When China started promoting its Belt and Road Initiative (BRI) in 2013, Europe was always going to be a key destination for both the "Belt" and the "Maritime Road" with an open goal of targeting the European consumer market. While Beijing has tried to promote its initiative across Europe, the BRI concept remains unclear to a lot of Europeans. In addition, it has been hard to differentiate between Chinese foreign direct investments (with a total amount of EUR 17.3 billion in 2018, mainly in the UK, Germany and France) and BRI-related projects, which have been scarce in the European Union - although the situation is quite different in the Balkans just outside the EU. Meanwhile, the EU has launched its own connectivity strategy, which makes Chinese objectives of offering to build infrastructures to European countries ever more challenging.
Join the Ash Center, the Mossavar-Rahmani Center for Business and Government, and the Fairbank Center for Chinese Studies for a discussion with Philippe Le Corre, Research Associate, Ash Center for Democratic Governance and Innovation and Mossavar-Rahmani Center for Business and Government. Tony Saich, Ash Center Director, Daewoo Professor of International Affairs, will moderate.
Lunch will be served. This event is open to the public and RSVPs are not required. Seats are first come, first served.
This event is a part of Worldwide Week at Harvard 2019, a week-long series of activities and events designed to showcase Harvard’s global activity, and promote interdisciplinary dialogue about global and international issues.
Event Audio Recording and Transcription
Presenter: You're listening to AshCast, the Podcast at the Ash Center for Democratic Governance and Innovation at Harvard Kennedy School.
Philippe Le Corre: From a European point of view, there's a lot of disappointments, because basically the annual summits, regular meetings, regular demands, market access, reciprocity, all these words, very little feedback from China, very little being delivered, and it's becoming a problem.
Presenter: When China started promoting its Belt and Road Initiative in 2013, Europe was always wanted to be a key destination for both the Belt and the Maritime Road with an open goal of targeting the European consumer market. While Beijing has charged for its initiative across Europe, the Belt and Road concept makes it clear to a lot of Europeans. In addition, it's been hard to differentiate between Chinese foreign direct investment and Belt and Road-related projects which have scarce in the European Union. Meanwhile, the European Union has launched its own connectivity strategy which makes Chinese objectives of offering to build infrastructure to European countries ever more challenging.
Presenter: On October 8, Philippe Le Corre, Research Associate at the Ash Center for Democratic Governance and Innovation, and Mossavar-Rahmani Center for Business & Government, led a discussion entitled China's Belt and Road Initiative, Impact and Perceptions in Europe; Anthony Saich, Ash Center Director, Daewoo Professor of International Affairs, moderating.
Anthony Saich: Hi. Good afternoon everybody. Obviously, the combination, Philippe of BRI and pizza is a clear winner… Before we start, there's just a couple of announcements to make. Today's talk is being audio recorded and photographed for educational purposes so it will be available on the Ash Center website after this.
Anthony Saich: Certainly, this is co-sponsored course, with the Fairbank Center for Chinese Studies, the Director of which is standing over here, Mike Sonzi; and also the Mossavar-Rahmani Center for Business and Government at HKS, so John Haigh is here as the Co-Director.
Anthony Saich: So we are very lucky to have Philippe with us. There's a lot of confusion as you know and Belt and Road, what does it really imply and what does it really cover, and there's a number of studies that's shown that much of the Chinese investments still actually falls outside of those countries that have been formerly declared as part of the Belt and Road Initiative.
Anthony Saich: But what Philippe is looking at, is really I think interesting, evolving set of questions, and that's about China's engagement in Europe, and of course, Europe's response have been very divided between different countries. For example, Greece, Hungary responded somewhat differently to other countries in the process, and what Philippe has been able to do, I think is really two things, first of all, through the painstaking research he's been able to piece together the trails of investments that China has been making throughout the broad definition of Europe's and not just the European.
Anthony Saich: Then secondly, he's began I think to piece together in interesting fashion, a slowly-evolving response on behalf, here primarily of the European authorities to how they want to deal with Chinese investments moving forward. Philippe himself has a very distinguished, varied career, he's been working with French Ministry of Defense, he's published prolifically both in terms of books, but also in terms of many articles.
Anthony Saich: So what we'll do is, Philippe will talk for roughly 30 minutes, and then we'll open it up for Q&A after that. Please join me in welcoming Philippe to speak with us.
Philippe Le Corre: Thank you very much, Tony. I'm delighted to be back after just a couple of months of leave, so to speak. I'm going to… First of all, let me thank, again, the Ash Center, and Tony, the Mossavar-Rahmani Center, and the Fairbank Center, all of them have been supporting me over the past two-and-a-half years.
Philippe Le Corre: As Tony said, I've been working on China and Europe, and obviously today's topic couldn’t avoid the concept of Belt and Roads, although I'm going to disappoint some of you by saying that the relationship between China and Europe is not so much about Belt and Road, but it's a much bigger picture, and the bigger picture is about China's rise, and how Europe reacts to it, and also we will look at some aspects that includes the perceptions of the Belt and Road.
Philippe Le Corre: But first, let me try to go back to the origin of this term, and you will notice that in my presentation, I don't use Belt and Road Initiative, but I use B&R, Belts and Roads. Why is that? Because I think six years after this concept was launched by President Xi Jinping in both Istana and Jakarta, it's time that we don't call it an initiative but maybe either a strategy, either nothing, just call it Belt and Road.
