Infrastructure and Brexit to top agenda at China-EU summit

Senior officials from China and the European Union due to meet this week will discuss ways for the two sides to cooperate on infrastructure investment and the wider effects of Brexit, a senior European official has said.

Beijing’s ambitious “One Belt, One Road” plan to deepen economic links from Southeast Asia to Europe would also be high on the agenda, according to Luxembourg’s finance minister Pierre Gramegna.

How will China be affected if Britain leaves European Union?

The annual EU-China summit will run over two days beginning on Tuesday in Beijing. The following week, G20 finance ministers and central bankers will gather in Chengdu, Sichuan province.

“I know the Chinese side is very keen and is very interested in looking into infrastructure investment in the EU and to eventually participate in the same way that many members of the EU have joined the Asian Infrastructure Investment Bank,” Gramegna told the Sunday Morning Post.

Chinese economists said that Beijing would likely flag support for bringing the EU closer into its “One Belt” initiative, while Britain’s decision to leave the bloc would encourage the union to seek more support from China.

Brexit is a blow to the confidence of the EU and its further development, which may push the bloc to seek support and help from China,” said Zhang Shengjun, a professor of international relations at Beijing Normal University. “The reiteration by the two parties to maintain political cooperation will be a big issue for the summit.”

Among officials due to attend the summit are European Council President Donald Tusk, European Commission President Jean-Claude Juncker and Federica Mogherini, the high representative of the union for foreign affairs and security policy.

Zhang said Britain’s exit could give the two sides an opening to tackle difficult issues such as China’s pursuit of market economy status within the World Trade Organisation, as well as trade conflicts and restrictions on exports of military technology to China.

Brexit shadow looms large over China’s exports to Europe

Although Beijing has pledged to maintain good ties with Britain despite the vote to leave, one Western diplomat said London might become less politically important to Beijing.

“The UK might become less interesting and a less equal partner to China if it loses its influence on European decision-making,” said the diplomat, who did want to be identified. “It’s hard to imagine that the Brexit referendum will not have a strong impact on Sino-UK relations.”

Chinese investors would be more cautious about investing in Britain following the change, the diplomat said.

Gramegna said it was normal for investors in London to consider options if they were relocating their businesses, and Luxembourg, as the largest financial centre in the euro zone, was one choice. He said his mainland counterpart, Lou Jiwei, told him Brexit would not have a big effect on China’s economy.

Wang Yiwei, a former diplomat with the Chinese Mission to the European Union, said preparations for the summit had taken almost a year and the two sides should reach broad consensus on cooperation.

“There is huge potential to connect the Juncker plan with ‘One Belt, One Road’,” Wang said. “At the same time, Beijing will further express its support for EU integration”.

The Juncker plan, named after the commission president, is an attempt to use several tens of billions of euros in seed capital to unlock as much as 315 billion (HK$2.7 trillion) in private and public funding for infrastructure projects. The scheme was to run from last year to 2018, but Juncker announced last month it would be extended.

It is a very good time for bilateral cooperation

Wei Jianguo, former vice-commerce minister

Wang said China might also commit to tackling overcapacity, especially in the steel industry, one of the EU’s chief concerns as it struggles with a slowing economic recovery and high unemployment.

Wei Jianguo, a former vice-commerce minister, said a long-gestating bilateral investment pact would likely receive a big push at the meeting.

“It is a very good time for bilateral cooperation,” Wei said. “The EU should not miss these opportunities,” he said, adding concerns over a Brexit domino effect were intensifying uncertainty among other EU members over whether to remain in the bloc and giving potential applicants reason for pause.

But Gramegna called for calm, saying the “divorce” would take years to complete. “There are some parties in some EU countries who are asking for a referendum and are in favour of exiting the EU. That’s their right, but they are a minority,” he said. “The risks of a contagion are extremely limited, if not close to zero.”

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