Stars and Dragons: The EU and China - European Union Committee Contents


The following are informal notes of the Meetings held in Beijing, Guangzhou and Hong Kong. Present at all meetings were the following Members of Sub-Committee C:

Lord Anderson of Swansea

Lord Crickhowell

Lord Selkirk of Douglas

Lord Teverson (Chairman)

Meeting with EU Chamber of Commerce President Joerg Wuttke and Vice President, Lyn Kok, Beijing 20 July 2009

The EU Chamber of Commerce provides a service to individual Member States and the EU as a whole. It does not undertake trade promotion and is self financed. They meet with the EU Trade Commissioner. The Chamber produced a Position Paper on 2 September 2009.

(Available at

China's WTO commitments: China joined the WTO in 2001 and said it would open up but in reality its performance was less good. The Chamber was undertaking benchmarking to reveal the discrepancies but they were difficult to prove as there had been some opening up. The problem was transparency and speed of action. The sanction was to take China to the WTO which Reuters had done when China had prevented it from publishing financial information.

Companies found it very difficult to obtain 100% ownership though it was easier if they were starting from zero. The situation for banking was quite good. Insurance had been an afterthought and the situation was not good as the Chinese showed a protective market attitude. It had been pointed out to them that if a disaster occurred, it would fall heavily on China. Lloyds of London had only recently arrived in China. Chinese measures had included being hit by a tax on the export of yellow phosphorus which it could not afford. The success of dispute resolution depended on the city. The quality of judges tended to be very poor and the lawyers were better than the judges. If cases were won the results could not always be enforced and in extreme cases the problem was taken to the bilateral ambassador.

The EU was a larger market than the US with 20% of the market share and 40% of the technical market share. The EU therefore had considerable leverage but competition between Member States and the lack of a single EU voice hampered the EU in using it. The EU, with a market of 500 million people, was very interesting for China which however liked to play one country off against the other and preferred a divided EU on trade matters. They took a pragmatic view and looked at and knew the EU's systems, for example the Parliament. They had a very able Ambassador in Brussels with a direct link to Wen Jiabao

Some EU Members were more pro China than others (Cyprus, Romania, Bulgaria). Spain, Poland and German were more outspoken when China cut corners on the environment and labour laws and produced cheap goods which the EU could not compete with. At the outset of China's WTO membership the EU had been reluctant to take China to task but they had been more active in the last 3 years because the reform measures had slowed. But in the end the Chinese market was too big and too profitable to withdraw and the positives outweighed the negatives.

The Chinese system did not really and substantially support green thinking on climate change and the environment although they talked their credentials up. Targets existed, about 50% of all solar power in the world was produced in China (but 98% exported) and another coal power station was installed every 15 days. Even if the EU delivered the 'clean coal' technology the Chinese would not use it, as the subsidised pricing mechanism for electricity is not in favour for upgrading the power stations. The Chinese were attached to reciprocity which was difficult for the EU to achieve if they had no single voice. Industrial development in northern China has stalled in some industries (chemicals) for lack of water but there were opportunities for EU companies in those provinces in other segments (e.g. automobile). The Chinese had succeeded in lifting their people out of poverty, and they will continue in this policy. EU companies liked to be in the big cities where operating was easier.

Beijing had the ultimate political power. If someone in the provinces strayed they were corrected. The Chinese ensured that corruption was avoided in their financial services but insider trading was rampant. Children of Party members received special treatment. The Chinese economy would overtake the US in 10 years based on purchasing power parity. The Chinese were very self confident and the problem was how to integrate them into the world system since they did not play by the rules if it did not suit them.

Meeting with Vice Minister Liu Jieyi, International Department of the Communist Party of China, Beijing 21 July 2009

Relations between the European countries, the EU and China were some of the most important relations in the world. There are many areas of common interest of potential cooperation in international affairs to advance the course of development and peace in different parts of the world. We share the view that multilateralism is important and that we can cooperate in many of the hot spots of the world. In trade and culture the two sides have much to gain from each other; and throughout history the exchange of ideas between Europe and Asia has been very important for the development of our civilisations The trend of relations was toward more common interests between Europe and China and hence more cooperation on international issues. China viewed its relations with the European countries from a global and strategic point of view: this relationship is not only bilateral but also has significance for global challenges. We are confident that we can with further efforts advance the relationship in future.

The understanding of the role of China has evolved in the global financial crisis. If we take a longer perspective, the relations between Europe and China will be positive and stable. Our decision-making in foreign policy towards Europe has been effective but the EU is a complex mechanism, between its Member States and European institutions and sometimes this leads to difficulties particularly since the Chinese public does not take a very nuanced view of the complexities of Europe. We perceive that EU decision-making is not consistent from time to time, varying on issues that affect China; but we do not find any institutional difficulties when dealing with Europe. Trade is an issue of concern, since China is not treated as a market economy by the European Union. Attitudes to recent events in Xinjiang are another area of concern, since this is a basic law and order issue and we do not think it would be dealt with differently in Europe. But China is not viewed objectively by some people in Europe, and this leads us to believe that China is not judged by the same standards as Europeans apply to themselves. We need to move ahead in trade and business on the basis of a rule-based economic relationship. We have mechanisms in place for the resolution of bilateral problems if these can be separated from political influence.

China has always supported a larger role for Europe in international affairs. This is not short-term expediency but strategic view founded on common interests in terms of peace, stability, security and development. The agenda has expanded to include climate change, regional security and development, non-proliferation, and assisting developing countries. Europe is a very important partner in multilateral cooperation in resolving global problems and in assisting developing countries where Europe sets a good example. On the Eurasian continent most of the trouble spots are geographically between Europe and China, so the world as a whole would benefit from a cooperative approach by Europe and China to resolving these problems. If the Eurasian continent with the joint efforts of Europe and China becomes a more stable, peaceful and prosperous environment then we will see a better world.

We have been following the constitutional process in Europe very closely. China has always supported European integration and wishes to see a European Union that supports more effectively the common interests of the international community in international affairs because we see that with globalisation the different parts of the world are more closely inter-connected and eventually they will all be on the same level. If the 27 countries of the EU can achieve greater unity this will contribute to this process.

China understands fully the role of good governance in development in places like Africa. Our approach differs from that of Europe in that we see governance and development as being complementary and mutually supporting activities: each should expand and encourage the other. China voted against sanctions on Zimbabwe for internal Zimbabwean reasons, the need to reach a consensus agreement inside Zimbabwe, and after consultation with other African countries. The successful settlement of the disputes in Zimbabwe shows that our judgement was correct.

China has participated increasingly in peacekeeping operations and UN standby arrangements. But we do not participate in operations other than UN ones and those only on the basis of a UN mandate, with the consent of the receiving country, and with an established timeline for completion. We will continue to support UN operations on this basis. China fully supports efforts at non-proliferation, and has been fully involved in the two main issues on the Korean peninsula and Iran. We welcome the cooperation with the European 3, Russia and the US to find a solution to the Iranian nuclear question. We regret that matters have developed in the way they have on the Korean peninsula but the six-party talks are still the best platform for achieving a resolution. We are co-ordinating with the other parties to turn the situation around. China is a victim of terrorist activities and supports counter-terrorist activities; but we should have common principles. There should be single standard so that a terrorist is a terrorist throughout the international community. There should be international cooperation on terrorism. But resorting to wars against terrorism is not a good option.

Round Table hosted by Vice President Yuan Jian, China Institute for International Studies; Professor Feng Zhongping, Chinese Institute for Contemporary International Relations; Professor Zhou Hong, Chinese Academy of Social Sciences; Xin Hua, Chinese Institute for Contemporary International Relations, Beijing 21 July 2009

Professor Feng: Chinese analysts over-estimated the nature of European integration: the single currency and eastward expansion led them to believe that a new superpower was emerging. But Europe is a very important soft power as we have seen at the G20 summit: Europe co-ordinates on the agenda of many countries. Before Maastricht China was focused on the capitals of the major states; but after that the pendulum swung the other way and Beijing began to focus on Europeanisation, including in CFSP. However, perception has shifted in this decade: attention has shifted back to the individual European countries, notably on the agenda of hard security or strategic issues. 2008 was a good example of this: the French Presidency saw a lot of successful diplomacy both as Europe and as European states; but when smaller countries have the Presidency the capacity of European diplomacy falls away. So if you ask Europe to do what the US does, you will be disappointed; so you have to deal with Europe as it is.

The Lisbon Treaty will not have a major impact on foreign policy. There will be a high-level profile President, but the Member States will not shift significant external decision-making to the European level. Having a permanent Foreign Policy head will allow for greater consensus but there will be no great breakthrough. Views of this vary in China: some think that EU's role in global governance has been very significant; and they think that an independent Europe is very important. But if you look at changes in US policy now with the arrival of Obama and Clinton, we see that the agenda and outlook have moved closer again. So China's problem may be that relations move closer only when the Transatlantic relationship is difficult. It is also the case that we need to move away from having top-heavy, government-to-government relations; the future of Europe-China relations should be shaped more by media, culture, education and the role of civil society. Europe needs more experts on contemporary China, not on history and culture but what is happening in China today; and we should cooperate on collaborative projects to develop new generations of experts on China and Europe.