Philippe Le Corre: The Belt of course is Silk Road economic belt that goes through various routes of Central Asia, and the Road, strangely enough, is the Maritime Silk Road, and both of them, as you see, is a very simplified map that leads to Europe, and it's 520 million consumer market, and that's if we only count the European Union of course.
Philippe Le Corre: If we go further than that, we are talking about 720 million consumers, that's the EU, the Balkans, Norway, Turnkey, Ukraine, you name it, so it's a massive Continent, and of course the EU being, by far, the most attractive in terms of economic developments. The BRI's scope is not very… still not very clear, it's not fixed anything… continuous expansion. Of course, you could argue that the two Belt and Road Forums that took place in Beijing in 2017 and 2019, both sort of gave some concrete aspects to this concept.
Philippe Le Corre: But it's still an ongoing project, and the project is about of course exporting Chinese overcapacity, interacting with different parts of the world. Now, unlike the original concept, at least that's the way many of us read it, it's now reaching out to all parts of the world, including Latin America, Africa, Australia and even the Middle East, so Europe happens to be the most, perhaps, developed market where Chinese export can develop and can expand, and also gain some expertise, technology as well as geopolitical influence in Europe being of course unlike America, surrounded by other continents, other regions, the Middle East, Africa, those regions have been also very attractive to China.
Philippe Le Corre: One reason Europe is a story for the Chinese leadership, of course the U.S.-China relationship has reached one of its lowest points in 2019, and of course counterbalancing this situation with another sort of developed partner, although it's really not unique to have one partner, it's a mixture of partners, and I'll come to that, of course, in the next half hour or so. But it's very important that Europe is there as a counterbalance to the U.S.
Philippe Le Corre: Now the real story is Europe's relationship with China. Both places, I mean, I'm going to talk mainly about the EU obviously, but the EU and China are almost each other's biggest trading partners. Every day they exchange rate $1.1 billion of goods at every trade. From the 1990s European companies, especially from Germany, from France, started investing in China. Now, obviously this was a lot about technology transfers, this was about Chinese markets, and even European companies were fighting against each other for a share of the Chinese market.
Philippe Le Corre: As we'll see later, the competition now is in Europe to get a share of Chinese capital, interesting developments. Economic relations became closer when China joined the WTO in 2001, and of course from the Chinese point of view the Policy, starting in the 1990s until under Prime Minister Zhu Rongji allowed Chinese companies, particularly credit ones to send some of their companies to Europe to search brands and technology, that was one of the original reasons for investing around the world, but in Europe in particular.
Philippe Le Corre: On a political level, I would say that China was pretty good at balancing the relationship with the various actors in China, and it stood pretty well the role of the European Union. I remember actually I was here 16 years ago, during the enlargement in 2004. It was a big deal, you had 12 new countries joining the EU. From the Chinese point of view it was a very positive move, because it was a bigger market. Let's go for it. Then we'll choose London as our headquarters.
Philippe Le Corre: Of course nobody had any idea what David Cameron was going to do, and still counting, and in fact was interesting, I also followed pretty closely Xi Jinping's visits to London in 2015 and it's one of the very few occasions where he made some comments on a foreign country, on basing the relationship between the U.K. and the EU.
Philippe Le Corre: He said, "Well, you know the U.K. should remain in the EU, a strong U.K. and a strong EU." I don't know whether he would say that now, but in any case it looks like our British friends will be out at some point, sooner rather than later.
Philippe Le Corre: Anyway, going back to the main argument, which is really Chinese FDI in Europe, I think it's important to keep in mind that the main Chinese investments, first of all our targeting countries that have not been signing MOUs with China on the Belt and Road, so that's really one of the main points I want to underline in this short presentation. But if you look at the main countries, so depending who… which figures you're looking at, American Enterprise Institute talked about $340 billion of Chinese FDI for the past decade, whole of Europe including non-EU countries, [inaudible 00:12:40] group has slightly lower figures.
Philippe Le Corre: In any case, U.K. is first, Germany second, Italy and France are third and fourth. These are also major developing economies. These are not the Eastern European countries, or the Southern European countries that are perhaps weaker except in the Balkans, we can speak about very weak states. These are major companies, Syngenta, Putzmeister, Daimler, these are major Western… I mean European companies.
Philippe Le Corre: So timing and geography are not necessarily aligned with the Belt and Road. In addition, since 2018 the investment boom has ended and we are now down to EUR22 billion of investments, 40% drop from 2017 to 2018. Now, obviously these are just mainly of Chinese decisions to restrict private capital outflow, which really speaks volumes about China's strategy when it comes to geo-economic development.
Philippe Le Corre: It's not just private business people. In fact, as you know, 70% of Chinese FDI in Europe are state-owned enterprises. Look, it's a very political move for China to allow its companies to invest overseas. When you have the Founder of Geely, this automobile company buying 10% of Daimler, and getting $9 billion overnight to get to that stage, don't tell me it's not a political decision. It's happening very quickly, and the Chinese banks, and the sovereign firms who are helping whenever the political decision to invest in one of the European countries has been met.
