China Flexes its Newfound Economic Muscles

China's cancellation Wednesday of a long-planned annual EU-China summit appears to stem partly from recognition of its new economic might as lender of last resort in the global financial crisis as well as the culmination of three years of deteriorating political relations with the European Union.

Beijing’s pique, following EU leaders’ refusal, in particular French President Niolas Sarvozy, to abandon meetings with the Dalai Lama, deals another severe blow to worsening EU-China relations as well as dashing prospects of closer cooperation in addressing the current global financial and economic crisis.

The growing freeze began with Europe’s 2005 refusal to lift its nearly two-decade arms embargo. There have also been sometimes-tense trade disputes and emotional conflicts over human rights, particularly over Tibet.

China’s slap in the face to the EU is especially interesting as it comes at a time when Beijing appears to have forced the United Kingdom to shift its long-standing recognition of Tibet as a sovereign power. David Miliband, the British Foreign Secretary, announced on October 29 that Britain would recognize the Himalayan kingdom as part of the People’s Republic of China. Tibet expert Robert Barnett, writing in the New York Times, speculated that the realignment could be traced to a request by Gordon Brown, the British Prime Minister, that China help to top up the International Monetary Fund, which has faced huge drawdowns because of the global financial crisis.

The crisis, Barnett wrote, “is going to do more than increase unemployment, bankruptcy and homelessness. It is also likely to reshape international alignments, sometimes in ways that we would not expect. As Western powers struggle with the huge scale of the measures needed to revive their economies, they have turned increasingly to China.”

The lengthy preparations for the cancelled summit had already been characterized as "disappointing and frustrating" and "lacking in ambition" by diplomats involved in Brussels.

As if to underline other immediate possible collateral damage, President Hu Jintao, in Greece during the week following a far-reaching trip that also took him to Latin America and the Asia-Pacific Summit in Lima, had signed lucrative economic transactions involving €4.3 billion to help develop the Port of Piraeus in Athens.

The cancellation of the meetings puts in considerable doubt near-term high-level contacts and ambitious but difficult negotiations over a broad treaty to seal the "strategic partnership" announced at a previous summit meeting. Beijing had already been recalcitrant because of human rights provisions sought by the EU in most such accords. The breakdown, however, appears unlikely to affect a wide range of technical bilateral meetings of experts to address other more day-to-day issues from transport to safety standards, that both feel useful.

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China reacted in a similar vein in 2007 when it cancelled a series of bilateral meetings with Germany after Chancellor Angela Merkel also insisted on meeting the Dalai Lama. Her actions were also heavily criticized by political rivals and by the German business and industrial community as undermining crucial economic interests for the sake of a symbolic political gesture. Political and economic relations and contacts between Berlin and Beijing returned to normal after a cooling-off period of a few months.

But the latest action also again brings to the forefront particular Chinese irritation with France following especially riotous protests this summer against Chinese bearers of the Olympic torch, including a paraplegic athlete in a wheelchair. As a result, earlier this year, French retailer Carrefour and other French interests had been the targets of Chinese demonstrations or short boycott campaigns. Chinese tourism to France was also discouraged.

It is uncertain whether any pending bilateral business deals that might have been signed or advanced during the Chinese visit to France will suffer or proceed unaffected. French industries, ranging from nuclear contractor Areva, which had high hopes to build additional Chinese nuclear plants, may hang in the balance, along with exports of European luxury goods that Chinese consumers crave.

It is also uncertain whether a similar economic backlash will now take place in France in an even worse business and financial environment despite relatively high political and popular support for the Tibetan cause.

Some Chinese academics and analysts visiting or based in Europe have in recent months expressed bitterness about a series of European and other Western political and media affronts to China, particularly over the 2008 Olympic Games staged in Beijing, which had shattered any lingering expectations of a return to the "honeymoon" period of bilateral relations that reigned until 2005. That year, the EU, under American, Taiwanese, Japanese and other pressure, reversed the earlier pledge to Beijing to consider lifting its arms embargo, imposed in the aftermath of the 1989 demonstrations and repression in Tiananmen Square.

The Chinese academics, in Europe for a series of conferences with European counterparts last week and next, had singled out Germany and France for their political, public and media attacks on China in recent years, citing also the shifting positions by Sarkozy toward China. He had backed away from previous vows to stress human rights to attend the Olympic ceremonies in Beijing, but had proceeded with plans to meet the Tibetan leader in Poland.