It is true that Europe policy towards China about the need for engagement was made a long time ago so perhaps it is natural that some people say it should be changed. In China the term engagement is not understood where we would use the term the term cooperation.

Professor Zhou: Our Institute has done research on Chinese attitudes to Europe: surveys show that a majority of people think that Europe is a Chinese friend. But in Europe we find that public opinion is going the other way: that more and more Europeans think that China poses some kind of threat to Europe. Chinese analysts think that this is due to some distortion in the perception of China. This also relates to the role of the US. Chinese analysts thought that Europe would play an independent role but we find that Europe has some reluctance to separate itself from the US, including in its attitude to China. It is important not to over-state this: Europe is not in a US 'camp' but at the same time Europe shifts between having an independent policy towards the developing world, such as China and India, and keeping a close relationship with the US. Europe does not participate in balance of power politics, but it is concerned with alignments and influence. China for its part attempts to influence Europe at different levels—both European institutions and important Member States, such as France, Germany and the UK.

China has made tremendous efforts to manage its modernisation and this is not fully recognised outside. Europeans think that they have the only successful modernisation but from the Chinese perspective their experience is also very relevant and the successes of China's modernisation strategy have been 'deliberately twisted again and again in Europe'. On this basis China and Europe should cooperate as equal partners, and not be in a situation where one side thinks it has more to teach the other. This is true in the environmental area where the West contributed far more to pollution than the East but now tries to make the East carry the responsibility for future climate change. So we should achieve some synthesis between developed and developing world of best practices and mutual responsibility.

The Godement-Fox report misunderstands the nature of the Europe-China relationship because it is too closely focused on political relations. The China-Europe relationship is not about independence but interdependence—we need to cooperate because under globalisation the future of the two are tied together in a whole number of ways. So we should emphasise the potential for cooperation.

Mr Xin: The Godement-Fox report is not an accurate account of the Europe-China relationship. First, the report does not sufficiently stress both the economic and political complementarity between the two sides: the relationship is far more beneficial than this report states. Second, the report argues that China pays more attention to the US than to Europe; this is not correct. Europe should favour a good relationship between China and the US, just as China should favour good relations between Europe and the US. Neither China nor Europe has anything to gain from trying to use US as an instrument in their relationship. Finally, the report says that Europe should learn from the US in the way that it treats China, but Europe cannot have the same relationship with China as the US does, so this argument makes little sense. The Chinese impression is that this report has not been well received in Brussels. Chinese analysts reject the idea that China favours and exploits European division. On the contrary China supports the integration of Europe because this will lead to a more balanced world order and because it will mean a more productive relationship between China and Europe

Meeting with Michael Pulch, Chargé d'Affaires of the EC Delegation, Simon Sharpe, Human Rights Policy Officer, EC Delegation, and Mattias Lentz, Chargé d'Affaires of the Swedish Presidency, Beijing 21 July 2009

Mr Pulch: The EU Delegation in Beijing is one of the largest and is increasing in size, which reflects the importance of China. It is now bigger than the EU Delegation in Japan with 120 people including local staff. It also includes people from the agencies, e.g. the European Patents Office. It is smaller that some European Embassies, but has of course no visa section. If the Lisbon Treaty goes through, the Delegation will be the Embassy of the EU as well as the Commission and will probably expand further. More reporting will be expected in particular on political matters than can probably be delivered with the current staff resources. Heads of Mission meet once a month; deputies hold a weekly meeting. There are also specialised working groups e.g. on trade and economic matters. The US Embassy is huge with some 1,100 people, illustrating how highly the Americans rate China. There has been a power shift in Eastern Asia from Japan to China in the past year.

Trade is the pillar of the Delegation's work but it also undertakes political work as part of the troika. The trade imbalance is a problem. There has also been a change in the balance of power between the US and China on finance and currency matters. The Chinese were beginning to say, should we still buy your bonds? There were some areas where China has not fulfilled its WTO obligations but there have been successes in the financial sector which made it possible for EU companies to operate, but this was too slow. Companies, such as those in the motor sector (VW), still find it profitable but they are free to invest freely in China. The construction market is the biggest in the world but housing standards are poor on energy efficiency. The EU has offered a dialogue but some change is needed in the Chinese market in order to sell EU technology in this field. European companies had experienced some problems with joint ventures, some of which had imploded (e.g. Danone).

The Delegation would like to work more on standard setting. China wants more technology transfer in the field of environment. The EU has invested a great deal in what will be the market for the future and this is an area where the EU could continue to sell. It should not give away the environmental platform. The EU should say that it understands the need for the transfer, but that top technology is not needed; China could use what it already has and address overcapacity in energy intensive sectors. There are dangers in transferring technology because of the under usage of licensing in the Chinese system which deterred companies from getting involved. Green technology is an area with great potential for China both to deal with its own problems and also the problem of trade deficits. China's per capita energy use was much lower than in the West. If the Copenhagen conference fails China would avoid being landed with the blame. They have no interest in being a deal breaker. Their biggest concern is whether they would be able to continue to export to Europe and the US.

Human rights was an area where more resources were needed, although the Delegation has one officer working full time. The picture did not look good in the short term but it was hoped that it would improve in 3 years. On the one hand, China had executed an individual in whom the Commission had taken an interest while the dialogue was going on. On the other hand, the Commission had opened a law school.

Mr Sharpe: It was not possible to have an equal exchange on human rights but European countries wanted the message put across and this happened in a twice yearly meeting. An independent review was underway, with the involvement of NGOs, on how the dialogue was conducted, but there were problems also for NGOs. Legal reform was the most productive area for development. The Chinese were very sensitive to publicity, including in European and national parliamentary debates. It was impossible to assess whether the EU's efforts were effective or not. If a prisoner's sentence was reduced, one could not say why. The best human rights lawyers had been active since the 1970s and said that they had never won a case. However, the EU was told that it was helpful to raise the subject.

Mr Lentz: climate change and the economic downturn will be priorities for the Swedish presidency, together with the EU-China summit later in 2009. The location of these summits alternates between China and Europe. The Swedish Embassy is growing with all institutions (not just the MFA) expanding their representation. The rotating presidency was difficult for China. Their interests were centred on their own policy priorities—Tibet, Xinjiang. It would be good for the Chinese to have an EU they knew how to talk to. On the Copenhagen talks, the EU should get the US on board.

There had been mixed results in the field of human rights; it was a difficult process, and results could not be measured. However, what was the alternative, especially as European publics and parliaments exerted pressure for action? Companies could play their part with corporate social responsibility.

Points raised in discussion:

Human rights: the EC Delegation's development section was also involved and also raised gender issues.

Climate change: 70 to 80% of all water deposits in China are seriously in danger. In 2007 one of China's lakes north of Beijing collapsed. Several hundreds of thousands of people had no drinking water. In 2007 China accounted for 70% of the world's increase in air pollution. China would represent the G77 in the Copenhagen talks. It was important that China should realise that success at the conference was in its own interests.

Round Table chaired by Ambassador Chen Jian, Dean of the International Relations Faculty, Renmin University, Professor Jin Canrong, Renmin University, Mr Chen Xiaohe, Renmin University and Mr Li Qingsi, Renmin University, Beijing 21 July 2009

Ambassador Chen: China's policy is called an independent policy of peace. This means that China will not seek alliances with major powers and that China sees peace and development as being the main tendencies in international life as Deng Xiaoping stated in 1979. The effect of two processes—globalisation and multipolarisation—proved the correctness of this judgement. China can rise peacefully without having to challenge anyone within the present international system; in these circumstances both Chinese and other peoples can benefit from China's rise. Opening and reform is the right policy and China's rise is a positive force for international peace and security. Under modernisation China will have dual characteristics: in aggregate China is a major power, but in per capita terms China will remain a developing country. So in terms of philosophy China shares with the developing countries a concern for national sovereignty due to the bitter experiences in the past. China will still make a positive contribution to international peace and security whilst defending the principle of non-interference. China will always favour persuasion rather than coercion; but this will complement the actions of the US in a kind of pull and push effect. So China will play an increased role in international security and stability; but it will be a limited role: limited by its history and its philosophy. Historically China has never employed force as a means of projecting its power; globalisation enforces this tendency because it provides means and motivations for delivering security by non-military means.

Professor Jin: Since the end of the Cold war most of China's security concerns come from the Southeast, especially the re-emergence of the Taiwan issue. The security used to come from the Northern border in the Cold war—from the Arctic regions; but now many people are concerned about the rise of religious radicalism.

