Speaker 3: Byd its main European plant is under construction at the
Speaker 3: moment in Hungary. Slovakia is also attracting EV and battery technology.
Speaker 2: These developments haven't gone unnoticed by the US. Earlier this year,
Speaker 2: Treasury Secretary Scott Bessant warned the continent against pivoting to China.
Speaker 1: A minister, the Economic Minister in Spain, made some comments
Speaker 1: this morning, Oh well, maybe we should align ourselves more
Speaker 1: with China.
Speaker 2: That would be cutting your own throat, Alan says. With
Speaker 2: geopolitical tensions rising and Trump's tariffs taking their toll, the
Speaker 2: EU is at a crossroads.
Speaker 3: Does it pursue strategic autonomy, as it's called, or does
Speaker 3: it try and align more closely with China, or indeed,
Speaker 3: does it just look past Trump's tariffs and overall aggression
Speaker 3: and continue its transatlantic ties.
Speaker 2: This is the Big Take Asia from Bloomberg News. I'm Wanha.
Speaker 2: Every week we take you inside some of the world's
Speaker 2: biggest and most powerful economies and the markets, tycoons, and
Speaker 2: businesses that drive this ever shifting region. Today on the show,
Speaker 2: how Trump's trade war is changing the EU's approach to
Speaker 2: Chinese investment. Relations between the EU and China have fluctuated
Speaker 2: over the past half century. From nineteen seventy five to
Speaker 2: twenty ten, trade between the two grew steadily as China
Speaker 2: initiated reforms, signed economic cooperation agreements, and joined the World
Speaker 2: Trade Organization. In two thousand and nine, Chinese investments in
Speaker 2: Europe rose to three billion dollars. By twenty sixteen, it
Speaker 2: had reached forty billion dollars. Here's Bloomberg Senior editor Alan Crawford.
Speaker 3: There were some really big, notable Chinese investments. The figures
Speaker 3: vary somewhat, but they reached a peak around twenty sixteen,
Speaker 3: and it was tens of billions of dollars. One example
Speaker 3: back then was ken China's takeover of the Swiss agrochemical
Speaker 3: company Syngenta, and that was valued at forty three billion dollars,
Speaker 3: So it gives you an indication of the kind of
Speaker 3: volumes we're talking about.
Speaker 2: And Bradley Allen, where were these investments going in Europe
Speaker 2: back then?
Speaker 3: In twenty fifteen sixteen, It was really in the big
Speaker 3: economies of France, Germany, Italy and the UK. China was
Speaker 3: investing in a real mixed bag of companies and assets.
Speaker 3: They were buying things like football clubs. They bought into Milan,
Speaker 3: a famous club in Italy. They bought travel companies. But
Speaker 3: then there started to be more investments in infrastructure, so
Speaker 3: in rail lines specifically, we saw ports. The famous one
Speaker 3: is Costco bought into Perea's port, which is the harbor
Speaker 3: for Athens and key to all of the Mediterranean shipping. Subsequently,
Speaker 3: China brought into other ports in the Mediterranean and in
Speaker 3: the Adriatic, So it looked very suspiciously as if Chinese companies,
Speaker 3: some of them were state backing, were deliberately buying up infrastructure.
Speaker 2: So when Chinese companies were picking up things like football
Speaker 2: clubs and travel companies, no problem. But when they started
Speaker 2: investing infrastructure, that really raised the alarm bells for a
Speaker 2: lot of European governments.
Speaker 3: Yes, it took up while for the concerns to be shared.
Speaker 3: Germany and France had concerns before Italy did, and this
Speaker 3: was communicated interestingly by a business group in Germany. They
Speaker 3: were among the first to issue a landmark which was
Speaker 3: critical of some of the investments and urging the government
Speaker 3: to be very cautious. And this was subsequently taken up
Speaker 3: at EU level and it became a new law in
Speaker 3: term that granted rights for investment screening.
Speaker 2: While China's infrastructure investments raised flags, there have been points
Speaker 2: of contention politically between the EU and China too.
Speaker 3: The pandemic was really an inflection point. There was a
Speaker 3: lot of criticism in Europe of China's mask diplomacy. If
Speaker 3: you remember that China produces a lot of the medical
Speaker 3: equipment which the world suddenly found themselves without, and China
Speaker 3: was criticized for favoring its allies in terms of these supplies. Subsequently,
Speaker 3: there were criticisms directed by European politicians at Beijing over
Speaker 3: the treatment of minorities in Shinjang, and that actually culminated
Speaker 3: in trading of sanctions between EU lawmakers and China.