Philippe Le Corre: In addition, and I'll come back to that in my conclusion, the Europeans have somewhat started to put their act together, by launching a little bit similar to the Americans, some of you may know about CFIUS mechanism. A screening mechanism that is looking at investments in critical infrastructures and technology, this mechanism by the way has been announced, is legally… has been legally implemented, but it's going to be in force just in 2020. So I found out a few days ago.
Philippe Le Corre: But it's there, and there's no single European country that voted against this, at the same time, national security issues remain part of national sovereignty, and so when it comes to national security, it's for individual governments to make decisions, it's not the EU.
Philippe Le Corre: This mechanism, which is non-binding by the way, is really a way to push individual EU states to put together a new screening mechanism themselves, many of them did not have such a screening mechanism, and so, for example, Greece, which I'll talk about as well, you know it's famous because of the Piraeus Harbor, which is one of the largest, most historical harbors in the Mediterranean area, is now controlled by Costco a top state-owned company. They didn’t have a screen mechanism, and it was not considered as strategic investments, vastly overpaid by the way, by Costco but you know, with some fairly successful outcome so far.
Philippe Le Corre: In addition to economic presence, I would like to point out that China is also pushing its BNR concepts, and globally its influence in Europe by using some of the non-economic ways, and one has been the 16+1 group of countries. These are mainly Eastern and Southern European countries, countries at the periphery of Europe, not the main countries that receive the top FDI, those are the periphery. Those that, perhaps in a weaker situation, and some of them have actually a long-standing relationship with China, it's very interesting when you speak from… and there might be people from Eastern Europe, and when you speak to people from Eastern Europe who travel to China regulatory, they speak to their Chinese friends, and very quickly the conversations they'll… you.
Philippe Le Corre: It's very strange, I don't get that as a Western European, but there is this impression in China that Eastern Europe belongs to the sort of the… the network of friends that China have which, honestly, it's a long story, and one can talk about, but when it comes to the Czech Republic that welcomes the Dalai Lama, and Usha Bo and a few people, I'm not too sure about that. It's a mixed picture to say the least.
Philippe Le Corre: In any case we now have 17 members, because Greece which is not, of course, an Eastern European country, is now part of this group, that meets once a year, usually with China's Prime Minister, Li Keqiang, usually in Eastern Europe, or in one of the 17, and only once in China, in Zuzhou this of course has been very helpful for China to push through its Belt and Road concepts, asking these countries since they're members of the 17+1, why not just as well sign a BRI, or BNR Memorandum of Understanding.
Philippe Le Corre: So most of them have done so, but the result has been, again, fairly mixed with very little result coming in terms of cash, and broad Chinese projects. So there's a bit of disappointment there, so if you're friends, you're supposed to help each other, but so far it's really seen more as a political gesture from China rather than to help these countries to develop their economies.
Philippe Le Corre: As I said, the key investments from China still are brands, technologies, infrastructures, automobile, machine tools, semiconductors, that's what China wants. That's the Made in China 2025 concept, although we don't hear about it as much as we used to a few months ago. But it's still very important to China. You could add the Confucius Institutes, what China is doing in Europe, Belt and Road Seminars, and so on, paid advertisements, that's also part of China's rise in Europe, which is really the story I'm talking about today.
Philippe Le Corre: Now, the result of all this work and this increased Chinese presence is obviously a mixed, and even more so you have perhaps a tougher response from the EU. As I said, the screening mechanism, there's also this EU-China Strategic Outlook that was published by Brussels in March of this year. That basically calls China a strategic rival… sorry, a systemic rival. A systemic rival it's as we say in French, calling a cat a cat, the system of China is different from the systems of Europe.
Philippe Le Corre: Although the EU also calls China the corporation partners a negotiating partner, that would be the case in climate for example. Also, there are a lot of corporations, there are no less than 60 bilateral dialogues between the EU and China every year, including on human rights, but when Brussels talks about Hong Kong, not good, when Brussels talk about Tianjin not good.
Philippe Le Corre: I'm not quite sure what they're talking about with these human rights dialogues, but anyway. What's most important here really the new definition of this relationship and the fact that a number of the large European countries are now considering that China move as a rival and should really put their act together to respond to China's rise.
Philippe Le Corre: Now, another interesting aspect… I'm looking at the time. Perceptions of China, as I said, it's still early stage in terms of studying the Belt and Road effects on China, but only few people have done so, including Pew Research and Google, and I'm doing some survey for myself on it, but you have here a number of European countries, and what's interesting is to look at the view of China. Now, the view of the United States has been declining ever since the Trump administration has been in place. I don't have charts on this yet, but it's easy to find.
Philippe Le Corre: But the view of China has not really increased, and the BRI is still a very confused message, many Europeans when you ask them about the Silk Road, they kind of think about the past, about some magical concept that would lead link continents with each other, they are not really sure of what it means, and they're not really sure of what's been achieved so far. In fact, again, the result of the Belt and Road has been fairly mixed around the world. If you look at what's happening in Sri Lanka, in the Maldives, in Croatia, in Africa, there's been some backlash.
