STARS AND DRAGONS: THE EU AND CHINA
CHAPTER 1: INTRODUCTION
1. The emergence of the People's Republic of
China as a major economic and political power has presented the
European Union, and the world, with a new challenge. China's vast
landmass, its population of 1.3 billion, its hunger for resources,
its distinctive culture and sense of grievance against others
have added to the challenge, as has the Chinese historical concept
that China is the centre of the world and superior to other nations.
2. As was shown at the climate change conference
in Copenhagen at the end of 2009, the balance of global power
is moving eastwards and southwards. Economic development has transformed
China's global position with implications for the world's economy,
and in particular for that of the United States and the EU, which
have reached a level of significant financial and trade interdependence
with China. This gives China international influence politically
as well as economically.
Understanding China today: the
THE STATE, THE PARTY, DEMOCRACY AND
THE RULE OF LAW
3. China has never known democracy as the West
understands it. The Communist Party, in power since 1949, continues
to run China at all levels and remains the dominant force. The
formation of alternative political movements or parties is forbidden.
This is unlikely to change in the near future.
4. Dr Kerry Brown (Chatham House) told us
that there had been talk about democracy but no recent significant
moves towards political enfranchisement (QQ 38-39, 67-70).
Professor Rana Mitter (Oxford University) commented that
the leadership had made clear that "there was not going to
be now, or at any point in the future, a Western-style, multi-party
democracy in China"
5. Despite the lack of a party-political democracy,
the Chinese do operate a consultative system which enables the
State to discover what people are thinking and the people to obtain
redress for grievances. This system was explained to us by Yang
Dong of the Chinese Peoples' Political Consultative Conference
in Guangdong (also Mitter
Q 153). Lord Patten of Barnes said that since Tiananmen Square,
China had emphasised economic growth and reform rather than political
development. However, the lives of the people had improved in
terms of disposable income, economic and job choices and where
they wanted to live. "Peoples' lives
better than they were in 1989" (Q 550).
6. Professor William Callahan (Manchester
University) pointed out that there were groups of well-placed
intellectuals in China thinking about democracy in the way it
was understood in the West. 7,000 to 8,000 people had signed a
"Charter 08" document calling on China to reform in
terms of liberal, multi-party democracy (Q 153).
7. Dr Brown commented that the Chinese had
developed their legal system since 1979 and people were more willing
to use the courts: some good judgments had been made. However,
the Party controlled the courts and the media (QQ 57-58).
Professor Shaun Breslin (Warwick University) said that trade
unions were official agencies but they were representing the problems
facing their members and, compared with 10 to 15 years previously,
there was greater legal protection for workers (Q 207).
CENTRAL AND PROVINCIAL GOVERNMENT;
UNITY AND MINORITIES
8. China is a diverse country with 31 very different
provinces and 56 nationalities, though the 55 national minorities
comprise only 8% of the population. Central directives can be
interpreted differently at local level and local rivalries and
conflicts exist between state industries and the state, and between
different provincial governors (Lord Patten of Barnes Q 557, Jochheim
Q 432, Moran Q 343, EU Chamber of Commerce Appendix 4, Brown Q
41, Hilton QQ 119, 137,
Song Q 483, Breslin
9. For the leadership, and in public opinion,
the unity of the country is all-important. Ambassador Chen
commented that this was the government's supreme concern, together
with the nationalities question (see also Brown Q 74, Callahan
Q 154). Tibet and Xinjiang are particularly sensitive issues where
dissent is harshly treated (Brown Q 61, Grant
Q 87, Hilton Q 133, Mitter Q 154). We discuss Taiwan further in
Chapter 5 and Tibet and Xinjiang in Chapter 8.
10. Isabel Hilton (China Dialogue) thought that,
in China's centuries-old search for a modern political form, the
dominance of Han culture had become an instrument of state to
the detriment of other cultures within the country. Both religion
and culture were seen as vehicles for local nationalisms. Long-running
discontent in Tibet and Xinjiang was of concern to the government.
Both provinces were tightly controlled by the Chinese authorities
and there was no prospect of independence for either: they were
strategically important, not least in Tibet's case, as a source
of water (QQ 97-99, 134-136).
THE REAL "GREAT LEAP FORWARD"
11. Dr Brown described China as "a
GDP growth factory" with an average economic growth rate
of some 10% per year since 1978. China had lifted some 300 million
people from poverty, created a successful middle class mainly
in the coastal areas and been "incredibly successful"
in terms of wealth creation. Agricultural efficiency had improved;
over 54% of people were still rural. The main area of growth had
been exports though this constituted around only 4-5% of the Chinese
economy (QQ 37-41, 44, 47). Professor Breslin and Lord
that the state continued to play an extensive role in economic
activity (QQ 182, 199, 718).