Speaker 2: What was the impact of this increased scrutiny, How did
Speaker 2: that affect Chinese investments in Europe?
Speaker 3: After that, it's been very clear that if you just
Speaker 3: look at a graph, is on a clear downward trajectory.
Speaker 3: There was a recent report by Merricks that studies China
Speaker 3: based in Berlin, where I am here, and it found
Speaker 3: that there were seven consecutive years of declines in terms
Speaker 3: of overall Chinese investment in Europe, but twenty twenty four
Speaker 3: Chinese investments ticked up for the first time. It's important
Speaker 3: to make the point that this is still just a
Speaker 3: very small uptick, and it's still at a low level
Speaker 3: compared to back in the heyday, the Golden era. But
Speaker 3: given the global environment we're talking about, it still seems
Speaker 3: significant to point out this change after seven consecutive years
Speaker 3: of decline.
Speaker 2: According to the report, last year's rebound of Chinese investments
Speaker 2: into Europe total ten billion euros or about twelve billion dollars.
Speaker 3: One of the interesting developments of recent years is that
Speaker 3: the investment profile has changed. It's starting to shift from
Speaker 3: taking stakes in companies or in particular projects or infrastructure.
Speaker 3: Then it's shifting now to more green field investments, which
Speaker 3: means they're building new factories. And it's reflective of the
Speaker 3: fact that China has moved up the value chain that
Speaker 3: now China has its own world leading technologies, notably of course,
Speaker 3: in electric vehicles and EV technology, clean tech, and European
Speaker 3: governments buy and large are very keen to have those.
Speaker 2: And then of course there's Trump's tariffs after the break
Speaker 2: the new China EU approach. Last year was an important
Speaker 2: year for Chinese investments in Europe. It was the first
Speaker 2: time that Chinese companies up their spending there after seven
Speaker 2: years of declines. Alan Crawford and a team of Bloomberg
Speaker 2: reporters dug into these figures and found there was a
Speaker 2: shift in the nature of these investments as well as
Speaker 2: where the money was going.
Speaker 3: Broadly speaking, a very notable development has been this shift
Speaker 3: from Western Europe to Central and Eastern Europe byd Its
Speaker 3: main European plant is under construction at the moment in Hungary.
Speaker 3: Slovakia is also attracting EV and battery technology. I think
Speaker 3: what's interesting about these two countries is that they're both
Speaker 3: run by leaders who are very close to China politically.
Speaker 3: They're both somewhat problematic in terms of the European mainstream,
Speaker 3: and by that I mean that they have ties to
Speaker 3: Moscow and they are proud of their those relationships with
Speaker 3: Shi Jinping.
Speaker 2: And it sounds like the governments are also responding differently
Speaker 2: this time around, right like some of these investments are
Speaker 2: actually being very much welcomed.
Speaker 3: That's exactly true. These are actually plants that bring jobs
Speaker 3: and technology and arguably prestige to the nations that have these.
Speaker 3: It's essentially a race for the technology at the moment,
Speaker 3: which is a change of course. Rather than China trying
Speaker 3: to get hold of Western technology, this is European countries
Speaker 3: that are very keen to have Chinese advanced EV plants
Speaker 3: in their countries.
Speaker 2: But it's not just prestige and shared political interests that
Speaker 2: are pushing European nations closer to China. Trump's terrorists have
Speaker 2: played a significant role.
Speaker 3: The US is already threatening the EU with thirty percent tariffs.
Speaker 3: It's not exactly designed to win friends and influence in Europe.
Speaker 3: It can only turn Europe away from the US. There
Speaker 3: are different voices in Europe advocating different paths as regards
Speaker 3: relations with China. There is an official skepticism, if you like.
Speaker 3: The official line from the European Commission Chief or Shulaf
Speaker 3: underline is to d risk as regards China.
Speaker 2: Europe is fully committed to result oriented engagement with China
Speaker 2: and this Commission is leading the way when it comes
Speaker 2: to d risking not decoupling.
Speaker 3: But that is not quite reflected in some of the
Speaker 3: individual EU member states. We recently had the Spanish Prime
Speaker 3: Minister Pedro Sanchez. He was in Beijing meeting with Xi Jinping,
Speaker 3: and he was talking very much about opening up more
Speaker 3: to China and his emphasis was on much more in
Speaker 3: terms of investment, much closer relations. But other leaders are
Speaker 3: somewhat more weary and are hedging their relations, notably the government,
Speaker 3: which is the biggest economy in Europe's the number three
Speaker 3: economy worldwide. It tends to set the tone in Europe
Speaker 3: and the EU as a whole.
