What does Xi’s ‘super’ state visit to the UK mean for EU-China relations?

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

Luigi Gambardella [Courtesy of TechEconomy]

If today Chinese investors are principally targeting traditional fields such as transport, energy and real estate, it is clear that the range of sectors will broaden to digital in the near future, writes Luigi Gambardella.

Luigi Gambardella is President of ChinaEU.

London has prepared with great attention the President Xi Jinping’s visit to the UK. Relations between China and the UK have never been so cordial. Strengthening the economic ties between both countries is more than ever crucial at a time when the Chinese economy is slowing down and the UK still struggling with austerity.  Observers are therefore already making guesses about the value of the economic spill overs of the state visit of October 20-22.

In any case, as China’s Ambassador to the UK, Liu Xiaoming said, Xi’s trip to the UK will be a “super” state visit. The UK government talks about the start of a golden decade in UK-China bilateral relations. Be it “super” or “golden”, expectations are high on both sides, with important business deals waiting to receive political blessing during the four-day visit. A recent report released by the Center for Economic and Business Research (CEBR) estimates that over 105bn pounds (€143bn) of Chinese investments will flow into UK infrastructure – mainly transportation and nuclear energy – and real estate between now and 2025.

At the same time, the successive state visits of President Xi to European capitals – last year he spent a total of 11 days in the Netherlands, France, Germany and Belgium, reflects the strategic position that the EU is playing in China’s foreign and economic policy.

Prime Minister Cameron together with chancellor Angela Merkel of Germany are the most forward-looking and practical government leaders in their approach to China. David Cameron’s government was the first government of a major Western country to have realized the importance to get engaged in the Chinese-led Asian Infrastructure Investment Bank (AIIB).

The UK government has well understood the scope of the One Belt, One Road (OBOR) and the enormous opportunities that this translates into for UK businesses, both within UK borders, for augmented inward investments from China, and beyond Europe, aimed at co-investing infrastructural projects along the Silk Road. Opportunities to realize such co-investments between Chinese and European players are substantial, thanks to the complementary expertise of the two sides. UK and European companies can contribute with their experience in project management, environmental protection, design, planning, PPPs, while Chinese companies can bring in their excellence in engineering, infrastructure, technology – a case in point is ZTE, who is heavily investing in 5G technology – and can provide the necessary financial backing.

This winning formula should be exploited in both directions, EU towards Asia and China, but also China towards the EU. Europe is the only developed region among the areas involved in the OBOR. Nevertheless, and this is partly legacy of the financial crisis, much of the existing European infrastructure is out-dated and many areas are under-invested. A few days ago, at the Summit of the European telecom operators in Brussels, a Chinese vendor got the point by highlighting that the Chinese city of Shenzhen has more LTE base stations that the whole country of France.

The Juncker Plan, now officially called the Investment Plan for Europe (IPE), can be an excellent catalyst of Chinese investments all across the EU. The recent set up of a EU-China working group aims at boosting bilateral investments by leveraging all possible synergies between the Juncker plan and OBOR.

If today Chinese investors are principally targeting traditional fields such as transport, energy and real estate, I am confident that the range of sectors will broaden to digital in the near future. When I say this I refer to the current Chinese policies of China 2025 and Internet Plus, which target high tech manufacturing, smart logistics, e-commerce, big data, fast broadband infrastructures, etc. All these areas will be key in the future of China-UK and China-EU cooperation and investment relationship.

The world of today is digital. We need to build a Digital Silk Road connecting Europe and China, in addition to the existing investment plans in traditional infrastructures between the two regions. If China and Europe managed to create a common cyberspace, they would put in place a market of 2bn Internet users. A common digital market between Europe and China would require a series of actions, including among others the harmonization of Chinese and EU rules for online purchases for digital contents, the harmonization of IP regimes, tax burdens reduction, promotion of affordable parcel delivery, etc.

If we really want to tackle the current economic slowdown, we need to be ambitious. Obviously, a common cyberspace could not be achieved overnight. But let us start with the first steps. One of these steps is meticulous inventory of the respective regulations and policies affecting the Internet sector and the assessment of their effectiveness. ChinaEU is setting up the first China-EU Internet Policy and Research Center as an important contribution to this aim.  The Center will be a tool for governments, businesses and stakeholders to compare the respective digital policies and examine policy alternatives so as to provide the most adequate regulatory environment to new ambitious investments planned and maximize their impact on the EU and chinese economy.

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