Ambassador Chen: This points to the supreme concern of the Chinese government with national unity, with the nationalities question and keeping China under one system of government. The main threat may be from across the Taiwan strait where a declaration of independence would force China to take military action even if the US were to intervene. So the main aim of China's military build-up is to deter foreign intervention in case of an attempted separation by Taiwan. Beyond internal unity, China's main interest is in regional stability and peace, and this is the basis of common interest between China and the European countries.

Professor Jin: In the Cold war China mainly defined its security in traditional terms. Under globalisation China is now concerned with non-traditional threats, such as climate change, organised crime, and so on. This is a commonality with Europe, but we also have commonalities with Europeans on traditional security, such as the situations in Afghanistan and Pakistan. The same is true of the nuclear hot-spots in DPRK and Iran. In Afghanistan China has made the largest single investment in a copper mine under NATO protection.

Ambassador Chen: Security activities should be complementary: not all states should do the same thing. So China does not have military forces overseas but carries out activities which support stability and reconciliation in different ways. China favours negotiation in all cases: because China has maintained relations with a country does not mean that it supports its policies, we saw this in the situation in Myanmar in 2007. China strongly supports counter-terrorism which is a universal threat; but unfortunately some people in the West have double standards on terrorism. Terrorist actions in China are not described as such and this threatens the international consensus on terrorism. There are also some double standards on non-proliferation. North Korea's pursuit of nuclear weapons has been treated entirely different from India's; many states can reach the conclusion that if they don't have nuclear weapons they could be the next North Korea but that if they do have nuclear weapons they could be the next India. China is expanding its presence in many parts of Asia and Africa, as an economic actor and as part of UN peace-keeping forces. It is likely that China will send combat forces on peace missions in the future though it will take time to make this step.

China supports UN reform but only in ways that strengthen its role and effectiveness. Expanding the category of permanent members would not achieve this, so China's solution is to create a new category between permanent and non-permanent members of Security Council. This would based on election and consensus. There are also possibilities for new institutions such as the G20 which might emerge as an economic security council. China's army might in future play a more significant role in international operations but it is a conservative and inward-looking institution at present. China will continue to have the dual characteristics of aggregate major power but a per capita developing country. The developments on the Korean peninsula are very damaging for everybody in Northeast Asia including China. We are applying a mixture of sanctions and dialogue but I am not optimistic in the outcome: what North Korea stands to gain from nuclearising is considerable, if we look at the case of India. It is likely that Iran will follow the example of North Korea and this has been motivated in large part by the position of the United States.

China has always supported European integration for strategic reasons—as a potential balance between the US and Russia. The relationship with Russia is strong in political terms but people-to-people relations are at a low-level. China understands why others raise the question of its military intentions and transparency. But China's the military modernisation has only one goal—to sustain national unity. As for transparency, militaries that resist transparency nearly always do so to disguise their weakness, and those who favour transparency do so to reveal their capacity. It is quite possible that China's military will favour transparency but only when it is strong enough. But the West is feeding China's insecurity by promoting Sinophobia which leads some young people to believe that China must be strong to resist.

Meeting hosted by Chris Wood, Deputy Head of Mission, British Embassy with Ambassador Wu Jianmin, former Chinese Ambassador to France and senior adviser to the MFA, Professor Liu Jianfei, Central Party School and Ms Stephanie Kleine-Ahlbrandt, North East Asia Project Director and China Adviser, International Crisis Group, Beijing 21 July

Ambassador Wu: Climate change is the most important issue and divides developing and developed countries. The former were challenging the latter who produce 85% of the world's greenhouse gases. China needed 20-25 million jobs daily and therefore needed development, and faced problems which no politician could afford. Other developing countries were in the same situation. In China clean water was needed by 320 million farmers who had no access to it. The glaciers were melting and have shrunk in the Himalayas causing serious consequences for the great rivers of India and China. Building consumed 35% of Chinese energy. It was investing heavily in renewable energy using the private sector.

Developed countries must find a formula to help developing countries. Advanced technology was needed but developing countries could not afford it. Some people believed that there was a western plot aimed at stopping China's development. The development model of the last 30 years could not last and must change. By 2050 China wanted to, and would, catch up with industrialised countries. China was growing ever more pluralistic. The Chinese people wanted democracy, a voice in economic and cultural matters, but they wanted Chinese civilisation to live in harmony. With 56 ethnic groups, China was a very diverse country with several components. It was necessary to modernise gradually to meet peoples' expectations and overcome problems which were not compatible with harmony in the country.

China was a founding member of the UN and took its responsibility for peace seriously. It was also attached to the principle of non-interference. The 6 party talks on North Korea were not dead. North Korea had done many things which the West and the Chinese did not like. Was it a regime in transition? Japan worried about North Korea and China, but the threat was limited because no major power was behind North Korea or its arsenal; the major powers were united on the subject. The North Koreans were hungry; we should wait and talk. No religion was involved which made things less complicated. North Korea was next door to China and its aid was basically humanitarian. If there was no aid, there would be 2 million refugees. China allowed refugees to go through China to Thailand and on to South Korea. It was necessary to take the overall situation into account as it was not desirable for North Korea to sink. Iran felt threatened because of the "axis of evil" label (cf Iraq). Incentives should be developed for Iran.

The EU had been a remarkable achievement which had made war impossible between France and Germany, though Europe was in transition. China would like to do the same in Asia. China had reformed because of the need to adapt to globalisation, but the change was difficult. The Chinese liked reform; the Europeans were afraid of it. The Europeans had developed a complex because the centre of gravity had moved from the Atlantic to the Pacific. The US had a place in the Pacific which Europe did not. For 3 to 4 centuries Europe had been the centre of the world and the Europeans did not feel good about the change. Few countries could compete with the UK in global vision (and they had the best diplomats). The common ground between China and Europe was growing and this was more important than the differences. The Chinese liked European culture. The UK was the second destination for travel after the US. The EU worked together economically, but politically as divided. China would deal with the EU politically if it were united.

China had acceded to the WTO and its rules. It should be treated on an equal footing. Market economy status had been granted to Russia, but not China. The Chinese economy was a much more market economy that Russia's. As for the arms embargo, why was the EU sticking to an obsolete policy? This was being unnecessarily antagonistic. The young people in China were not happy about it, and they were important.

Mr Liu: China's aim is peace in the world and a successful world economy. It was sometimes critical of EU policy. The EU and China understood each other although they had different histories and interests. Both recognised that, with globalisation, they faced common threats: climate change, WMD, and they had to cooperate to deal with it. In China, climate change was taught in party schools. President Obama was doing very well in cooperating with China, although there were conflicts between the US and China.

Ambassador Wu: China should never be pushed to give up its principles. It had a tradition of pragmatism which had led millions out of poverty. It was a member of the P5 group and also other groups and now had an identity crisis. The EU should work with China. In Africa there was a common interest in stability, in keeping its people safe; China was also interested in its reputation. China had an interest in non-proliferation but was less concerned in ensuring stable and accountable governments. China saw its interest in ensuring better relations between the DRC and Rwanda and was conducting shuttle diplomacy. Chinese leaders were visiting India and Pakistan and took an active role in showing Pakistan that it was in its interest to defuse tensions with India. It was cooperating in Afghanistan/Pakistan where it was coming to terms with US intentions to ensure its own safety from terrorism. Investment in military infrastructure was in the in the interests of the public good. China tried to convince African governments of the necessity of engaging in peace keeping.

China's number one concern was the growth and development of China. In its foreign policy it looked at issues on a case by case basis. The UN would like more troops from China, especially resource intensive troops and ones who spoke English. Many peacekeeping operations could not work if it were not for China's contribution, for example with medical support. China had had offered 1,000 combat troops for the Lebanon but the UN had refused because of the French offer. The Chinese contributed police in Haiti and East Timor.

Ms Kleine-Ahlbrandt: The West overwhelmingly sends troops to peace keeping operations when it is in their own interest. The South Koreans had given the North $40 billion. None of the refugees from North Korea had been given status under the refugee Convention. China would treat the EU differently if the Lisbon Treaty were implemented and the Presidency ceased to rotate. It would be good for China to have one place to go to.

Meeting with Sean Winnett, Human Rights Policy Officer, British Embassy, and Simon Sharpe, Human Rights Policy Officer, EC Delegation, Beijing 22 July 2009

Mr Winnett: China was doing well on social and economic rights, for example in lifting people out of poverty and in access to housing and water. Progress was much slower on civil and political rights. It had signed but failed to ratify the International Covenant on Civil and Political Rights (ICCPR) whereas it had both signed and ratified the International Covenant on Economic, Social and Cultural Rights (ICESCR). Until it ratifies ICCPR, China is not open to formal UN examination of its record on the provisions of the Convention (freedom of expression etc). There were some significant obstacles to ratification. For example, 68 crimes were subject to the death penalty.

The UK aimed to raise human rights as part of high-level ministerial contact with Chinese officials including at Prime Ministerial level. The UK-China human rights dialogue takes place twice a year, alternately in Beijing or London. In the last 2 years only one dialogue had taken place The EU consulted with Member States to agree approaches to their dialogue, which took place every six months.