Philippe Le Corre: But in Europe since there hasn’t been many… much investments BRI-related, there hasn’t been a backlash on the BRI, there's been a backlash on China's rise, and that's my main message today, is really that the story is the China-Europe relationship, as opposed to how the Belt and Road is succeeding in Europe, because it's not.
Philippe Le Corre: Another element of this is the Chinese leadership, and how it's being seen on the world stage. Again, Pew is doing some work on this, and interviewing a number of people, but there's a generally very low confidence in Xi Jinping. Now, the message, the strong message that's been put forward in the 19th Party Congress, in the Policy Address, in the various speeches, including the one on October 1st in Beijing, has not been very well received, at least in Western Europe, and it may affect some of the investments.
Philippe Le Corre: Germany, Europe's key trading partner, the only country with a trade surplus, the only country in Europe with a trade… or almost balanced trade with China is now saying the BDI, which is the confederation of German industries, is now recommending the tougher stance on China. At the same times you have of course part of the German industries that want to continue to use the Chinese markets to especially, sell cars and machine tools, and the things that made… the Germany industry very famous in China.
Philippe Le Corre: One thing to point out as well is the fact, Chinese investments in Europe have not produced a lot of jobs, and first of all we are not talking about a lot of greenfield investments, we're talking about acquisitions, and we're talking about infrastructure-related investment, in stakes in harbors, airports, energy facilities, in Portugal, in Greece, in Italy, sometimes in Eastern Europe, in France, in Germany, all these places. These have been fairly conservative investments that have not created a lot of jobs.
Philippe Le Corre: Now let me come to the sort of the key part. The unofficial whitepaper coming out of the European Commission, really pushed by the main players there, now Germany, France, somewhat the U.K., Theresa May, Former Prime Minister Theresa May, was fairly cautious on China, unlike her predecessor, and her successor, we'll see how long he lasts, but he's very… he declared himself very pro-China. Anyway that's... time is a better to be pro-China than for EU.
Philippe Le Corre: The latest EU-China Summit that took place in April really started demanding things from the Chinese side. The keyword of course is reciprocity, now China doesn’t like this word at all, because there is no such word in Chinese, and also China considered itself as a developing nation, therefore it should not be facing this kind of demand.
Philippe Le Corre: But in Europe, now it's too late, they all think reciprocity is necessary at this stage, and there is the question of procurement, state contracts, the fact that, if you're a European company, or indeed an American one in China, there's a long list of sectors which you cannot bid for, where you cannot make business, and that's been a problem, because in Europe that's not the case, so very, very unbalanced.
Philippe Le Corre: Last, but not least, September 27th, 2019, that was just a few days ago, and the EU has organized a Connectivity Conference in Brussels, following the launch of the Connectivity Strategy of the EU, just about a year ago. Now what is it all about? Well, that's Europe's BRI for you, and in addition to the fact, Prime Minister Abe of Japan was there to sign a deal with the EU to implement some joint projects between Europe and Japan, in both Asia and Europe, and in between, in energy, in various fields that will be looked at, cyber, maritime, this is all very new, but it's interesting that the EUR60 billion provided, and that follows the Japan EU trade deal.
Philippe Le Corre: I'm sorry. It's not very good color, so let's forget about this slide. I'll go back to the last slide, sorry. I think really, to conclude it's an interesting time that despite the fact the U.S.-China relationship has been so bad under President Trump, the Europe-China relationship is not really that good to be honest, and from a European point of view there's a lot of disappointments because basically, annual summits, regular meetings, regular demands, market access, reciprocity, all these words, very little feedback from China, very little being delivered, and it's becoming a problem because obviously where China sees in the Japan-EU agreement, they don't like it.
Philippe Le Corre: When the EU signs free trade agreements with Vietnam, with Singapore, with [inaudible 00:30:19] or with India, they don't like it either. But that says there's a lot of work to be done on the Chinese side, and I think the Europeans are now sort of dealing with China in a different way, it's no longer a divided Europe, even though it looks like this atomized, to say the least. But there is now a strong leadership at EU level that says China has become a big player, and Europe is not necessarily with America, but not necessarily against China, but it's got its own way of saying things, and implementing its own policies. Thank you.
Anthony Saich: Okay. Thank you. I'm sure there's going to be a lot of questions. I find this really interesting because I think this fits into a much bigger set of issues and challenges, that not just in the question of how countries trade or are dealing with it, but I think also how academia is dealing with this across the board. In a sense when China came into WTO, it was really like a baby in the global economy, and now it's even more of a 500-lb gorilla than I am, in the sense of its influence, the way it's dominant within a lot of these practices, and I think as a consequence of that, we are all trying to wrestle with the fact that, how do you incorporate China constructively further into the global order, but at the same time begin to think about the kinds of practices which are less supported by the international community?
Anthony Saich: I think this is another good example of where, even within the European Union they're beginning to pull together a response. I think one of the first times it was noticed, but for me, it has been September 2018, I think it was, when the trade ministers of Japan, European Union and the United States, all put out a joint declaration, it never names China specifically in the declaration, but it's very clear with almost every sentence, every paragraph is about Chinese practices, whether it's domestic practices, or whether it's international practices.
Anthony Saich: I think that's caused a surprise in China, for a long time it would have been pushing China to be more transparent about its objectives and its activities, and in a sense now that it has become more transparent is getting a lot more pushback from the international community.
