◎ The CCP’s modus operandi ensures that the EU-China joint statement might as well be a blank sheet of paper.
Edited on April 13, 2019.
Chinese premier Li Keqiang traveled to Europe on April 8 for five days of meetings with the leaders of European countries. During his trip, Li signed joint agreements with the European Union and Croatia that covered trade, diplomacy, and other areas.
We believe that in signing the deals, Europe has walked right into the Chinese Communist Party’s “concessions trap.”
The backdrop:
China and the EU released a joint statement at the EU-China Summit in Brussels on April 9. Eleven of the 24 points in the joint statement are particularly noteworthy:
- The EU reaffirmed its One-China policy;
- China and the EU agreed to comprehensively implement the EU-China 2020 Strategic Agenda for Cooperation;
- Both sides reiterated their “willingness to enhance bilateral economic cooperation, trade and investment and to provide each other with broader and more facilitated, non-discriminatory market access”;
- The EU and China “reaffirm that all human rights are universal, indivisible, interdependent and interrelated”;
- The EU supports China to seek “faster progress towards joining the WTO Government Procurement Agreement”;
- China and the EU will “strengthen their exchanges and cooperation under the EU-China Cyber Taskforce”;
- Both sides agreed that “5G networks will provide the basic backbone for future economic and social development”;
- Both sides agreed to “renew the EU-China Science and Technology Cooperation Agreement”;
- The EU and China “firmly support the rules-based multilateral trading system with the WTO at its core, fight against unilateralism and protectionism, and commit to complying with WTO rules”;
- China and the EU will “intensify the discussions with the aim of strengthening international rules on industrial subsidies”;
- Both sides agreed that “there should not be forced transfer of technology”;
- China and the EU “support the work of the United Nations Commission on International Trade Law on reform of the investment dispute settlement system and will engage cooperatively in that process.”
Before the EU-China Joint Summit was held, news outlets reported that EU diplomats nearly abandoned discussions with Li Keqiang’s team because they were unclear whether the Chinese regime would follow-through on its reform commitments. Later, European officials told EURACTIV.com that a joint statement could be reached after Beijing made “last-minute concessions to bolster the rules-based international order and tackle industrial subsidies.”
On April 10, China and Croatia signed a joint statement. Key points of the joint statement from Xinhua’s version include:
- Croatia affirms the CCP’s One-China policy;
- China and Croatia agreed to “safeguard multilateralism, international law, and the international system with the United Nations at its core”;
- Both sides agreed to “fight against unilateralism and protectionism”;
- Croatia supports the Belt and Road Initiative, and both sides agreed to advance other Europe-related Belt and Road plans;
- China invites Croatian institutions to issue Panda bonds in China. Croatian banks and enterprises are invited to use the renminbi in trade and investments on the mainland financial market via the Qualified Foreign Institutional Investor Scheme and the RMB Qualified Foreign Institutional Investor Scheme;
- China and Croatia will collaborate on the China-Czech Culture and Tourism Year project in 2019.
According to EURACTIV.com, Huawei and Croatia’s Central State Office for the Development of Digital Society signed a memorandum aimed at “encouraging cooperation in digitization.” The memorandum “provides for continued communication and stronger cooperation between Huawei and Croatia in developing ‘smart city’ solutions, exchanging expertise, industrial standards and using the possibility of attending conferences and seminars on digital technologies in Croatia and in China.”
The big picture:
Li Keqiang’s Europe trip comes amid ongoing Sino-U.S. trade discussions and deteriorating economic conditions in China.
In recent months, Washington appears to have stepped up efforts to challenge and isolate the CCP regime on the world stage. America’s actions include increased frequency of cross-strait patrols; improved relations with Taiwan; raising awareness among American allies and partner nations about the threat of using Chinese 5G technology; and issuing warnings to allies that America will not share intelligence with them if they use Chinese 5G equipment.
Last year, we wrote that the “Trump no longer wants America to be part of the CCP-hijacked world order and is seeking to build a new rules-based, reciprocal global trading system.”
Our take:
1. In our article on the CCP’s “Red Matrix,” we noted that “survival and dominance are two sides of the same coin” for the Party. We see this dynamic in the EU-China and China-Croatia joint statements.
2. The CCP is in survival mode due to pressure from the United States, a rapidly worsening economy, and political crisis in the elite ranks. To survive, the Party can do virtually anything and make all sorts of compromises.
The struggle between the CCP and the Kuomintang during the Republican Era offers a glimpse at the lengths that the Party is willing to go to stay in the game:
- In the 1920s, the Soviet Union ordered CCP cadres to join the KMT. The CCP, which only had about 400-plus members, took the opportunity to grab key positions in the KMT and seize power from within. By 1927, Generalissimo Chiang Kai-shek was forced to launch a “White Terror” to purge the KMT of CCP influence.
- In the 1930s, the CCP instigated the “Xi’an Incident” to force Chiang to stop eliminating the communists and form a Second United Front with the Party to fight the invading Japanese forces. Previously, the CCP was forced to go on a Long March to avoid being eliminated and was reduced to only 30,000 troops. After the “Xi’an Incident,” the weakened Red Army was reorganized into the Eighth Route Army and the New Fourth Army of the KMT government and received national funding. Both CCP armies engaged the Japanese minimally, and the Party was able to use the Sino-Japanese war years to regroup and build up its forces to a strength of 1 million troops.