Human rights dialogues with China had developed over the past decade partly through a desire to move from simply criticising China's human rights record in the UN towards more meaningful engagement. The UK used its bilateral Human Rights Dialogue to raise individual cases of concern and China also uses the opportunity to raise cases, which the UK welcomes.

Project work was a major part of the UK's strategy for engagement on human rights. There were about 12 projects in place or planned between 2008 and 2011 on criminal justice reform, the death penalty, freedom of expression, civil society. For example, a survey had been undertaken on attitudes to the death penalty. The UK was able to work with Chinese partners on these projects. There was some evidence that project work brought about more concrete progress than high-level dialogues.

Deciding whether and how to raise cases of concern was a difficult judgement. The UK and other EU member states made efforts to build contacts at working level with legal professionals to better understand the situation.

Mr Sharpe: The EU holds high-level dialogues and undertakes projects. China was becoming more confident about the dialogue, for example in putting forward its line on economic, social and cultural rights. It also promotes this to those who sympathised with the line. There is now a longer list of what both sides wished to discuss, but time was limited. The Chinese were tending to use the dialogue to avoid human rights being raised in top level discussions with President Hu and for that reason were willing to hold the talks twice a year. However, several EU leaders had raised cases at the highest level (e.g. the British and Swedish). The EU-China dialogue with China on human rights runs parallel with the US-China dialogue; but China prefers to 'corral' these dialogues. The project work was the best thing the EU did and had more effect than anything else. The EU held seminars on the death penalty and had seen a change of attitude over the years. Whereas 5 years previously all those at on a seminar had said that the death penalty was a good thing, now they were saying that the long-term aim was to abolish it. There was now a pilot project to look at Chinese law and work with the Peoples' Prosecutors on implementation. The NGO Great Britain-China Centre did a very good job and had many contacts in China. It received a Government grant but needed more.

The human rights dialogue was very difficult, but it was important to deliver the messages even if there was no apparent result. Talks took place in Beijing or in the capital of the presidency. The presidency, future presidency, Commission and Council Secretariat were involved which represented a coordination challenge. The Delegation were consulting all on how to improve this. Not all Member States conducted a separate dialogue, only 4 or 5. Member States have their own budget and the EU also has a budget. The projects conducted span public welfare and explicit rights projects—there is no clear separation of rights from other activities. The European Law School gives 15 million euros. The UK's dialogue was well established.

It was difficult to determine the extent of any human rights problem in China. China is shifting its attitude towards the law: capital punishment was previously in the category of Chinese tradition; but it is now viewed as an undesirable but nevertheless necessary aspect of legal control. The Delegation had to rely on NGOs for the numbers of those executed. The numbers were unknown. Amnesty International had verified 1,000 to 2,000 cases which had been publicly stated. In the past the number had been estimated at 5,000. More executions were carried out in China than in the rest of the world put together. The Delegation met with anyone who had had experience of prisoners, for example judges who defended them or government officials at the central, provincial and local levels.

Torture was not an instrument of policy. It happened because of incompetence and was linked to overall development and tended to be in the pre-trial phase when the authorities were looking for a confession. Torture in prison was more systematic for Falun Gong. The issue was raised regularly by the EU. There were 68 crimes in the criminal code which brought the death penalty, including smuggling cigarettes and falsifying tax returns, but in the main it was used for violent crimes (murder, rape.)

Round Table on Human Rights in China, with Ms Lei Vuori, EC Delegation lead on the EU-China Law School, Mr Wyndham James, Save the Children (STC), Mr Tom Mountford, English barrister, LGBT (lesbian, gay, bisexual and transsexual) rights in Beijing and Mr Tim Wilkinson, Project Manager, EU governance programme, Beijing 22 July

Mr James: Save the Children's work focuses on the rights of children and its "Child Rights" programme was targeted at education (access, quality, teacher training, disabled children, demonstrating what could be done,) and health and sanitation (HIV/AIDS). The organisation's regional programme aimed at helping children understand their rights (trafficking etc). It worked with the relevant Ministry on orphans and foster care. In the field of disability it worked with Chinese NGOs, most of which were connected to the party organisation. STC trained adults to work with children to help them with the transfer from incarceration back into the community/bail. Chinese criminal law did not discriminate between adults and youth. For street children STC worked to give them social protection and life skills training in activity centres. Local authority support was needed for this work. STC preferred to focus on the poorer western provinces where 700 million people lived. The work was difficult and it was often necessary to work in local languages, and not just Chinese. The organisation also aimed to influence key academics and had organised study tours to the UK and within China.

Ms Vuori: The School had a legal personality of its own. It was expected to become financially self-sustainable in 2009 0r 2010. It was running 2 major good governance projects and worked with UNDP. The civil society programmes have had a bigger effect than had previously been thought. A previous programme on village elections in collaboration with the Chinese authorities (Ministry of Civic Affairs) had worked well. In Xinjiang the School had run a minority education programme for children and there had been interest in other provinces to replicate the experience. The School trained judges on international law, including human rights and the Ministry of Justice wanted this to continue. It was hoped that a new generation of layers would make a difference. What the School did was a drop in the ocean but it had a potentially very big effect on the new generation of lawyers. By teaching comparative law the School was creating a questioning mind and the perception was changing from "rule by law" to the "rule of law". Lawyers were beginning to realise that prisoners too had rights.

Mr Wilkinson: The key themes of the EU's work were to help drafting laws, access to justice and work on civil society. They were also involved in migrant workers' rights. The work programme was implemented by 3 organisations with nearly 80 activities. The EU's programmes had an "additionality" impact in China and allowed the Chinese to do things they would not otherwise have done. Developments on human rights were coming from within China, with the increase in incomes. The middle classes were saying they wanted more free speech.

Mr Mountford: The LGTB was funded by the Bar as part of a programme to promote law abroad. The LGTB spent £600,000 supporting 81 organisations in China. The gay population of China was estimated at 26-40 million people who were geographically disparate, an "invisible population". No gays were shown on television so it was difficult for them to become visible. Gay activity had been de-criminalised in 1997 and in 2001 removed from the list of mental disorders. Since then there had not been much official activity, but there was no official protection for gay people: there was no male rape law, local police made arrests, licences were not given for gay bars etc. The age of consent in China was fourteen.

Meeting with Experts on China-Africa Issues: Professor Zeng Qiang, Researcher Professor, Institute of Asian and African Studies, China Institute for Contemporary International Relations (CICIR), Dr Phil Karp, Head of the World Bank Institute, Mr Mark George, Policy Analyst—China and International Development, DfID and Mr Wu Zhong, Managing Director, International Poverty Reduction Centre in China, Beijing 22 July 2009

Professor Zeng: China's approach to Africa has advanced the position of women through its emphasis on education and equality.

Dr Karp: The World Bank (WB) specialises in gender and Africa. WB and DFID's participatory approach advances women's role in development. The dichotomy between West and China in development has been over-emphasised. Beijing policy 'mirrors' that of the Washington Consensus: it is market oriented and China advocates 'neo-liberal' policies of opening on the basis that markets work—create jobs and increase fiscal revenues.

Professor Zeng: There is no such thing as a China development 'model' but there are lessons from China's experience: it is important to set strategic objectives; it is important to have a central source of authority; and important to be pragmatic. The other idea that is pursued now is harmonious society—social dislocation is bad for development so there must be distributive policies to ensure stability.

Mr George: The Chinese and Western approaches are mutual: the West 'delivers' development; China 'shares' development. China tends to mix aid and economic partnership: these are not de-linked as in European strategies. The European and Chinese approaches should be complementary: with the Chinese emphasis on construction and the European emphasis on governance. A lot depends on African governments: what they want shapes development more than the actions of Europeans or Chinese. Europe should welcome other development actors; but it should be African priorities that determine the context.

Mr Wu: China knows that governance is essential, and makes this evident through its lending and training programmes. Even so this does not mean that China is trying to export a model.

Mr George: China does need to be more transparent about its activities.

Dr Karp: China is competing to bring in investments: it is very competitive in hard and soft infrastructure projects. African governments look upon this favourably, as it is obviously in their interests to have external investors competing for projects.

Professor Zeng: Projects will employ either African or Chinese labour depending on what is most effective: but this is complementary. There are perhaps 600-800,000 Chinese in Africa on these projects now.

Mr George: One key difference between European and Chinese actors is their risk perception: Chinese corporations have lower risk thresholds from European equivalents.

Dr Karp: Africans want to deal with China on their own terms; and others favour closer regional cooperation. China is overwhelmingly bilateral in its approach, but Europe is multilateral and some Africans favour this.

Mr George: African governments like doing business with China, but NGOs/ civil society groups are more sceptical due to the lack of accountability and transparency. We need to emphasise the importance of 'projects on the ground'. China is good at scaling-up if projects work. China's position is 'pro-active, non-interference': actions short of interference in sovereign affairs.