Anthony Saich: As Philippe mentioned, Made in China 2025, although it's still going on, is not referred to any more, it's been dropped. I think the last BRI Party in Beijing was significantly more restrained than the first one, and less celebratory. Even Xi Jinping I think in his speeches was trying to indicate with China was taking into account some of these concerns relating to the environment. It's not creating debt traps, and so on, it's more responsible investing.
Anthony Saich: I think we're seeing this as a much broader phenomenon, and this is an important part I think of that puzzle of how to deal with Chinese growth and the emergence. I mean China could say, and I think they're right, "What we do in terms of our policies is our own business." Fair enough, but when it affects the international businesses in the way operate in China, or how China operates internationally, I think that goes beyond China's own specific interests.
Anthony Saich: So one of the charts that really interested me, Philippe, is when you show the figures, and it because Italy is the one EU country which signed on to the BRI as… yet Italy had the most unfavorable evaluation of China 60%, that interested me. In other countries, Greece and Hungary, where China has been very active in terms of quoting, certainly as you said, the career sport in Greece being important, yet those two also had the majority who viewed China unfavorably.
Anthony Saich: So there one could argue, well if China is trying to use this to court more popularity within the European Union, and some of the other countries outside of that framework, it's not really been working effectively, but I think we've been using this one Philippe, for during this period.
Anthony Saich: So, with that, let's open it up for questions from people, and there should be a micro phone to go around. Try and keep it brief, let us know who you are, and try and make it a question preferably. I think this lady here, had her hand up first, and then the gentleman next to her second. Let's take two or three questions together… and oh, and then the gentleman over here in blue after.
Lu Ling: Thank you for the lecture. I'm [Lu Ling 00:35:45], I'm a bank visitor in Harvard Law School, I come from China. Just in your presentation you mentioned U.K. is taken as China's Headquarters to invest or to trade in Europe. There is a common event, the U.K., withdraw from Europe maybe in the near future, so how do you have this, does that have any negative effect about China's future developments in… I mean a lot of investments, all those things, in Europe?
Jerry: I'm Jerry. I'm sophomore in a college right now, also from China. I have a question about what are the future trans-Atlantic relationship between the United States and Europe, or influenced as EU's stance towards China. As we all know that Mr. Trump is also doing something that is not favorable to the European Union, like the digital tax, like the tariffs to Airbus, and everything. I'm wondering how would this ensure that you would that change towards BRI or the EU-China's relationship, or it would still the remaining very, you know like aggressive, or very firm by this right now?
Anthony Saich: Let's take one more from Malcolm, and then let Philippe reply, and then we'll have another round.
Malcolm McPherson: Thank you. I'm Malcolm McPherson, at the Ash Center. Could you answer Tony's question please, because you said you were going to come back to Greece in your presentation, and I think that his, what he asked, is exactly the question I was going to ask. Why is it that Italy, Greece and so on, favorably viewed up… in China's view so unfavorably there about the events?
Philippe Le Corre: All right. Thank you. Well, maybe I'll start with this. In fact, you know, I've been looking at the Pew figures for now at six, seven years, and Italy has been the most unfavorable to China forever, I would say. The other countries, strangely enough, that was very unfavorable, and that is switching slightly is Germany, and which is very strange, because Germany had been a very closed trading partner to China and at the same time the Germans care about the environment, they care about human rights, there are number of issues that have some of that put them on the other camps so to speak.
Philippe Le Corre: At the same time, they still think China is a great market; it's helping with the economy. In terms of Italy, I think the country is really in a situation where the government is very shaky, and there's a coalition that was so… about to collapse, and President Xi's visit in March was coordinated by one side of the coalition, against the will of the side of the coalition, if that makes any sense.
Philippe Le Corre: So it's a very confused situation, and the thing is, he visited both Italy France, and France got more out of the visit than Italy. So there's something I don't understand there, and even though Italy had signed the Belt and Road Memorandum of Understanding. So I think that the Italians are maybe in a situation where they feel they don't more foreigners in their countries, it's they feel badly, and before Germany and France are different situations.
Philippe Le Corre: Greece, I think you know, has been by and large a successful acquisition, I'm a little concerned that, in terms of job creations, I don't think it's been that good, but now Costco runs the harbor, most terminals at four out of six, but they're trying to expand, when they're sort of facing local conditions, the archeological office of Greece, or something like that. There are elections and things like that, so it's also quite mixed. As you can see here, it's still fairly small, EUR1.9 billion as opposed to 47 billion in the U.K.
Philippe Le Corre: Turning to the U.K. now, a very good question, so technically in two weeks the U.K. has to leave the European, although you never know, it changes like every day, almost every minute, and depending on what's what's happening, if Prime Minister Johnson doesn’t shut down Parliament, or the Queen decides to change Prime Ministers, whatever, or may be a bit too far-fetched but… Honestly, I think this country is much too busy to deal with its international relations right now, and I wouldn't like to be Foreign Secretary of the [inaudible 00:40:59].
