Germany ‘won’t take bad deal’ on investment with China

Stuart Lau

Germany’s top envoy to the European Union has warned China that the bloc’s biggest economy is not prepared to accept a half-baked investment treaty, saying: “A bad deal is not an option.”

In an exclusive interview with the South China Morning Post, Michael Clauss, a German ambassador to Beijing before moving to Brussels in 2018, described the progress of talks over the deal to protect European investors in China as “quite limited”.

With Germany preparing to take up the EU Council’s rotating presidency next month, Clauss struck a cautious tone on EU-China relations and cast doubt on any attempts to divide EU opinion on China, saying: “Today, there is a growing convergence among European member states on a joint, common, unified China policy.”

The EU and China launched talks on an investment deal seven years ago and any initial hopes that any agreement can be reached have faded. That is in part due to the bloc shifting its priorities to the economic fallout of the coronavirus pandemic and in part because of Beijing’s unwillingness to make concessions on the special status enjoyed by state-owned enterprises.

“So far, progress on the investment treaty has been quite limited. We are definitely not there yet. We currently don’t have the dynamic that would be necessary in order to clinch a deal,” Clauss said. “The EU and China have been negotiating for seven years, so I think we should come to terms now.”

Coronavirus ‘dents plans’ for EU-China investment deal by September

Nevertheless, the investment deal is expected to be a major focus on Monday when European Council President Charles Michel and European Commission President Ursula von der Leyen hold their first EU-China summit with Chinese Premier Li Keqiang.

It was also expected to be on the agenda when Chinese President Xi Jinping was scheduled to visit the German city of Leipzig in September and meet all 27 EU heads of government.

That meeting has been postponed indefinitely, with German Chancellor Angela Merkel citing the coronavirus pandemic.

But some observers said the delay also reflected the lack of deliverables over the investment deal, with China refusing to make further concessions on market access and a level playing field for European companies in China.

“Basically, Europe’s economy is open, and China’s is not,” Clauss said. “That means China will have to take more steps than we do to come to a comparable level of economic openness.

“We have been trying to get to a level playing field. Still, we haven’t given up on this.

“Hopefully it will still be possible to meet [for the summit] during the German EU Council presidency.”

In an interview with the Post last month, China’s ambassador to the EU, Zhang Ming asked the bloc to be flexible on the deal, saying: “We hope our EU partners will meet us halfway.”

But Clauss said “a bad deal is not an option”.

“It has to be a comprehensive and ambitious agreement that brings real progress,” he said. “In any case, the EU side is committed to the end-of-the-year deadline, but only if we have a deal worth having.”

China’s state-owned firms remain barrier to EU investment deal

Clauss’ five years in Beijing as Germany’s ambassador came as Beijing extended its reach into Europe via Xi’s Belt and Road Initiative, as well as the “17+1” platform with central and eastern European countries, some of which are EU member states.

But in the last two years, Clauss said he had seen a change in attitude to China among European countries.

Referring to the “17+1” countries, he said: “I think the 17 – especially those being member states of the European Union – take a Europe-first approach. All of this is quite different compared with what it was a few years ago.”

Clauss said one thing that had not changed was Germany’s willingness to speak up on sensitive human rights issues.

Some activists in Hong Kong have accused Merkel of being less outspoken on China’s plans for a sweeping national security law that they see as a curb on free speech and political freedom in the city.

Clauss said Merkel “regularly raised human rights issues directly with the Chinese leadership”, and the German government “has been very consistent on this and this didn’t change”.

Last week, German Foreign Minister Heiko Maas joined his counterparts from the other Group of Seven nations in backing a strongly worded statement on the security law, and agreed to work on the issue with British Foreign Secretary Dominic Raab.

And on Friday, the European Parliament passed a resolution critical of China’s moves on Hong Kong, calling for European leaders to raise the issue with Li on Monday and suggesting EU member states take China to the International Court of Justice.

Some EU countries, including France and Sweden, have complained about aggressive Chinese diplomatic behaviour, including the spreading of critical, if not factually incorrect, information on social media.

“The so-called ‘Wolf Warrior diplomacy’ is a relatively new concept in Chinese diplomacy,” Clauss said. “It is – to put it mildly – a much more assertive approach to a degree where it starts to hurt China’s image in Europe.”

Chinese Foreign Minister Wang Yi defends ‘wolf warrior’ diplomats for standing up to ‘smears’

Clauss’ appointment to Brussels coincided with a move within the EU to forge its own path on China – diverging from Washington’s confrontational style.

But for Berlin that did not mean choosing between Beijing or Washington.

“When it comes to values and the political system, we are closer to the United States than to China,” he said.

“But at the same time, China continues to be an important trading partner, and also when it comes to resolving international issues, China is and remains important.”

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