12. Professor Robert Ash (School of Oriental
and African Studies) told us in March 2009 that the global economic
crisis had slowed Chinese growth and exports significantly. Hopes
that domestic consumption would become a new driver of growth
were unlikely to be fulfilled because of slower per capita income
growth, rising unemployment and weakened consumer confidence.
The government was attempting to increase non-industrial, infrastructural
investment, e.g. in the health sector and other social insurance,
in the hope of diverting resources from the remarkably high levels
of saving into consumption (Q 180).
13. Other problems in the economy are an unsustainably
high current account surplus; the fixed exchange rate; the need
to move up the technological ladder and diversify in manufacturing;
the need for a larger service sector; and an unsophisticated banking
system struggling to modernise (Bertoldi
14. With the economic take-off, China's outward
investment and foreign exchange reserves have increased exponentially
and changed China's relationships with the rest of the world,
including with the US where China has substantial investment in
Treasury bonds and lost considerable amounts in the 2008-09 economic
crisis. The motivation for the very sizeable Chinese overseas
investments is to secure resources and strategic assets, access
markets, and obtain managerial, organisational and technological
know-how (Ash Q 193). Dr Brown told us that China was also
using its wealth for political purposes: when Costa Rica recognised
the People's Republic of China instead of Taiwan in 2008, China
bought £120 million of its debt (QQ 41-42).
DOMESTIC PRESSURES AND THE DEMOGRAPHIC
15. China is developing rapidly and some of China's
cities are at least as developed as any in the world. There are
however severe domestic social and environmental problems. Aggressive
population planning targets have reduced absolute population but
have produced significant distortions in gender and generation
balances, with men outnumbering women, and difficulties supporting
the elderly, which will affect Chinese views and policies in the
future. The lack of social security in China and the consequent
need for self-reliance has created a conservative society where
savings are valued over western-style consumption (see Brown QQ
46, 61, Hilton Q 131, Lord Mandelson Q 729).
16. China's new wealth is unevenly distributed,
with considerable contrasts between the rapidly developing eastern
seaboard and the poor regions, mainly in the west. This has provided
benefits for China as the flow of population from the underdeveloped
areas enables its products to be cost-competitive, and its industries
to move up the production and technology chains. The transfer
of cheap labour is likely to continue for several decades. Ambassador
Chen told us that,
under modernisation, China would have dual characteristics: it
was a major power but in per capita terms it would remain a developing
17. New inequalities have been created and unemployment
has recently grown. We were told that, with the world economic
recession, 20 million migrant workers had returned home. These
problems led to unrest, which has been contained so far by the
Communist Party. China also remains a male-dominated society (see
Brown QQ 37-41, 45-47, Hilton Q 131, Lillie
Q 9, Ash Q 180, Breslin Q 188).
18. China's industrialisation and continued use
of coal has been accompanied by environmental degradation, air
and water pollution, desertification and drought. Dr Brown
told us that China was the world's biggest user of energy, except
for oil, and was still 70-73% reliant on coal. China was now suffering
from drought, particularly in the north east, and desertification
north of Beijing. Beijing was without sustainable sources of water,
which came largely from neighbouring provinces (QQ 48-50).
Isabel Hilton added that the Himalayan glaciers were melting,
affecting 40% of the world's population, as they were the source
of all the rivers in Asia, including the Chinese Yangtze and Yellow
rivers (Q 137).
Lord Patten of Barnes
pointed out that, with glacier melt, water stress would grow as
an important issue for China and India which they should discuss,
perhaps with US and European encouragement (Q 562).
19. Isabel Hilton commented that the Chinese
model of internal development ("you get rich first and you
clean up later") was not sustainable. Official policy was
sustainable development but a number of problems remained including
the absence of an effective legal state and a free press (Q 137).
EU-China cooperation on climate change is dealt with in Chapter
The EU's institutional arrangements
20. The EU's formal relationship with the Peoples'
Republic of China began in 1975 with the establishment of diplomatic
relations, followed in 1978 by a trade agreement. It is currently
governed by the 1985 Trade and Cooperation Agreement,
under which the EEC and China granted each other most-favoured
nation status. The objectives are chiefly trade-related: promoting
trade, increasing economic cooperation and encouraging investment.
21. In 1994 and 2002 the Agreement was supplemented
by exchanges of letters establishing a broader political dialogue.
The institutional architecture is now extensive, with annual summits
and other high-level meetings held alternately in China and Europe.