Philippe Le Corre: So you have this sort of golden era, a very, very extreme terms of describing the U.K.-China relationships which we could talk about because of what we hear about Hong Kong obviously. One cannot forget that Hong Kong was a British Colony for more than 50 years, so it's a very complex relationship, and switching from that, from the Opium Wars to the Golden Era, was slightly farfetched to say the least. I think… You know, to be more serious, I think London will remain and economic hub for some of the Chinese finance, and financial companies, banks, insurance, funds and so on, in terms of industry there's not much to in the U.K., and of course the original idea behind Xi Jinping's statements on sort of pushing for a strong U.K. and a strong EU, was that we will, we Chinese will benefit, our companies will be stationed in London, and we will use London as hub for the rest of Europe.
Philippe Le Corre: Now, that looks increasingly unlikely, and so now China has been very good at exploring other ventures or opportunities, but obviously, Frankfurt, Paris, Brussels, and so it's not going to be that easy. But having said that, property prices are still very high and it's mainly due to Chinese investors. There will be more Chinese investments in the U.K., under, if you missed it that's what I'm now trying to say.
Philippe Le Corre: Last the trans-Atlantic relationship, so even though the relationship between U.S. and the EU has suffered some vengeance. Thank you, President Trump. In many cases the EU and the U.S. are at the same side of the table when it comes to China.
Philippe Le Corre: By saying this, I'm not saying everybody should gang against China, I'm saying there such as the one I mentioned earlier, reciprocity, and procurement, and market access. European and American companies have exactly the same issue, You look at the reports from the European Chamber of Commerce, the American Chamber of Commerce, every year, year-after-year, they're saying the same thing.
Philippe Le Corre: On the Belt and Road, for example, quite typically European officials will never condemn the Belt and Road, it will not say we are against it, but they may not support it either, that's the European way. The U.S. way is to say, it's so bad, I really think I may [inaudible 00:43:57] with that, and so we disagree on that. But we are trying anyhow… when I say we, the Europeans are trying to push perhaps their own advantage in a situation that's been very tense over the past couple of years.
Philippe Le Corre: I believe though, we made attempts for the next few years, is you hear people in both Democratic and Republican Parties, they're not giving you a very optimistic future. I think what's interesting is between these two giants that we'll sort of either [inaudible 00:44:34] game, so to speak, in the next decades that will be the European way, which will be a bit different. At the end of the day the European market will remain very attractive to both Americans and Chinese, and of course a few others, and that's something to be quite hard to get when you're with the Europeans, quite you have to defend what your assets, your markets and your consumers,
Philippe Le Corre: President Macron, for example, is going to be in China very soon. He said one thing, his first China visit that was in January last year, "The Belt and Road shouldn’t be one way, it's two ways." That's way back to this idea of reciprocity
Anthony Saich: Yes. This lady here, one, two, and then three, we'll start up there. Okay.
Hwan: Hi. My name is [Hwan], I'm a Fulbright Scholar from the Fairbank Center. Actually the higher education section of China is responding actively to the BNR Initiative, Chinese universities enrolled quite a lot of international students from BNR-Initiative countries during the past few years, you could say that's the percent of international Students from those countries increase rapidly, but the picture is still very complex, because on the one hand Chinese universities are doing many efforts in enrolling, and training, and providing education to those international students.
Hwan: But on the other hand, what of the companies, those international, Chinese companies, will they go out to the Belt and Road Initiative countries? What they need and, and most of… what they need actually is those labor workers with the limited… limit to a good vocation... vocation attribution. So it's a kind of conflict, so I'm wondering what do you all think of the prospects of Chinese high education system, and more so, how do you save the demand of the local, and was not related to the international students, but the local labor workers.
Ruth: Hi. My name is Ruth, and I'm a PhD student at AshCast from Germany. You briefly mentioned the unofficial whitepaper about the Commission on the… like foster European champions, and I was wondering, what is your advice to the European governments on that? Also a bite of the concept merger between Siemens and Alstom last year, also because of the concerns that, European… like national companies will obviously be not be competitive anymore if you go for very few champions.
Jhing Yu: My name is [Jhing Yu], a fellow at Ash Center, and my major is political Science. I'm really interested about their international relations about China. China thinks of herself as covering the work so that it can be right, and China initiative is Road and Belt Project so that can arrive at work flow [inaudible 00:48:06]. From the investment, your data, and I mean the economic factor, what do you think China's role to achieve this… achieve international aim to [inaudible 00:48:24]?
Anthony Saich: Yeah, let's take those three and then…
Philippe Le Corre: Okay. Higher education is not really my field, but there are plenty of experts in the room. I would just say, I think the whole idea of the Belt and Road, it's a corporation, right, the idea is cooperate with local countries, so in the case of Kazakhstan, or Pakistan, the idea is to use local workers. In the case of Western countries, or developed countries, the idea is to grant contracts to some of these companies, so that the U.K. and France, I don't buy [inaudible 00:49:09], however, but British, France, I mean part of the original deal was that British firms, consulting firms would be getting a lot of engineering contracts to build infrastructures in Central Asia or South Asia, or things like that.
Philippe Le Corre: Now I don't believe that's happening. But I'm only a higher education subject, I mean, I know China has been spending a lot, at the university think tanks in encouraging Belt and Road, and even in Europe there are conferences and seminars. So far, people don't really understand what's the Belt and Road. They understand what China is, because one hears about China much more than we used to anywhere in the world.
