Daily Israel Report

Fast Tracked Chinese Leader Arrives in Spain

Li Keqiang, most likely China's next premier, is touring Western Europe and using cash to smooth over differences
By Amiel Ungar
First Publish: 1/3/2011, 8:01 PM / Last Update: 1/4/2011, 12:15 AM

 

China is avidly pursuing its efforts to establish influence in the European Union. Staring January 4, Chinese Vice Premier Li Keqiang will  visit Spain, Germany and Britain as part of an effort to promote China-EU ties. Li is a vice premier but he is a good bet to assume China's top economic post in the next leadership replacement scheduled for 2012. Li has both a law degree and a doctorate in economics and his wife is a professor of economics and business in Beijing. Already in 2010 he presented the Chinese position at the economic conference in double Switzerland. This trip is therefore putting the final touches on his apprenticeship.

Rich Uncle

Spain is the first stop and here the Chinese visitor will meet Spain's Second Deputy Prime Minister and Finance Minister Elena Salgado, to be followed by meetings with Spanish King Juan Carlos, Prime Minister Jose Luis Rodriguez Zapatero and Foreign Minister Trinidad Jimenez.

In an interview prior to the trip, Li proffered two major inducements to Spain: Help with its debt problem and access to the huge Chinese market. The Spanish government has adopted austerity measures following the collapse of the building boom and has had to cope with severe unemployment. Li held out the prospects that China would buy Spanish debt thus easing the government's access to the global credit market and its debt service.

The Zapatero government would very much like to avoid the humiliation of requiring a bailout similar to that extended to Greece and Ireland. The European Union likewise would not want to provide a bailout to Madrid because the amounts invested in Greece and Ireland would be penny-ante amounts compared to the mammoth amounts required to prop up the much larger Spanish economy. Li raised hopes when he said, "China is a responsible long-term investor, both in the European financial market and in the Spanish financial market. China has confidence in Spain’s financial market. It has purchased Spanish Treasury bonds and will buy still more" Chinese Ambassador to Spain Zhu Bangzao made a similar pledge, saying that China would play a key role in restoring financial market confidence.

1.3 Billion Consumers

Spain, argued Li, could only benefit from the inexhaustible Chinese market "If each of the 1.3 billion people in China would buy a bottle of olive oil or taste a few glasses of wine, the demand will outrun Spain’s annual supply. And if only a few in every hundred Chinese would travel to Spain every year, no hotel room in Spain will be left vacant."

Why are the Chinese trying to butter up to Spain?  Spain, as a major country in terms of size and population, exerts influence within the EU. Spain is indebted to the European Union for easing its transition from dictatorship to democracy and applying pressure for democratic change during the last years of the Franco regime. It has always been a proponent of further European unity which highly pleases the Eurocrats. The current Zapatero government was a major critic of American policy in Iraq, and withdrew Spanish forces after its election in 2004. Such an orientation is welcome to the Chinese.

Despite the protestations about the strategic relationship between China and the European Union, ever since 2007 the relationship has cooled, notably due to the rising trade imbalance between the European Union and China in favor of the latter. Although couched in diplomatic double talk, the problems between China and the European Union were not resolved in last month's China EU dialogue. The EU, in that dialogue, sought transparency regarding state interventions into the economy, raised its concerns with regards to distortions of competition resulting from the use of Chinese export credits and guarantees.

In plain-speak, the Europeans accused the Chinese of preventing European countries from getting fair access. This came at a time that cash-loaded China was snapping up European companies and technologies. EU industry commissioner Antonio Tajani told the German business daily Handelsblatt on December 27 that"Chinese companies have the means to buy more and more European enterprises with key technologies in important sectors,and this necessitated the establishment of "an authority tasked with examining foreign investments in Europe." Tajani was effectively saying that it was time for the EU to play hardball.

By helping the EU out of a jam, and Spain in particular, China is hoping to defuse the debates on trade or at least enter them from a position of greater influence.