Romano PRODI, President of the European Commission (1999-2005); Prime Minister of Italy (1996-1998; 2006-2008)
WANG Jianye 王建业，Professor and Dean, Guangzhou Institute of International Finance; Former Managing Director, Silk Road Fund (2015-2018)
One year ago, for our event#60, ThinkIN China invited Professor Romano Prodi, former President of the European Commission and former Italian Prime Minister, to talk on the future of Europe after Brexit and the revamp of populist movements in the EU. For the 67th event, ThinkIN China welcomed back Prof. Romano Prodi, together with Prof. Wang Jianye, Dean of Guangzhou Institute of International Finance and former Managing Director of the Silk Road Fund, to see if the political situation in Europe has changed and to highlight the future of China-EU relations in the light of recent developments of the Belt and Road Initiative. Prof. Giovanni Andornino (professor of International Relations of East Asia at the University of Torino and vice president of the Torino World Affairs Institute) moderated the debate where our special guests shared their views on the future of Europe, China and the most intriguing and ambitious geopolitical initiative of the XXI century.
On China and the Belt and Road Initiative
Professor Romano Prodi highlighted few passages of his political career in which has been in close contact with China, stating that he always had a cooperative approach towards it. He underlined that when he was President of the European Commission, during the bilateral meetings, the Chinese counterpart was sharing the same positive approach towards Europe. From an economic standpoint, Prof. Romano Prodi praised the exceptional double-digit economic growth that China had for several years, stressing that the recent decrease to 6-7% points GDP growth per year should not be worrisome, as the economy is more consistent and prosperous than in the past two decades. Prof. Prodi argued that, with the XIX National Congress of the Communist Party of China, the PRC changed outlook by becoming more assertive. The Belt and Road Initiative is now a component of Beijing foreign policy, the first world non-military foreign policy project since the Marshall Plan. According to his view, the BRI cannot be defined only as an economic initiative because its ambition, as well as its nature, implies the necessity of facing political challenges. Protectionist measures could potentially jeopardize the implementation of the Belt and Road, especially if those measures will be carried out by the European Union. Mobilizing international resources is key to the initiative’s success. The value of the initiative stands in its capability of aggregating people and resources and the cooperation between Europe and China must be at its core.
Professor Wang Jianye noted the progress that China achieved in the last forty years since the Reform and Opening Policy was introduced. As an example, in 1978, China had only one bank, the People’s Bank of China (PBC), acting as central bank, commercial bank, investment bank… with little foreign exchange reserves or foreign assets. After forty years, China has developed a large banking sector, the central bank PBC now has over US$ 3 trillion foreign exchange reserves, and foreign assets outside the central bank are larger than that of the PBC itself. China has benefited tremendously from integrating into the world economy under the global trade and monetary systems, put in place mainly by developed countries after the Second World War, that facilitated cross-border flows of goods, services, capital and people. Since the global financial crisis in 2008, China progressively shifted role, from a passenger to a key driver of global growth, from a pure importer to an exporter of capital, from a quiet participant to an active reformer of global institutions and governance. The Belt and Road Initiative is part of this process, its launching in part is a response to Western demand for China to become a more “responsible stakeholder”. Quoting its action plan, the BRI is “an ambitious economic vision of the opening up of and cooperation among the countries along the Belt and Road”. Since the essence of the BRI is to open up, it must start from the country that proposed the initiative. In fact, such an opening is not just to the BRI countries, but to trading partners around the globe. The BRI is not an international treaty, a country’s opening and reform do not depend on “reciprocal” actions of the others.
Financial institutions doing business related to the BRI must carefully evaluate the sustainability of the projects. Investing in developing countries along the Belt and Road is challenging because most of them have relatively small domestic markets and there are hidden costs of doing business there. In addition, projects there are often associated with high geopolitical risks, currency risks, and counter-party risks. Many developing countries are vulnerable to external shocks as their economies are heavily dependent on commodity productions and exports. As the countries participating in the BRI are becoming more and more open, the stronger the pressure for domestic reforms, as capital, talents, entrepreneurs could vote by foot, the better the outlook for achieving win-win outcomes for all BRI countries.
On Europe and China-EU relations
The absence of a common political will among European leaders and the lack of power in the collective European institutions, the commission and the parliament, are weakening the EU decision-making process, especially concerning foreign policy. Romano Prodi hoped that the economic crisis would have awakened the European members and accelerated the EU integration process, instead it has contributed in the revival of nationalist sentiments and anti-system political forces. European political leaders are still pursuing national interest in international bilateral meetings, stressing their concerns at the expenses of EU’s interests, such as the French President Emmanuel Macron did during his last visit in Washington. Even the mood towards China is changing. Two years ago, the acquisition of the leading German robotic company Kuka by Midea, a Chinese company, passed without restrictions even if the German government was concerned about selling the company outside of the EU. Today, however, the European and national authorities have stopped minor acquisitions led by Chinese companies. To drive away these uncertainties and misunderstandings, Romano Prodi suggested that the EU and China should aim at extending and strengthening cooperation on knowledge and culture, particularly in the field of science and technology. Bilateral meetings should contribute in establishing agreements and common regulations on future fields of expertise such as intellectual property rights, artificial intelligence, automation and so on. He affirmed that if China and EU do not develop preventive solutions, then the results achieved in the past would be in danger. If a trade war will start between China, the European Union and the United States, the result will be unpredictable because, from an economic perspective, the interconnections between these entities are so tangled that no-one will benefit from such war.
Report written by Andrea Barbieri