Meeting on EU-China Climate Change Cooperation with Mr Jiang Kejun, National Development and Reform Commission Energy Research Institute (NDRC ERI), Mr Yang, World Wildlife Fund (WWF), Mr Yu, State Electricity Regulatory Commission (SERC), Beijing 22 July 2009

Mr Jiang: China should move to Carbon Capture and Storage (CCS) by 2020 through some projects; but there is strong resistance from special interests in the industrial hierarchy who fear that this will choke growth. China should set high targets for carbon reduction—it should be ambitious—but this is a chain process, targets alone are not the strategy. There are many possibilities for scientific development, and international collaboration is very important.

Mr Yang: Who is the champion of the environment in China? Who will champion CCS? China consumes 70% coal in its energy supply; and must reduce this to 40-45%; but it is not possible to persuade NRDC to move on this because its primary responsibility is to deliver growth. It will fund some projects but it is not committed to clean growth.

Mr Yu: There are two projects currently using limited carbon power production. These have no economic advantage over conventional plants; but they operate at low productivity and neither is based on CCS. Implementing carbon capture will put up production prices by 80% and will be politically sensitive. China continues to install new capacity and is trying to be energy aware and efficient. This may be a better way of dealing with sustainable development than using CCS which is maybe unrealistic. China cannot introduce subsidies for clean energy; this will distort market efficiency.

Mr Yang: CCS is essential to reduce carbon emissions; but it is not the best option at present. China is achieving great reductions in energy intensity—the target is to improve energy efficiency by 20%. Construction remains a big problem; buildings less than 10 years old are being demolished, in way that makes no environmental sense but does provide economic gains. The EU and China should collaborate on projects like low carbon zones, though central and local governments will have different interests here.

Mr Yu: China is more like the US in terms of its energy structure; but the EU model can help China because it delivers development at lower energy levels.

Mr Yang: Climate change is already having an impact on China in the relationship between energy consumption and climate change and the impact of this on water and food.

Meeting with Vice Minister Zhang Zhijun, Ministry of Foreign Affairs, 22 July 2009

We recognise that there are major issues to do with European integration and constitutionalism; but even more than this we think the challenges of globalisation are more pressing for Europe. Reform in European markets has been slow in the last decade and national governments and political parties recognise that the European social model needs reform. There has been the rise of some uncertainty and insecurity about where Europe is headed and we see that the government parties are being punished by the people. So we think that Europe is still in the process of reform and that it will take several decades for Europe to adapt to the challenges of globalisation.

Europe is one of the major power-centres of the world, and it will get stronger. With the achievement of the Union of 27 countries with half a billion people and the largest economy in the world, Europe's integration is in the interest of world stability and development. That a Europe that is integrated and powerful is in China's interests was stated by Deng Xiaoping almost 30 years ago. Europe is open to us in terms of trade and technology relations and we should strengthen our relations with Europe. China neither plays national governments of Europe against each other or against the European Union: this is not our strategy, we want to see a more united Europe and a more constructive role played by Europe, both the EU and the national governments.

Strategically speaking China and Europe do not have any major conflict of interest. A strong Europe and a strong China are in our mutual interests and in the interest of the world: it will contribute to a more balanced distribution of interests and power in the world. China's idea of multipolarity is not about balancing poles against one another but a more equitable order among different poles; we do not want to see poles locked in hostility with one another. The European and Chinese economies are highly complementary to each other—you are the most developed economic area in the world and we are the largest developing country in the world which is rapidly expanding through the process of industrialisation and modernisation. So we see a driving force to develop closer cooperation between us. We have deep cultural links and there is no shortage of popular support for developing Europe-China relations on both sides. We also see a rise of global challenges—climate change, food security, energy security, pandemic diseases—which cannot be addressed by any single power but need to be co-ordinated by all countries, especially the major powers of the world.

There are of course differences between China and Europe because of different histories, cultures, levels of economic and social development, and political

systems. This is natural, but we should have the conviction of not allowing these differences to disturb the development of this very mutually beneficial relationship. So we should have full confidence in the broad prospects of the Europe-China relationship and we should not misread, misjudge or mis-decide on this important conclusion. So I do not agree with the conclusions of the Godement-Fox paper. We should seek to expand the areas of cooperation in the relationship since this is of benefit to more people, and then they will be convinced of its value. We should handle differences in an appropriate way. We can put these in different categories. There are differences that will remain—you cannot change your history, culture, or political system. There are issues that touch on the core national interests of China—national unity, sovereignty, territorial integrity such as questions and issues related to Taiwan, Tibet and Xinjiang—if these are harmed by speeches and acts on the European side then China has to respond. So these issues have to be approached with great caution. The third area is in economic relations; where two so different economic entities come into interaction there are inevitably fractions but these can be handled through mutual consultation and agreement, rather than taking protectionist measures and sanctions.

Of course, all things are changing, but China's political culture is deeply rooted in its history, and the people's mentality is quite different. So Western ideas of liberalism which equate with personal initiative are viewed in China as 'do whatever you wish'; whereas Chinese value collectivism which in the West is similar to nationalism or statism. One major difference is about the defence of the principle of non-interference because China was subjected to foreign invasion, which we suffered for more than 100 years. So we do not want our internal affairs to be interfered with, and we do not want to interfere in the affairs of others, even though you and some other countries try and push us in this direction, with regard to Sudan, or Myanmar, or DPRK. But we do not think we should impose our views on others. China has more awareness of the position of smaller, weaker countries: large powers should respect these countries' feelings. So these powers can get involved in certain cases but this must only be under the rules of the UN. With UN mandate we can do certain things, but we need to consider—who is going to control the major powers if they misbehave? So we need to further strengthen the authority of the UN; it will need further reform but only to strengthen its authority. The big powers should set an example that makes the smaller countries feel safer.

There are three main areas to consider in EU-China relations. First, confidence in its worth—don't lose sight of the value of the relationship in the long-term. We have achieved a lot and we should not abandon this course. Second, expand co-operation and try and bring about durable results. Third, handle the differences with caution and in an appropriate way. In economic terms we should not resort to protectionism in response to the ongoing economic and financial crisis; and UK as a trading nation should play a strong role in this way. We should get rid of the two old issues: the arms embargo and the market economy status

Meeting with Chinese and British journalists; Ms Jane McCartney, The Times, Mr Wang Chong, Director, China Weekly and Mr Chen Lingshan, Director, International Department of Beijing News, Beijing 22 July 2009

Ms McCartney: there has been a change for the better for journalists in moving around China. In the 1980s travel restrictions meant that one had to apply 10 days in advance to travel. In the 1990s this eased a little. In 2005 a great deal of information was available, with internet discussion and more newspapers. Since the Olympics travel was permitted everywhere except Tibet. The "great firewall" of Chine was overdone. A huge range of topics were discussed, though twitter and facebook had been closed. Xinjiang was not discussed much. Most people supported the government on Taiwan as part of China. If a foreign journalist reported something which had been clamped down on, they faced problems afterwards. The milk scandal had been uncovered by journalists and had been on line. There was no censorship and articles could be written about anything if they were accurate. There was however a limit to how the information was obtained. Journalists did not buy information or they would get expelled, though Japanese reporters would pay. It was not possible to hire journalists in China. It was not true that western journalists put the emphasis on minority issues; they looked at the underlying issues. One of the most interesting stories in 2008 had been the Tibet-China relationship and the rise of nationalism. Problems had been created because the press had not been allowed in. China felt aggrieved that shareholders had turned the Chinese offer down in the Rio Tinto case, and portrayed it as a rejection just because the offer came from China.

Mr Lim: The usual pattern of the 7 o'clock news was an account of what the Politburo had done, followed by a utopian picture of China and an account of how bad things were abroad. Xinhua did not block news which was sent direct to clients (by feeder). Journalists could publish stories if they were true. Reuters had over 30 journalists in Shanghai.

Mr Chen: Western journalists did tend to emphasise the minorities question. Different EU Member States had different opinions. It would be good if the EU could become a political force. The EU had its own distinctive features which were different from those of the US.

Mr Wang: The Chinese wanted people to be united on their assessment on Tibet. The phrase "multi-polar" had been abandoned for "harmonious world" in Chinese terminology. As far as the arms embargo was concerned, the EU was not as powerful as it thought and had not lifted the embargo in 2005. It was a worrying sign that there was no hostility in Europe to China because of the lack of pressure from outside. The young generation in China was politically disengaged—but they loved American culture. It was not good for China's development that the Chinese were not allowed to know about the opinion of China by others and it was not easy to break through this wall. Media emphasis should change to focus on the national government. In the Foreign Ministry the focus was on the US and Japan, not on the EU. In foreign affairs in general it was not always possible to ascertain who was directing policy. In the case of the first North Korean nuclear test, it was said that the exact wording of the communiqué had been drafted by the President, but it could also have been the Asia bureau or the Section Chief.

