The 1,000th China-Europe freight train to set off from Xi'an, Northwest China's Shaanxi Province, in 2023 leaves Xi'an International Port on March 23, 2023. Photo: VCG

Editor's Note:

Leaders from European countries have recently announced trips to China. Spanish Prime Minister Pedro Sanchez attended the Boao Forum for Asia in South China's Hainan Province which lasted from March 28 to 31. French President Emmanuel Macron and some EU leaders, including EU Commission President Urusla Von der Leyen, will also pay visits to China. What does this wave of visits signal about China-Europe relations? How should Europe balance its ties with China and the US? Global Times (GT) reporter Wang Wenwen talked to Michele Geraci (Geraci), former undersecretary of state at the Italian Ministry of Economic Development, over these issues on the sidelines of the Boao Forum for Asia.  

GT: How do you analyze the recent trend of European leaders visiting China?

Geraci: It's a positive signal. In Europe and maybe other parts of the world, there's always a fight between ideology and pragmatism. Sometimes ideology dominates, and sometimes the practicality dominates. So I think these visits mean that practicality is becoming dominant again. France, Germany, Spain, Italy and the European Union realize that our economy needs China as a partner. It's not just China, but it's all Asia and Africa where China is an important player.

The reason of the shift from ideology to pragmatism is that we have problems and we realize that we cannot solve it without cooperation. When people don't have problems, they don't see them. It's when the problems arrive, then they need to look for solutions. And the solution has always been there - more trade, more investment, more exchanges, more knowledge exchanges with the rest of the world. We cannot isolate Europe from the rest of the world. We will not succeed. 

GT: In terms of economic cooperation, does Europe need China more than before the pandemic? What's your take on the so-called decoupling between China and Europe?

Geraci: It's a different kind of need, because the problem that we have in Europe is inflation. One of the solutions for inflation is to do more business with China, because China exports deflation with relatively cheaper import prices. If we don't trade with China, our inflation will go up even higher than it is now. So this is one problem that China would solve. Both can benefit, because when we import things, we also import lots of raw materials that are important in the production chain and in the whole supply chain of our manufacturing industry. We need metals, material, and energy. We don't have enough of those things. We want to do the green transition, but we don't have nickel and we don't have a solar panel industry. That's also where China could help to accelerate this green transition. 

I'm completely against the voices calling for "decoupling." It is very negative and it would bring the European economy to a disaster. 

GT: Some Americans believe US tolerance of its EU allies prioritizing trade with China is a flaw. What does such thinking reflect about the US attitude toward China-Europe relations?

Geraci: Now there's a bit of confusion in what these people think, because what Europe wants to do is not ideological. Europe is not going to change alliance. They will stay with America in NATO - that will not change. What Europe wants to do is exactly what America wants to do - more business with China. America first [of all] wants to export more goods from the US to China. The Americans should not see it as a change of philosophy. It's only to be practical and exactly like the Americans also want to be. 

It's the duty of a government to do the interest of their own country in a way. What people need to understand is that in order to do the good things for your own people, it is also good to do business with others, including China. It's not contradictory. 

There is pressure from the United States on the Netherlands by restricting semiconductor tech exports to China. European companies need to withstand US pressure. I take the example of semiconductors. Without ASML [a Dutch company] machines, you cannot manufacture microchips smaller than 7nm. ASML as a company is a leader and monopoly in the world. In Europe, we have this company. This company can make two choices - stops selling things to China and kill its own business, or continue to do business with China. 

If they continue to do business with China, they will flourish, they will reinvest the money, and they will continue to advance in development. And Europe will retain a very strong presence in the semiconductor industry, which is the industry of the future. If they stop selling microprocessor machinery to China, China will make them by themselves, maybe not today, maybe not next year, but in 2 or 3 years' time. And ASML will lose its competitive strength and Europe will also lose one of the great companies that they have in this sector. 

So what's the best choice? They need to manage the pressure from the US because it's a very important decision between short term and long term. If the Netherlands government chooses to listen to the US, they will destroy their long-term future in exchange for some short-term gains. And in exchange, China will lose in the short term, because China will suffer a little bit, but in the long term will win. 

Michele Geraci. Photo: Courtesy of Geraci

GT: The Russia-Ukraine conflict has had a certain negative impact on China-Europe relations. Do you think it will slowly subside in the future?

Geraci: I think so, because at the beginning, people were maybe expecting that China would also condemn the war and join the sanctions. We thought that the sanctions were going to work. Now we all understand that the economic sanctions against Russia are failing. People start to question if this is the good thing or not to do. So they see that China didn't do the sanctions and [that] keeping a neutral position may be a good idea. If you cannot keep a neutral position, you cannot be a negotiator. So Europe cannot negotiate peace between Russia and Ukraine, but China can. 

So now China is actually slowly being perceived as one of the players that can help the peace process, just thanks to the fact that it did not take a very strong position on either side. China does a lot of businesses with Ukraine as well. They import iron, grains and wheat. China also buys things from Russia. So it's a very interesting situation that now China emerges as the solution. Before, maybe people thought it was a problem, and now China is becoming a potential solution. 

GT: You deal with economic development issues. What's your understanding of high-quality development promoted by China? 

Geraci: I think it's about fairness. Everyone should have similar opportunities as much as possible and allow for more evenly distributed wealth. When we look at company profits, we look at the earnings, but analysts also look at the quality of earnings. So now we are looking at the quality of Chinese growth. You could have lower headline growth. But inside that, you would have a better quality, because a more distributed growth is more sustainable and creates a higher consumption in the low-income people. Concentration of wealth is not good for the economy. You can sacrifice headline average in exchange for a wider distribution. 

It's also about improving the actual quality of people's living. For example, we already know China is one of the safest big countries in the world. So the problem of crime there is much better than many other countries. You don't have mass shootings in schools. I also know that the problem with young people and drugs is diminishing. So that's another positive achievement. Less criminality, less health problems, and the technology and the modernization of infrastructure improve further the overall quality of economy.