Philippe Le Corre: That's both the result of monthly China's successful economic rise over the past 35 years, but also of maybe the political stance that China has been taking for the past couple of years, and it's developments of all kinds, diplomatic, economic, soft power, somewhat, not very successful, but soft power, and military rule, and that brings me to the third question about the BRI peaceful rides.
Philippe Le Corre: So, yes, practically it's a peaceful rise, but then you’ve got the [Jipudy] Naval Base, and then in many parts of the world, of course there is a use of the security dimension of the Belt and Road, that is a rising. It's slightly early to describe precisely, but certainly, when you have such a wide range and ambitious project, reaching out to all continents, many places that unfriendly, not just to China, but to everybody. I mean the environment, and the geographies, there are, there are all kinds of potential risks, you need the security dimension.
Philippe Le Corre: How is China going to handle this? On one hand wanting to go peaceful, by the way, peaceful rise is no longer a part of the language, I'm a having a theory about this for quite some time, since the change of President. But anyway let's assume it's useful, but certainly the recent developments, and including in Beijing on October 1st, don't necessarily translate into a peaceful image, and that's my impression.
Philippe Le Corre: Third question, which was second actually on the European Champions, well, I'm sorry about the Siemens Alstom, I was a foreign correspondent in China in the 1990s, when both firms were competing for the high speed training, from Beijing to Shanghai, and eventually none of them got the deal and, you know, it's a very sad story, and now China Railways is now wanting to build railways in Europe, including the Beijing to Shanghai competing, and eventually none of them got the deal. It's a very sad story, and China Railway is now wanted to be a railway in Europe, not yet in Paris and Berlin.
Philippe Le Corre: I think we need the European Champions and some of the connectivity announcements that's being made, and the money that has been put on the table by the European investment bank, particularly, it is a good start in selling the digital sector. So one question, which I won't touch because it would be a very long subject to discuss, it's 5G, and the competition between the Chinese firms and two European firms. A subject John knows a lot about.
Philippe Le Corre: Ericsson and Nokia, two European firms that are able to provide 5G technology, no American firms I'm afraid, and then the others of course are Huawei are somewhat, it's a big issue, that basically a lot of subjects that I've covered today, and I didn’t mention telecommunications in great details. I think, you know, it's one of the key subjects for the future, because everything is going digital, and anybody who travels to China, knows that today, the no cash economy, and the user of digital waves is just everywhere. I think, being Europeans, Europeans need to put their acts together on that one for…
Anthony Saich: Yeah. I think that's. I mean, I think it's not just with the 5G, but I think if you look at the digital payment systems, satellite, AI, there's a whole varies now where you're really seeing two competing standards emerging, in the west with one system, and in China with a different system. I think for a lot of countries particularly those along the Belt and Road, they will be forced to choose one system or another, it's very difficult to mix, say, your Internet access with one system, than with another. I do think that's going to be a huge area of challenge moving forward.
Anthony Saich: One thing struck me, when you were asking, the lady was asking about, you know, research centers and think tanks, I mean, the last time I was in China, [inaudible 00:54:34] will be pretty much replaced by [Bowden], I mean two years ago everyone was asking me to join the research project of Belt and Road. The last visit, like forgotten Belt and Road, and they all wanted to join in on the Greater Bay Development Project, because people follow where the money is, and that's where the money is coming from the Chinese Government at the moment.
Anthony Saich: Other questions that you people have? I know people have to go off to class, so please, feel free. Yes, the gentleman over there.
Thomas Jevanah: Hi. Thank you very much Mr. Le Corre. My name [Thomas Jevanah] I work in School, and my research is on Belt and Road and U.S. grand strategy. I was wondering if you could say a few words about your leaning of Russia's influence, especially in Central and Eastern Europe, and the potential synergies, or the potential tensions with China and its agenda for those sub-regions. Thank you.
Philippe Le Corre: Thank you. I've spent some time in Central Asia over the past five years, I go there every year, and what strikes me really is when I go to Central Europe, or Eastern Europe even though I was telling this little anecdote about Chinese relations with former members of the Soviet Bloc in Eastern Europe. I don't believe Eastern Europe is that close to China, but in a way it's an easier go for Chinese investors, because there is political stake there.
Philippe Le Corre: I mean the Chinese investors, if you take Serbia, for example, some of the Balkan countries, most of the non-EU members with the exception of Croatia, they welcome Chinese investments because they don't have that many other options, and there's no competition. I mean, the EU is not there, the U.S. is not there, and then China has been, you know, a very strong partner to Serbia, and to Montenegro, with lots of problems. In the case of Montenegro, of course, the debt trap has been stunning, and I'm sure some of the gaps with having set forth, but it's kind of too late.
Philippe Le Corre: In the case of Central Asia there aren't a number of problems, one of them of course is Russia's influence, and you may not view that the China relationship… the China-Russia relationship is very close at the top leaders level, but when it comes to perceptions, and the way people see China's rise on the ground, that's another story. Certainly in Kazakhstan, in Kyrgyzstan, in Uzbekistan, maybe not Tajikistan, they are really scared of China, and therefore the governments of these countries even though the old [inaudible 00:57:39] welcome Chinese investments and China's Belt and Road.