Other comments (David Ward, British Embassy): BBC World is not available generally. Every province had some 12 channels, driven by commercial considerations. CCTV was the official channel which ran some advertisements. China had not been tested on any questions of leadership in the world. It did as little as possible to join the WTO. China would probably like to deal mainly with the US. The Chinese people were not allowed to know about the opinion of others. The public perception of China was very different in China and internationally.

Meeting with Development and Research Centre of Guangdong Government, Guangzhou, 23 July 2009

Guangdong was not a big province (178,000 sq km, 4.9% of the whole of China) but was the most populous with 7.4% of the Chinese population. Guangdong had experienced an economic miracle and was very proud of its unique development path (in China and in the world). The reasons for this were:

  • the favourable policies of central government. Guangdong had been a pilot province to practise open and reform policies. There had been an island effect with international and internal resources directed there;
  • a unique geographical location close to Hong Kong and Macao, both of which had transferred human and financial resources to Guangdong; Guangdong also attracted talent from other provinces.
  • practising an export economy to drive economic growth.

Banking deposits of residents had increased 1,558 times in 30 years.

International, bilateral and multilateral relations were improving. The EU was one of the successful examples of interregional regions with 33% of the world's economic performance. It was one of the show cases of a win-win strategy. However there were many challenges including the gap between developed and less developed countries in the EU. It was trying to promote close economic and trade relations but needed an integrated currency. The EU was one of the important trading partners for Guangdong, 25% of whose import/exports came from the EU (including trans trade from Hong Kong). Guangdong would like to learn lessons from the EU.

However, only less than 5% of investment came from the EU. The reasons were:

  • not all the 27 Member States were developed to the stage where they could invest;
  • the EU needed to understand Guangdong better;
  • Guangdong needed to be better at advertising itself;

the EU should establish better links. Guangdong needed technology and technical transfers. The House of Lords' visit was timely and relevant and the Lords should lobby the EU to relax the technical transfer agreements. The French had supplied the technology for nuclear power plants; Germany had supplied the technology for the metro which had multiple good lines. This showed that the deregulation of technology transfer was a win-win situation. It was also true that Guangdong had done well on technology transfer, partly because of Hong Kong.

Guangdong had a modern service industry and an advanced manufacturing industry and welcomed investment. The service industry included finance, logistics, exhibitions, technical services, trade and services. Guangdong was the headquarters of cultural creative industries and tourism. Advanced manufacturing include the automobile, petrochemical, steel, ship building, power transmission equipment and transformers, ICT Baltac, new materials and new energy sources, environmental protection and marine technology. In the automotive industry China worked closely with Japan and South Korea and had 5 Joint ventures with giants (including Honda, Toyota, Hyundai and Nissan).

The relationship with Hong Kong was good and the two could not live without each other. The latter had a dilemma as on one hand, Hong Kong needed further development and on the other hand, Hong Kong had limited space for its development, thus it needed a hinterland for economic develop; this could be Guangdong. The two were not competitors but could cooperate economically. Hong Kong had the quality law firms and legal industry. Both had busy airports and multiple natural ports. Guangdong needed Hong Kong to develop its world ranking port. Hong Kong had invested in 60,000 Guangdong companies and the development of these businesses needs more business services. Macao and Guangdong were crucial to Hong Kong's development.

Five years ago Guangdong had formulated a five-year energy saving and emission reduction plan. For example, the city of Guangzhou will spend 40 billion renminbi in the next 400 days to clean water. Inward investors were needed to provide high technology. Hong Kong maintained that Guangdong was polluting them.

Round Table with NGOs on Climate Change: Mr Zong Wei Dong, China Director Business for Social Responsibility (BSR), Mr Daniel Gross, Project Manager, BSR, Ms He Zheng, BSR, Mr Alfred Deng, Research Programme Manager, The Climate Group (TCG), Dr Liao Cui Ping, Associate Professor, Research Director, Guangzhou Institute of Energy Conversion (GIEC), Dr Luo Zhi Gang, GIEC, Professor Wang Xiao Hui, Ling Nan College, Sun Yat-sen University (SYSU), Mr Wan Yang, Programme Manager, Institute for Sustainable Community (ISC) and Ms Shenyu Belsky, Programme Director, Rockefeller Brothers Fund (RBF), Guangzhou, 23 July 2009

The British Consulate General (CG) has been sponsoring projects in Guangdong aimed at exploring possibilities for cooperation in managing climate change. It is appropriate that the Guangzhou CG leads on this given Guangdong's role in China's export and foreign direct investment strategy. The inquiry has an interest in kinds of practical cooperation between UK, Europe and China; and has a particular interest in cooperation on climate change.

Ms Belsky: Southern China has played a pivotal role in China's economic development and hence climate change. We focus on two content areas: environment and health; energy and climate change. We work indirectly with the CG and support the same kinds of projects; such as carbon accounting and recording; community-based energy efficiency projects; and studies of the industrial strategies and low-carbon road-maps. On the energy and climate change content we look at US and China relations, looking at two levels: the central level on climate dialogue; and at the provincial level in Guangdong encouraging state-to-state cooperative projects between Guangdong and California.

Prof. Wang: SYSU has been conducting training programmes through the Business School aimed at raising awareness on environmental areas, through a programme: Environment, Health and Safety Accountability. This has been part funded by CG, and seeks to keep officials up to date on important areas like climate change and low carbon up-grade issues. Numbers are up to 200 and come from three main government agencies: environmental protection; trade and economic commission; and development and reform commission. From autumn 2009 a new building will be opened which will permit a wider programme of research and training on questions of environmental awareness and low-carbon economy.

Dr Luo: Guangzhou Institute of Energy Conversion is an energy research institute that provides energy policy advice to the central and provincial government. Dr Luo is from the department of energy strategy development which is responsible for policy development in areas such as climate change and carbon capture, helping decision-makers to improve the quality of their policy and developing cooperation with international partners. The Institute hoped to coordinate between Guangdong and international investors in the development of low carbon technology and infrastructure. After approval by London in March 2009, they are now working on an SPF project which aims to develop a Low Carbon Economy Roadmap for Guangdong. This project is one of two ongoing SPF projects managed by CG Guangzhou.

Mr Zhou: BSR is a US based NGO, has worked jointly with the UK NGO The Climate Group to implement a carbon management capacity building programme. This programme will operate for Chinese businesses and for international businesses investing in GD, including the largest transnational corporations.

Mr Wan: ISC is a US NGO promoting sustainable development and energy efficiency operating in industries and communities. The main focus is on community projects and in civil society development in areas of environmental protection. They currently operate four programmes out of Guangdong: environmental health and safety academies, working with business communities to bring in good practice; community awareness, seeking to mobilise common Chinese people on the importance of climate change and energy consumption; third element is working with educational establishments from schools to universities, to build teaching and research on environmental issues; and the fourth element is directed at local officials increasing awareness on the issues and laws in relation to environmental protection and climate change.

Mr Deng: The Climate Group is a UK based NGO that promotes the concept of low carbon economy and advocates for climate change actions globally. The aim is to promote climate change awareness by creating a coalition of business and government internationally. Active in China since 2007 with offices in Beijing and Hong Kong, they have established partnerships with government departments and businesses; and are also active in Chinese cities developing awareness on climate change and energy use. Guangdong has the potential to be a case for low carbon high development model. They have had good communication with Guangdong top leaders on core projects, including the low carbon model. TCG cooperates with Chinese specialists in Chinese Academy of Sciences and the provincial governments in many parts of China to create a network on projects aimed at dealing with climate change.

Mr Zhou: In China most of the climate change agenda remains in the sphere of policy debate, particularly the need to influence Beijing. If Beijing can be convinced of the need for a course of action then it will happen, so there is clear linkage between macro-level policy and micro-level response and people wait for Beijing to show the lead. When implementation arrives it is most likely that China will adopt an incentive-based set of policies: encouraging business to control energy use and adopt new cleaner technologies by schemes of fiscal and financial incentives. This requires consideration of the other part of the equation—investment in research to develop the new technologies that businesses require.

Mr Deng: There is clear evidence that businesses are seeking to respond to the environment agenda and they look to the government both to set the policy context and provide the financial support for development of the new technologies. There is evident ambition of Chinese enterprises to try and win market share in the growth area of clean technologies. We do need to develop environment awareness among China's businesses in the area of corporate social responsibilities; but businesses do want to make their expansion sustainable, so we need to develop lines of policy and communication that will allow then to do so. We need to understand better how businesses will operate in future under the transition to a low-carbon economy, as they face both opportunities and risks.

Dr Luo: We must approach the question of the low carbon economy from the perspective of business competitiveness. Businesses have to understand that clean growth is the route to greater efficiency in relation to their market competitors. Chinese businesses unquestionably consumes far more energy in relation to their international competitors, and therefore they will be forced to make changes in energy use as competitive pressures rise.