- After the surrender of the Japanese in 1945, the KMT and the CCP carried out peace negotiations that led to the signing of the Double Tenth Agreement in October 1945. During the negotiation period, Mao Zedong shouted “Long live Chiang Kai-shek!” several times in public. However, the CCP never ceased attacking KMT forces while the peace process was ongoing. The peace was ultimately short-lived, and after four years of bitter fighting, the CCP forced the KMT to retreat to Taiwan and founded the People’s Republic of China in October 1949.
Now that the CCP’s survival instincts have again kicked in, we are thus not surprised that Beijing would admit to forced technology transfers and agree to stop them in the EU-China joint statement. Nor should anyone be shocked that the Party is willing to allow European countries “more facilitated, non-discriminatory market access” in the mainland or that the regime seems to be willing to negotiate on the topic of its industrial subsidies. And by acknowledging the need to abide by multilateralism, international law, and world organizations, the CCP is likely hoping to downplay its threat to the international world order in the eyes of the EU.
3. We see the “survival-dominance” dynamic at work in the recent agreements reached by the Chinese regime in Europe.
As we previously analyzed, the CCP has been “gradually hijacking the post-WWII global system since the People’s Republic of China (PRC) was admitted to the UN in 1971.” Today, the international rules-based order and multilateralism work in the Party’s favor. For example, the CCP has abused the need for consensus in world organizations like the UN or the WTO to block criticism or prevent the implementation of organizational reforms that work against the regime (survival). The Party can also use the time needed for countries to reach consensus on issues like countering CCP interference to regroup and pursue alternative strategies to achieve its expansionist agenda (dominance). Thus, the CCP’s focus on “multilateralism” and maintaining the international rules-based order in agreements with Europe is an attempt to undermine the U.S.-EU alliance and counter the Trump administration’s efforts to isolate the Chinese regime.
The CCP secured a collaboration between Huawei and the Croatian government, and got the EU to agree that “5G networks will provide the basic backbone for future economic and social development.” This gives Huawei an opportunity to break into and entrench itself in the European market. In the short term, Huawei may be able to survive being locked out of the U.S. market by exporting to Europe. In the long run, the CCP can use its 5G “beachhead” in Europe to advance its world domination agenda.
In Croatia, the CCP managed to add support for its Belt and Road project and continue the gradual internationalization of the RMB with Panda bonds. Both initiatives are part of the Party’s expansionist plans; the CCP’s expansionism is aimed at both dominance and survival.
Finally, the EU and Croatia’s acknowledgment of the “one-China” policy allows the CCP to keep up its pressure on Taiwan, an issue that is both about survival and dominance for the regime.
4. We would also not be surprised if the CCP sticks to its Europe agreements, at least in the beginning. The Chinese regime’s actions over the past two decades, however, have proven that it is untrustworthy. Once the CCP believes that danger has passed, Party nature dictates that it would revert to form and find ways to avoid fulfilling its promises to Europe. There is a very good reason why the U.S. is insisting on including an enforcement mechanism in the final trade deal with China.
At this point, it should be noted that it is entirely within CCP modus operandi to adhere more stringently to the Sino-U.S. trade deal (presuming one is reached) than to the April 9 EU-China joint statement even though the points in both agreements may be identical (such as greater market access and forced technology transfers) because the latter is unenforceable. For the Chinese regime, Party interests always come first and “the end justifies the means.” Thus, the CCP can be expected to renege on any agreement that goes against its self-interests, or try every trick in the book to avoid completely fulfilling the agreement. Party nature is why we are skeptical that Xi Jinping can carry out the structural reforms that America demands, and why we believe that the April 9 EU-China joint statement might as well be a blank sheet of paper.
What’s next:
1. The CCP could step up influence operations in Europe and lockdown 5G deals as part of its strategy to simultaneously survive American pressure and push for global dominance.
2. Current geopolitical trends could convince the Trump administration to strengthen America’s “unilateralism” and even take precautions against traditional allies who cannot be convinced to act against the CCP threat. For instance, President Donald Trump threatened to impose $11 billion worth of tariffs on EU products in retaliation for illegal Airbus subsidies in a tweet on April 9, the same day that China and the EU signed a joint statement. Given that the WTO has yet to make to issue a decision on U.S. tariffs after ruling against Airbus in May 2018, the timing of Trump’s tweet and the release of a proposed tariff list by the Office of the United States Trade Representative (April 8) is somewhat suspicious.
We believe that the U.S. could take further action to distance itself from post-war international organizations (UN, WTO, etc.) and rebuild the global order.
Get smart:
Governments and think-tanks need to recognize the CCP’s “survival-dominance” dynamic and deeply understand Party nature to develop effective counters to the Chinese regime’s expansionism and influence operations. Countries that focus too narrowly on gaining short-term economic interests by working with the CCP regime without considering the longer term implications of the collaboration are exposing themselves to unnecessary and potentially existential risks.