Philippe Le Corre: They know that they are somewhat playing with fire, especially with what's going on in Tianjin, and some Kazakhs in fact have been in trouble on the Chinese side of the border. That's kind of 15 minute situation, but most of the leaders would actually praise the bilateral issues with China in the case of Kazakhstan, there are 15- or 18,000 Kazakhs, Kazakh students going to China every year, many of them would be part of BNR projects.
Philippe Le Corre: But they also have demonstrations, and they are somewhat worried about being sort of diluted, we are talking about the Greater, the Greater Bay, that's another type of [inaudible 00:58:37] but… for Hong Kong. But certainly they are a bit worried about what happened to these sort of small, I mean, Kazakhstan's 80 million people, and its huge piece of land. They are kind of weak, but with the Chinese giant which is next door, which is developing all this infrastructure.
Anthony Saich: It's then one then two, the gentleman in the back, and then the lady here.
Salman: Hi. Thanks for an excellent talk. My name is [Salman], and I'm just a regular attendee of these talks. Can you talk a little bit about how automation and 3D printing might have an effect on bilateral trade negotiations, and whether you see as shift more towards trade and services as opposed to goods in the future? Thank you.
Speaker 11: Thank you for your lecture. I'm a student, but the first-year college student. I have question. Like you mentioned before that there is a kind of upheaval, from Europe and also are familiar with the BRI Initiative, and so… because I bought it from China, like from my perspective, like ordinary people from China are also not so familiar with the BRI Initiative to Europe.
Speaker 11: Like most of their perspective about like Chinese Foreign Development… the FDI towards like Southeast Asia, like now they could offer it like a fundamental infrastructure constructions, or like the FDI on the average stuff, but when you talk about Europe, it's more like a boldness or like a future dream for those people, because like ordinary people they don't really know what they could offer to Europe. They know that it has certain kind of high technology, which is like this [inaudible 01:00:36] phone corporations with these more related to the sensitive parts of the industry which could not be reached an agreement so easily.
Speaker 11: There is a kind of like the recognition gap between those kind of people, I know maybe they have certain kinds of thoughts on the... like the agreement perspective, which we're they… offer people, they certainly have different views between the Chinese and the also like the European perspectives. Do you feel like there could be any kind of things related to this kind of BRI, do you?
Philippe Le Corre: I'm not too sure what your question is. Can you just sum it up?
Speaker 11: Yes. I would say like… because the peoples from Europe and China have different, have certainly different kinds of view of what they could get and offer from each other, which could be a little bit complex, or like the gap between the contract things, and also like the private sector's investment. Do you think if we might need to give the state-owned corporations and only like get rid of those, like the state-owned influence on these areas? Do you think… I know I'm not too correct.
Philippe Le Corre: That's fine. Thank you. I think, as I said, I mean, 70% of Chinese FDI in Europe are from state-owned companies, so it's really appearing now from the sort of the private citizen point of view, and more of a geopolitical plan, rather than private companies. I mean, when you have Chinese private investors, it doesn’t always go well, but at least it's a private company talking to another private company.
Philippe Le Corre: But even if it's state-owned enterprise, you're talking about the Chinese State, right, so that's kind of scary for a number of people and they see, state-owned enterprises, or the state entities acquiring a piece of land including agricultural land, and wanting to build projects which is somewhat contrary to the interest of the [crosstalk 01:03:07] somewhat, and I believe that's how people see it. We live in very changing environment with a lot of upheavals, and all kinds of things that scare people, wherever they sit, including in the West, including in America, which is why we have Donald Trump, it's one of the reasons.
Philippe Le Corre: The problem is, China cannot… the Chinese investor cannot put its flag in his pocket, cannot say, "Well, I'm not Chinese." If you're a state-owned enterprise, well people are not stupid, they know what a state-owned enterprise is, they understand it's being used. At the same time you have this problem market access in China, still… still unsolved as of today, and not in the way of being solved to be honest, because the EU and China, their last summit, decided that they would have deal, the Bilateral… this treaty by 2020. It doesn’t look like it at the moment, it's really very brief progress.
Philippe Le Corre: So from the people point of view, it's a very, very mixed picture, and by introducing a concept like the Belt and Road, it doesn’t make things easier. I think China is its own advocated, and its own PR company, so to speak, and Belt and Road as global concept, as far as I can tell is still unconvincing to a number of people.
Philippe Le Corre: On automation, yeah, of course I mean China is moving from being manufacturing country to a more service industry, to the economy. That's why I was referring to digitalization, and many of the companies that we hear about, now that's really another topic, but the question is since… when you go to China and you cannot use any of the Western social media, or many of the brands that we are familiar with, that we cannot use it, China has its old brands that they're all trying to expand or so... in the rest of the world, there's obviously a risk that that these two blocs will, so have some problems with the decoupling, it comes to mind, but it comes to [inaudible 01:05:34] to the subject.
Anthony Saich: Okay. I'm afraid we've reached the bewitching hour. Thanks all for attending and join me again in thanking Philippe for a very interesting [crosstalk 01:05:47].
Presenter: You’ve been listening to AshCast, the Ash Center for Democratic Governance and Innovations Podcast. If you'd like to learn more, please visit Ash.Harvard.Edu, or follow the Ash Center on social media @harvardAsh.