Mr Zhou: We are working with a lot of factories and businesses in the Pearl River delta and across Guangdong. We go to these factories and talk to owners and managers to help them to reduce their emissions and improve their energy efficiency. Businesses will have different reactions; and we need to understand their motivations. On the one hand they are not prepared to discuss restriction of their business development; on the other they are concerned with long-term sustainability. Of course, it is also important to raise awareness of environmental responsibility among consumers.

Consulate General: When the Consulate General began working on public communication it realised quickly it needed to build a constituency of people and organisations. So we have been trying to create a South China climate change network, which is part of the mandate of GIEC, to share knowledge and best practice on achieving low carbon economies.

Prof. Wang: Public awareness on the low carbon issue is relatively low compared to government and academics. What can the EU do about this? At present funding and activities are very limited; and EU could do more; for example, providing funding to universities, with open programmes for educational awareness. The EU should do more in comparison with the US, which is more active.

Meeting with Mr Yang Dong, Chinese People's Political Consultative Conference, Guangzhou 24 July 2009

The CPPCC would celebrate 60 years of existence in September 2009. In 1949 The first plenary of the CPPCC had decided the capital, agreed the change to the international calendar system, and selected the national anthem and flag. After the National Peoples' Congress was founded in 1955 as the organ of state power, the CPPCC has remained and continued to play a significant role. It was the organisation of the Chinese people and promoted democracy in political life through multi-party cooperation. It worked together with the Committee of the Communist Party, the National Peoples' Congress and the government, all of whom complemented each other under the Communist Party. The CPPCC was the only organ for democratic consultation and had a wide representation with 34 circles, e.g. for democratic political parties, people's communities, science, economy, culture, art, education, all the provinces and representatives from Hong Kong and Macao. The membership was different in different provinces according to the work which needed to be done. There was one Chairman, with 9 Vice-Chairmen, four from the Communist Party and the rest were leaders of democratic parties. The name of the leader of the provincial CPPCC was discussed by the political parties. In Guangdong there were 980 members including 200 standing committee members. The leaders of the CPPCC were elected anonymously in a plenary meeting.

Committee members could say what they wanted and make suggestions. One plenary meeting and four standing committee meetings were held each year and each plenary made some 700 proposals to the relevant government department for action. Committee members could make proposals on the internet and there were 112 departments for handling the internet proposals this year. One third had received a reply so far. Committee members also performed the role of checking the implementation of proposals. Committee members represented all walks of life and should reflect public opinion, for example on noise, pollution and other matters important to local people. The committee members put these concerns forward to the CPPCC which would take the matter forward. It was also possible for people to report directly to a government department. An example had been when a Guangzhou resident had reported to the Environmental Protection Department that he could not sleep. The matter was not dealt with so he reported it to the CPPCC. It was investigated and the officials concerned were criticised.

Each committee of the CPPCC carries out a series of research projects and investigations each year. For example, one of the CPPCC's committees covered population and the environment and carried out investigations into environmental protection. Attention was particularly paid to water resources and pollution. The CPPCC researched into and made recommendations to the provincial government on the subject. The Department for Environmental Protection also attended meetings to advise the CPPCC.

A new committee for foreign affairs had been created 3 years previously. It received high-level delegations from overseas, including from parliaments. It also issued invitations to officials of Consulates General. The CPPCC visited foreign countries to get a better understanding of their political institutions and social systems. There had been no exchanges on economic collaboration yet. The CPPCC had few contacts with the EU Chamber of Commerce. Contact was mainly between the provincial government and the Chamber of Commerce.

Visit to Strix Factory, Guangzhou, 24 July 2009

The British (Manx) manufacturer of controls for electrical heating appliances, Strix, set up its first overseas office in Hong Kong in 1989 and opened its factory in Guangzhou in 1997. China is the biggest consumer of electric kettles. Strix has 62% of world-wide sales of kettle control units, but in China, copies of Strix products account for around 20% of market share. In China there were 10 serious copies of the product. Taking people to court could fail and opponents can often prolong legal battles considerably, but people knew that Strix would always take action if its patent was infringed. It cost Strix six times what it cost the opponent to take action. Strix have to use both Chinese and international lawyers, which was more expensive. As kettles fitted with copies were often unsafe, a faster route to stopping the copying was to explain the safety issue to local authorities (in China and other countries where the products end up) and then leave them to decide how to proceed. The kettles would sometimes be taken off the market putting pressure on the Chinese infringers to close down. One successful way to harm the infringers was to seize the copied products when they arrived in a container in Europe as they had already been paid for and it damaged the reputation of suppliers. The Germans were good at stopping containers.

The Commission had been very active recently in Brussels and Beijing on IPR (intellectual property rights). Intervention by the UK Government was better received and more helpful and Strix relied more on them than the EU for assistance. An EU system existed (Rapex) for notifying Member States if an electric kettle was found to be unsafe in the UK, but there was no common action and the system was not very fast. The Commission was very reluctant to take up individual manufacturing cases but did a considerable amount of macro work. Strix did not feel they were handicapped by not having an EU representative in Guangzhou.

Briefing with Maria Castillo Fernandez, Head of EU Commission in Hong Kong and Macao, Rudolf Hykl, Czech Consul General, accompanied by Neale Jagoe, Head of Policy Sections, British Consulate General, Hong Kong, 24 July 2009

Mr Jagoe: The UK has a political, legal and moral responsibility to the people of Hong Kong (HK). In recent years, when the UK has raised Hong Kong issues, it has often found support from the EU. In December 2007, the British Foreign Secretary made a statement expressing disappointment at the ruling out, by the Central Government, of universal suffrage for elections to be held in Hong Kong in 2012. The EU, led by the Slovenian Presidency made a similar statement a few weeks later, which provoked a strong reaction from the Hong Kong Government. In January 2009, visiting FCO Minister Bill Rammell expressed concern to the Hong Kong Government at the postponement of a public consultation on arrangements for elections to be held in 2012. The EU, led by the local Czech Presidency, expressed concern in similar terms.

There has been speculation recently that Beijing is keen for democratic reform to succeed in Hong Kong, so as to provide a reassurance to Taiwan. The huge turnout by Hong Kong people at the vigil to commemorate the 20th anniversary of the Tiananmen massacre had shown the attachment of Hong Kong people to their rights and freedoms.

Ms Castillo: There is good cooperation among the Europeans—not only formal but also informal—HK is a platform for entry into China; this was evident on the anniversary of 4 June when there were major anniversary commemorations. Consequently HK is important for influence into China; but there is also a reverse process by which Beijing pursues Taiwan by means of HK. EU-Hong Kong Trade and commercial links continue to expand; and they continue to move towards European standards of regulation; we are also moving to new areas for example, in civil aviation. Macao and HK have Market Economy Status; the PRC does not. The main obstacle in China is IPR

Seventeen EU Member States are present in HK. The EC structure is vertical: HK inputs to Brussels on the same basis as Beijing. The EC has 13 staff: 4 from the EC and 9 local agents. The EC has limited manpower compared to Member States such as UK, France, or Germany. This is not adequate for the level of political work that has to be undertaken, but Brussels will not expand the representation.

Meeting with Stephen Lam, Secretary for Constitutional and Mainland Affairs, Hong Kong SAR Government and Andrew Seaton, HM Consul General, Hong Kong, 25 July 2009

Hong Kong's financial situation is stable: prudent lending and regulatory policies, and solid bank capital ratios had meant that there had been no need for bank recapitalisation or rescues. HK businesses have 100,000 factories in the PRC with 10 million employees: this is three times the HK workforce. HK has outsourced its business skills in exchange for land, labour, and environmental conditions.

The triangular relations between the PRC, Taiwan and HK have changed in the wake of Lien Chan's 2005 visit to China and the coming to power of the Ma Ying Jeou administration: the position of Kuomintang (KMT) leadership (in Taiwan) and HK government are now much closer. HK needs formal announcement of negotiations between Beijing and Taipei: if this happens free trade arrangements could be possible. This would see a capital and commodity free trade zone; but not freedom of movement of people or transfer of technologies.

Guangdong is the closest mainland economic partner of HK; it provides basic commodities, is the location of the biggest concentration of Hong Kong investment in the mainland (although Hong Kong companies are the biggest external investors in every mainland province) and is a strong market for Hong Kong capital and professional services. Hong Kong's business relationship with the mainland is supported very strongly by the Closer Economic Partnership Arrangement which allows free market access to the mainland for Hong Kong-based companies in a growing range of sectors. HK companies are now paying more attention to the Chinese hinterland where its core function remains capital inter-mediation: PRC and Taiwanese firms will list in the HK exchange in the future.

