The setting of Wednesday’s EU-China summit in Brussels is quintessentially European. But the man who apparently holds all the cards at the table is Chinese Premier Wen Jiabao – and it looks like China’s largest trading partner will cave in.
The setting is designed to show Europe at its best. When Chinese and EU leaders meet Wednesday for talks at the Belgian royal palace in Brussels, they will be overseen by priceless European artworks and glittering chandeliers. But the star of the show will undoubtedly be the Asian tiger in the room: China.
Wednesday’s EU-China summit follows the two-day Asia-Europe Meeting (ASEM) in Brussels, where leaders and representatives of 46 nations – including the 27 EU member states – met for wide-ranging talks on strengthening political dialogue and enhancing trade.
All eyes are now on the EU-China summit, which sees China – the world’s second largest economy – arrive at the table from a position of inordinate strength.
Chinese Premier Wen Jiabao effectively pre-arranged the tone of Wednesday's talks during a weekend visit to crisis-hit Greece. Addressing the Greek parliament on Sunday, Wen said Beijing would buy Greek government bonds and he asserted that China was committed to "supporting" the euro.
“What’s at stake in these talks is the relationship between Europe and China,” said Olivier Lefebure, a partner at UGGC, a Paris-based law firm and former vice-president of the French chamber of commerce in China. “China is coming to the talks as a new superpower, it’s giving a hand to Greece and it’s doing it in a very efficient way.”
China, the EU’s largest trading partner, holds the biggest foreign exchange reserves in the world. Wen's weekend pledge to Greece was a welcome show of support after Europe battled to beat back the Greek debt crisis, which nearly destroyed the euro earlier this year.
The Chinese lifeline to Greece, according to Lefebure, sends a message to the entire 27-member EU bloc. “It’s a way for China to show Europe that it could be even more effective than the EU in helping a European country in a bad position,” said Lefebure. “China is just starting its shopping in Europe in Greece. It’s Greece now, but it could be some other EU member country later.”
China’s offer comes not without a price. On Sunday, for instance, Wen also announced that his country would pledge $5 billion to finance the purchase of Chinese ships by Greek shipping companies.
“China is showing that it’s ready to help European countries if they have financial problems. China has the power – and cash – to do it,” said Lefebure. “But there will be some exchange, it will not be done for free.”
All eyes on the money
A particularly thorny issue at the EU-China summit is the international war of words surrounding the value of the Chinese currency, the yuan.
US authorities have accused China of keeping the yuan artificially low against other world currencies, making Chinese goods cheaper globally.
Last week, the US House of Representatives approved legislation enabling Washington to seek trade sanctions against China and other nations for manipulating their currencies to gain competitive advantages.
Beijing’s reaction was swift and strong. Speaking to reporters in Beijing last week, a Chinese foreign ministry spokesperson slammed the US bill and warned that pressure on the yuan issue could "severely damage" trade ties between the two countries.
Will China put its money where its mouth is?
On Tuesday, the EU added its voice to the international outcry when Jean-Claude Juncker, head of eurozone finance ministers, EU Monetary Affairs Commissioner Olli Rehn and European Central Bank President Jean-Claude Trichet told the Chinese premier that the yuan's “effective exchange rate remains undervalued.''
French President Nicolas Sarkozy has been meeting with Chinese officials ahead of his forthcoming presidency of next month’s G20 summit in Seoul, South Korea, in an attempt to draw China into a multilateral dialogue on currency stability.
But like most experts, Lefebure does not believe that China is about to budge on this issue. “For years now, China just considers this issue as something linked to its sovereignty,” he explained. “They didn’t give in then and they’re not going to give in now because they’re much stronger than they were a few years ago, so why would they cave in to these pressures now?”
European diplomats say China is skilled at making gestures ahead of major international summits, such as Beijing’s announcement of a more flexible yuan exchange rate just before the June G20 summit in Toronto. But once the international spotlight has been turned elsewhere, they say Beijing simply reverts to its old ways.
Speaking to reporters in Brussels Tuesday, Juncker said Europe had welcomed China's June 19 decision to make the yuan's exchange rate more flexible, before adding that the move had not worked well enough.
The euro-yuan rate is not "what we would have hoped,'' said Junker.
In which case, even if China were to make the right noises on the currency issue in the next few days, few believe that Beijing would put its money – literally – where it’s mouth is.
Date created : 2010-10-05