China has New Wind in its Sails

By Antoaneta Becker Reprint | | Print |

Analyis by Antoaneta Becker

LONDON, Nov 13 2010 (IPS) - The poppy argument between Chinese and UK politicians this week may not have escalated into a serious problem to derail British Prime Minister David Cameron’s first official visit to Beijing but it was symbolic of how 150 years after the Opium wars the two powers are still talking across each other.

Cameron was leading the largest ever UK trade delegation to China in hope of doubling bilateral trade in the next five years. But when he and the accompanying four cabinet ministers turned up adorned with red poppy flowers meant to commemorate Britain’s war dead, the Chinese saw an uncomfortable reminder of the Opium wars in the 19th century, which they fought and lost against the British.

Then as now the British wanted access to the lucrative Chinese market. Instead of guns, this time around they came fortified with sizeable trade mission, described in the Chinese press as the most “lavish” in history. Leading representatives of the UK finance, low-carbon technologies and innovation industries sectors featured prominently. Chinese business newspapers claimed the output of the companies making up the prime minister’s trade entourage accounted for 60 percent of Britain’s GDP.

Cameron lauded China’s astounding success of transformation over the last 30 years but warned Beijing mandarins to open their markets or risk their burgeoning economic might becoming a liability to world prosperity. Pointing out that the country has regained its place as the most important economic power, Cameron said it was now time for China to show leadership in trade.

Offering to champion Chinese access to European markets Cameron asked in return of China to be “open to Europe.”

While Cameron was issuing these warnings in Beijing, the European Union was considering blocking access for Chinese companies bidding for publicly- funded contracts unless businesses from Europe get the same access in China they claim have been denied to them by far. While China’s public procurement market has tripled over the past eight years, foreign businesses have been largely locked out of the boom due to Beijing’s policy of requiring local authorities to buy only Chinese goods and services.

The Chinese were appreciative of the size of the UK delegation, which they saw as recognition of China’s surging economic might. The education agreement, which set a target for a tenfold rise of qualified Mandarin teachers in England, reaching 1,000 by 2015, was interpreted as the right step forward on the UK side in deepening its understanding of China.

“In the past they (the British) looked down on us,” Ma Zhengang, former Chinese ambassador to the UK told the 21st Century Economic Herald. “Later on when China began rising and the ‘China threat’ theory spread, they feared us. Now they are entering a new phase when they are truly trying to understand China.”

In formal pronouncements Chinese officials talked at length about the complimentary character of the UK and Chinese economies but promised little. No longer a country of sizeable manufacturing industries, the UK is now looking to China as a market for its low-carbon technologies, wind turbines and high-end products. But in many of these areas China has ambitious plans of its own that could easily blow a hole in Britain’s industries.

In the area of renewable energy alone, China expects to generate 150 gigawatt of power from wind turbines by 2020. That is six times the British target. In 2009 China overtook Germany to become the country with the second largest installed wind power capacity after the United States, according to the China Wind Energy Association.

According to the Global Wind Energy Council, last year only 17 Chinese turbines were exported. Yet there are nearly 100 domestic turbine manufacturers, including three of the world’s largest, and many of them are eager to expand overseas.

Hua Rui and Jin Feng wind power companies are among the Chinese producers that are eyeing the expansion of wind power offshore where most of the large projects are being built and where Britain currently holds the crown.

“The government helped nurture the domestic manufacturers by shielding them from competition and delivering ready markets for them while all the while we have been sitting outside the fence. It is an unfair playing field for foreign firms,” said one frustrated European entrepreneur working in the green energy business in China.

If the development of other renewable energy industries is a guide, then the plight of the German solar industry, Europe’s largest, is indicative. German manufacturers were hard hit by the plunging price of solar panels last year due to as some allege dumping by Chinese rivals who can produce the same products for much less.

European labour unions have complained that Chinese companies are seizing big chunks of Europe’s markets from green-energy technologies to sophisticated telecommunications equipment thanks to Chinese government tax breaks and cheap state loans.

China has steadfastly denied charges that it unfairly subsidises its industries, arguing that Europe’s allegations are a cover for its own protectionism.

But Cameron delivered a warning to Beijing that keeping its trade walls up may endanger even China’s seemingly invincible economy. Arguing that no economy could insulate itself he said that a “dangerous tidal wave of money” from west to east was threatening to drown the global recovery from recession and all countries could lose out.