Speaker 2: What are some of the concerns the reservations that specific
Speaker 2: countries have about the warming ties to China and the investments.
Speaker 3: The single biggest issue that is shared by the vast
Speaker 3: majority of EU nations, the governments, and the EU itself
Speaker 3: in Brussels is China's close relationship with Russia. European governments
Speaker 3: leaders individually, the German Chancellor, the French President, and EU
Speaker 3: officials have been making the case to Shi Jinping to
Speaker 3: exert influence on Vladimir Putine to stop the war in Ukraine.
Speaker 3: The argument is that China could exert pressure on North
Speaker 3: Korea not to supply Russia with artillery and with troops. Actually,
Speaker 3: but that doesn't seem to have had any influence either,
Speaker 3: which to take us back to the upcoming EU China summit,
Speaker 3: that will undoubtedly be a sticking point in any development
Speaker 3: towards closer relations.
Speaker 2: I'm wondering, then, where does this leave us now? Are
Speaker 2: we seeing a pivot to China from the EU side.
Speaker 2: Is there a strong sense that EU countries want to
Speaker 2: do risk or do you leverage from the US market?
Speaker 3: These are two separate but connected issues. Yes, EU nations
Speaker 3: Buy and Large do want to de risk from the
Speaker 3: US market because they see it as unpredictable. At the
Speaker 3: very least, the Transatlantic relationship is arguably in more trouble
Speaker 3: than it has been for decades. At the same time,
Speaker 3: I don't think that yet translates to a pivot towards China,
Speaker 3: for the reasons of China's support for Russia during the
Speaker 3: Ukraine War. But also there is a skepticism, an inherent
Speaker 3: wariness which has developed over the past decade, which means
Speaker 3: that Buy and Large as a whole Europe isn't quite
Speaker 3: ready to fall into bed with China, if you like.
Speaker 3: I think that there's a recognition that Europe needs to
Speaker 3: find its own path between the two giants of Beijing
Speaker 3: and Washington.
Speaker 2: Now, US Treasury Secretary Scott Bessnont had warned European governments
Speaker 2: against aligning more with China. At the same time the
Speaker 2: US seems to be cozying up to China itself.
Speaker 3: Of course, things change on a day to day basis.
Speaker 3: A few weeks ago where we're talking about threats of
Speaker 3: one hundred and forty five percent tariffs on China. Now
Speaker 3: we've seen that the US is allowing Nvidia to sell
Speaker 3: some of its AI chips to China, which is a
Speaker 3: complete reversal of the Biden administration's policy and indeed the
Speaker 3: Trump administration's policy of a few weeks ago. And we're
Speaker 3: talking about a potential she Trump summit. Trump seems to
Speaker 3: be willing to do some kind of broader deal with China,
Speaker 3: and by its very nature, I think that would carve
Speaker 3: out Europe and leave Europe further adrift, which kind of
Speaker 3: gives more ammunition to the calls in Europe for more
Speaker 3: autonomy here on the continent.
Speaker 2: Back to the EU China summit later this week. What
Speaker 2: outcomes do we expect from the talks? You know, what
Speaker 2: could be the biggest signals that things are warming up
Speaker 2: between the EU and China or are there things to
Speaker 2: watch in terms of flags red flags? Possibly?
Speaker 3: I think it will be very easy for the both
Speaker 3: sides to agree on the need for free trade and
Speaker 3: to call out protectionism. They are highly unlikely to name
Speaker 3: the US or Donald Trump, but they will, presumably, I
Speaker 3: would imagine, put out a robust statement in terms of
Speaker 3: global values, multilateralism against unilateralism going it alone. So reading
Speaker 3: between the lines is clear that they don't like the
Speaker 3: approach of the Trump administration slapping tariffs and unilaterally pulling
Speaker 3: out of the Paris Climate Accord and so on. I
Speaker 3: think that they will agree on climate issues. One of
Speaker 3: the biggest potential sticking point is over this China support
Speaker 3: for Russia. China is still withholding rare earth experts to Europe.
Speaker 3: I guess the issue really for me is whether these
Speaker 3: blow up and come out into the open, or whether
Speaker 3: they manage to keep them behind closed doors and maintain
Speaker 3: a unified stance on those points they can agree on.
Speaker 2: This is The Big Take Asia from Bloomberg News. I'm
Speaker 2: wanha To get more from The Big Take and unlimited
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