Apart from regular political, trade and economic meetings, there
are 56 sectoral dialogues and agreements on a wide range of matters
of common interest. A full list of EU-China arrangements is in
The EU's policy towards China
22. In October 2006 the EU Commission published
a communication "EU-China: Closer Partners, Growing Responsibilities"
in which it set out the EU's aspirations for the relationship.
In 2007, negotiations began on a Partnership and Cooperation Agreement
(PCA) to replace the 1985 Agreement.
23. A High Level Economic and Trade Dialogue
Mechanism (HLM) was launched in April 2008 to enhance cooperation
on trade and economic issues, with the participation of eight
Commissioners and 10 Chinese Ministers. According to the Commission's
website, the main objectives of EU policy towards China are to:
- extend dialogue with China, both bilaterally
and on the world stage, working together on global challenges
such as climate change;
- support China's transition to an open society
based upon the rule of law and respect for human rights;
- encourage the integration of China into the world
economy and trading system, and support economic and social reforms;
- raise the EU's profile in China, to aid mutual
UK policy towards China
24. The UK Government recently set out its policy
on China in a framework document,
the first about a specific country. This recognises that China's
"impact on UK interests is already critical, and it is growing"
in a wide range of areas such as trade and investment, sustainable
development and reducing conflict. The UK's response is based
on three pillars: getting the best for the UK from China's growth;
fostering China's emergence as a responsible global player; and
promoting sustainable development, modernisation and internal
reform in China, including respect for human rights. The Government's
strategy also sets out the tools at the UK's disposal, such as
regular interaction with Chinese counterparts and a growing network
of diplomatic posts. The EU"the most effective multiplier
for the UK's objectives"and cooperation with partners
within the EU both have a prominent place in the strategy. The
United States and key players in the region are also seen as important
partners for engaging China.
25. We took evidence from experts in the UK and
travelled to Brussels and China to hear from both sides. A picture
emerged of different perceptions and attitudes and this is explored
in Chapters 2 and 3. China's international responsibilities for
security and stability are examined in Chapters 4 and 5, including
its attitude to the UN and non-interference, and its role in Asia.
Chapter 6 covers trade and investment and Chapter 7 deals with
EU-China relations in the area of climate change. Chapter 8 looks
at values and human rights. In Chapter 9 we consider European
and Chinese approaches to international development, especially
in Africa. Chapter 10 is on Hong Kong. Our conclusions and recommendations
are listed in Chapter 11.
26. This Report was prepared by Sub-Committee
C (Foreign Affairs, Defence and Development) whose members are
listed in Appendix 1. Those from whom we took evidence are listed
in Appendix 2. We are grateful to them all. We visited Brussels
on 5-6 May 2009 and thank the UK Permanent Representative and
his staff for their assistance. On 20-25 July 2009 we visited
China and we are especially grateful to the UK Ambassador and
the Consuls-General in Guangzhou and Hong Kong and their staffs;
the note of our meetings is in Appendix 4. We are also particularly
grateful to our Specialist Adviser, Dr David Kerr, of Durham
27. We make this report to the House for debate.
2 Comment by the Chairman of the National Peoples'
Congress (Parliament) and member of the Politburo Central Standing
Committee in March 2009. Back
Appendix 4. Back
In 1989 the Chinese state violently suppressed anti-government
protests in and around Tiananmen Square. Back
CEO, China Dialogue. Back
UN University, Bruges, and Renmin University, Beijing. Back
Renmin University, Beijing, Appendix 4. Back
Charles Grant, Centre for European Reform. Back
First Secretary of State, Secretary of State for Business, Innovation
and Skills, Lord President of the Council. Back
Moreno Bertoldi, Head of Unit, Directorate-General for Economic
and Financial Affairs, European Commission, Brussels. Back
Renmin University, Beijing, Appendix 4. Back
Stephen Lillie, former Head of Far Eastern Group, FCO. Back
The fact that it is now admitted that the pace of glacier melt
has been exaggerated by some scientists does not lessen the significance
of glacier melt as an environmental threat to China. Back
Last UK Governor of Hong Kong, 1992-97, EU Commissioner for External
Relations 2000-04, Chancellor of Oxford University Back
Council Regulation (EEC) No 2616/85 of 16 September 1985. Back
See: http://europa.eu/legislation_summaries/external_relations/relations_with_third_countries/asia/r14206_en.htm Back
COM(2006) 631 final, Brussels, 24.10.2006. Back
Source: European Commission: http://ec.europa.eu/external_relations/china/index_en.htm Back
"The UK and China: A framework for engagement". Foreign
and Commonwealth Office, 2009, http://ukinchina.fco.gov.uk/en/working-with-china/uk-and-china. Back