HK's political future remains as set out in Basic Law and is governed by the One Country Two Systems principle, under which Hong Kong maintains its own rights, freedoms, and economic and political systems. At present the Legislative Council (LegCo) is elected, partly by direct elections; and partly though sector-based functional constituencies. The Chief Executive is indirectly elected. The National Peoples' Congress in Beijing has overall responsibility for HK constitutional development. In 2007 it was decided that universal suffrage would be introduced into Hong Kong for the election of the Chief Executive in 2017 and in the elections for LegCo in 2020. There is a dual system of selection in which candidates for Chief Executive cannot be selected without consensus in HK and approval in Beijing. The Chief Executive then has considerable power to make senior government appointments in a quasi-Presidential system. Even though universal suffrage has been deferred there are still possibilities for democratic development, both in the short term electoral arrangements, where the Government would be consulting the community on possible reforms to the current system, in time for the 2012 elections, and in considering in the longer term the application to Hong Kong of accepted standards of universality and equality.

Meeting with Frank Ching, Hong Kong Political Commentator, Hong Kong, 25 July 2009

The English language press had been marginalised since 1997 and was now much less influential than before. While previously the government would leak information to the South China Morning Post, now it does so to Chinese language media In general people were much better informed than previously because of the internet, and most got their information from the television and internet, rather that from newspapers. In China 30 years ago Chinese officials would not talk and dissidents sought you out. Now the MFA held 2 press conferences a week and had a website, but they edit the press conference proceedings before putting them on the website. If there was self-censorship in the Hong Kong media, it was hard to prove.

Human rights were much improved in China compared with 30 years previously. In the past the government used to be involved in every aspect of life: people were assigned a job, a study course, travel. Large areas had opened up and people could now choose their jobs. China had not ratified the CPPR but the US had not ratified the CESCR. Every year China put out a report on human rights in the US the day after the publication of the US report. The Chinese report tended to focus on racial and other social issues. China said that it had lifted hundreds of millions out of poverty and the right to life was most important.

The Chinese Ambassador to the EU had put out a statement about Xinjiang saying that the western press was prejudiced and European governments should understand that the riots had been instigated by the Chair of the World Uighur Congress. China would like the EU to support China's position on this as well as on Tibet. China had been more open in allowing the press to the area this year. One journalist had been expelled from Tibet, although his reporting was fairly objective in general. China did not want the press in the city of Kashgar. China would like more sympathetic coverage of the minorities issue. China did not consider that there was a minority problem but believed that there were people who were not identifying with China and that the problem came from outside agitators, and not Chinese policy.

Meeting with Jasper Tsang, President of the Legislative Council and Maria Tam of the Democratic Alliance for the Betterment and Progress of Hong Kong (DAB), Hong Kong, 25 July 2009

Ms Tam: The 2007 decision by the National Peoples' Congress Standing Committee on future electoral arrangements in Hong Kong meant that in the 2012 elections LegCo would retain geographic and functional constituencies—bicameral within one legislature. No significant decisions will be taken on the introduction of universal suffrage in 2017/20 before 2012. Democratic and conservative factions have different views on this—democratic factions want to push for a decision on 2017/2020 arrangements now, whereas the conservative factions are content to wait for 2012. Under the NPC decision, the Chief Executive will be chosen by universal suffrage in 2017, although there will be some kind of selection process to determine who can stand as a candidate. For LegCo the electoral process is not decided: in particular there is a major debate on whether or not the functional constituencies will continue to have a place in a universal suffrage system. Some Legco members are also Deputies of the National Peoples' Congress. In the eyes of many Chinese HK is as free as it has ever been: there is more popular representation under this system than had been the case under the former colonial system.

Mr Tsang: DAB is the largest political party in Hong Kong. Its roots are as a welfarist movement which addresses grassroots economic and social concerns and needs, seeing these as a higher priority than political rights and democratic development. The continuation of functional politics in Hong Kong reflects Beijing's preferred model of representation.

Meeting with Pan-democratic Legislators; Ms Margaret Ng, Civic Party, Ms Cyd Ho, Civic Act Up, Ms Emily Lau, Democratic Party, Mr Alan Leong, Civic Party and Mr James To, Liberal Party, Hong Kong, 25 July 2009

Ms Ng: It was important to maintain relations with the European Parliament (which she had visited) because of China's economic development. China was looking at Europe but how to keep up lobbying on democracy and human rights was a challenge. There should be no functional constituencies. The UK introduced this system but it should now condemn it as the transitional period has ended.

Ms Lau: HK remains an international city—the consular presence in the city indicates its continued linkage to the international system. The UK had a special role but the UK Government/FCO had not been robust; the UK started the process of political change in HK before the handover but has not followed through since 1997. I asked Margaret Thatcher 'Is national interest the basis for moral behaviour in international politics?' as she delivered Hong Kong into the hands of a communist dictatorship. Only Alan Leong is allowed into mainland China; the UK should raise the question of why HK democrats are not allowed into PRC. Why are there different standards of Chinese citizenship?

Mr Leong: The present system could not be phased out: it had to be rejected to allow politics to advance. Politics was being polarised between the DAB and LSD—professionals favour some kind of middle ground. HK is still run by its business interests, and the UK shares in these interests—the UK is no longer the HK government but it is still a shareholder in HK. The UK is therefore complicit in the bargain between the CCP and the tycoons.

Mr To: We should be clear that universal suffrage means 'universally accepted form of popular suffrage'. The Beijing plan of geographic-functional constituencies and vote-counting system enshrines its control. For the Chief Executive it will control the nomination process and for LegCo it controls the voting system.

EU Chamber of Commerce in China

Summary of Meeting with Lord Teverson, House of Lords, 24 September 2009

These notes complement those from Sub-Committee C's meeting with the EUCCC during their visit to China in July.

Lord Teverson met the delegation of the EU Chamber of Commerce in China (EUCCC) in the House of Lords on 24 September 2009. The delegation consisted of:

  • Mr Joerg Wuttke, President of the EUCCC and Chief Representative of BASF in China
  • Ms Lyn Kok, EUCCC Vice-President and Managing Director of Standard Chartered Bank in China
  • Mr Loesekrug-Pietri, Chair of the EUCCC Private Equity and Strategic M&A Working Group
  • Mr Jens Ruebbert, Deutsche Bank
  • Mr Tony Robinson, EUCCC Business Manager

The EUCCC made the following points:

The context

China is more important than ever, but economic reforms are lagging. China is one of the lowest employment generating economies in Asia. The Chinese economy is plagued by over-capacity, which destroys research and development activities in China.

The private sector is growing but is still underdeveloped. Most of the recent stimulus has benefited the state-owned sector.

It is a mixed picture on EUCCC concerns, with progress in some areas and back-pedalling on others. Major concerns include market access, administrative cooperation, transparency and intellectual property protection.

A lack of IPR protection poses problems for outside investors and acts as a brake on China's development.

How can the EU address the problems?

Be united, do not let the Chinese drive a wedge between the 27 Member States.

We should not focus too much attention on the trade imbalance and currency issues.

Pinpoint areas where China has a vested interest, e.g. where it is vulnerable to action taken through the WTO.

The EUCCC is seeking to bolster the arguments of the pro-reformers in the Chinese state, including Vice-President Xi Jing Ping.

We should not have an inferiority complex with regard to China, as Commissioner Verheugen has said. We can be assertive and respectful.

There is a link between the EU's openness to Chinese investment and the Chinese willingness to accept European investment in China. We must improve the attractiveness of Europe as a destination for business and investment.

Energy and climate change

There is excess of capacity in the power generation sector in some regions. Utilities must install (but not generate) 4% of their electricity from renewable sources. This has led to windmills being built in Mongolia, some of which are not even connected to the grid, as the law does not require them to produce electricity. The grid company has to only install it to meet the requirements. The Inner Mongolian grid refuses to allow major wind power farms to get linked up, as they cause major fluctuations, which the grid finds difficult to control.

China sees nuclear power as renewable energy. They have set extremely ambitious targets on building new nuclear power stations but they lack the engineering capacity to achieve them.

This tends to obscure the fact that every year the Chinese build 80 Gigawatts worth of coal-fired electricity generation capacity (in comparison, the power generation capacity of Germany is 125 GW).

China subsidises its electricity prices, creating a disincentive to consume less power. This also has the effect of distorting trade as energy-intensive industries are in effect receiving a form of subsidy (e.g. production of solar panels and steel manufacturing). 90% of solar panels made in China are exported.

Copenhagen conference

The EUCCC is worried about proposals for technology transfer and financing options under the Copenhagen negotiations. This is a definite threat. China should not be treated like Sierra Leone, as it has the largest foreign exchange reserves in the world (US$ 2.4 trillion) and therefore plenty of money to spend on new technologies.

China's leaders have made commitments to reduce their reliance on coal and to improve energy efficiency, but these are often poorly implemented. The EU should seize the opportunity to help build China's implementation capacity.

There are indications that some Chinese officials are waiting for the US to make stronger commitments before going further.

China has reacted very moderately to Indian protectionism, perhaps because China needs India as an ally during the negotiations.

The idea of an EU carbon border tax worries the Chinese. Perhaps this option should remain on the table to put pressure on them.

Financial services

There has been significant progress in the banking area over the last 12 months, partly driven by the financial crisis.

However, there are major barriers to accessing the insurance market, although this does not apply to re-insurance.

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