China: A New Partner for Europe in the Middle East

Yixiang Xu

China Fellow; Program Officer, Geoeconomics

Yixiang Xu is the China Fellow and Program Officer, Geoeconomics at AGI, leading the Institute’s work on U.S. and German relations with China. He has written extensively on Sino-EU and Sino-German relations, transatlantic cooperation on China policy, Sino-U.S. great power competition, China's Belt-and-Road Initiative and its implications for Germany and the U.S., Chinese engagement in Central and Eastern Europe, foreign investment screening, EU and U.S. strategies for global infrastructure investment, 5G supply chain and infrastructure security, and the future of Artificial Intelligence. His written contributions have been published by institutes including The Chinese Academy of Social Sciences, The United States Institute of Peace, and The Asia Society's Center for U.S.-China Relations. He has spoken on China's role in transatlantic relations at various seminars and international conferences in China, Germany, and the U.S.

Mr. Xu received his MA in International Political Economy from The Josef Korbel School of International Studies at The University of Denver and his BA in Linguistics and Classics from The University of Pittsburgh. He is an alumnus of the Bucerius Summer School on Global Governance, the Global Bridges European-American Young Leaders Conference, and the Brussels Forum's Young Professionals Summit. Mr. Xu also studied in China, Germany, Israel, Italy, and the UK and speaks Mandarin Chinese, German, and Russian.

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For those who wished for an improvement in the Middle East, the New Year certainly started with plenty of disappointments. Drastic deterioration of Saudi-Iranian relations, calamitous attacks in Afghanistan and Pakistan, and the persistent menace of the Islamic State (ISIS) are conspiring to erase all traces of optimism. At home in Europe, mass assaults on women in Cologne, whose perpetrators were identified as mainly asylum seekers, renewed Europe’s sense of urgency to restore order and security in the Middle Eastern neighborhood.

Despite repeated efforts from Europe and the United States, the emergence of problems in the region seems to far outpace any attempt to resolve them. Yet there is hope, and China could be an important partner for Europe in the Middle East.

Partner with Potential

Although China has not played a major role in the Middle East in recent memory, expanding Chinese interests are now rapidly propelling the country into the region. Unlike many of the established forces of influence in the broader Middle East region, China’s absence there in modern history often spares it from local suspicion and hostility. Even as Chinese trade and investment rushes into risky frontier markets like Iran and Pakistan, Beijing’s insistence that countries have the right to development regardless of regime type helps to satisfy and reassure local governments that China is to be a constructive partner.

Despite having taken the backseat on regional affairs in the Middle East, China is showing its willingness to play the role of a neutral mediator and act as a force of persuasion in conflict resolution. Having hosted both the Syrian deputy foreign minister and the Syrian opposition leader, Beijing is offering a new environment for all parties of the peace negotiations, which could serve as an extension to rejuvenate stalling diplomatic efforts on existing platforms.

China’s force of persuasion is also being tested in mediating tension between the region’s two major powers—Iran and Saudi Arabia. After deploying a special envoy to both countries, the Chinese president embarked on a rare visit with main stops in Tehran and Riyadh, hopeful that China’s position as a top trade partner for both countries could cool hostilities. Weary from waves of wars and conflicts in the Middle East, Europe will be well advised to engage China’s influence to prevent further turmoil in the region from spilling over onto its doorstep.

As countries in the region look to the past as they seek glimpses of hope for their futures, the romantic memory of the Silk Road brings about optimism and confidence for generations young and old. Beijing’s One-Belt-One-Road (OBOR) strategy gives a modern blueprint that promises to significantly expand regional economic development. This strategy not only entails fresh economic opportunities for countries along the route of the Silk Road and Maritime Belt, but also provides incentives for regional cooperation, ranging from security to infrastructure, for mutual benefits.

A Rising Tide Lifts All Boats

Much of the Middle East has seen little trade and investment from outside the region, largely due to high risks associated with instability and sanctions. These frontier markets are extremely attractive to international companies looking for new sources of growth. The lifting of sanctions in Iran continues to build anticipation, particularly for European companies eager to tap Iran’s 80 million consumers.

There’s little doubt that Beijing’s promotion of regional economic development through its OBOR strategy caters to the country’s economic interests. As China’s economic growth continues to slow down with tremendous overcapacity in its industrial sectors coupled with little success in boosting domestic consumption, it is looking to export its capacities and products to the frontier markets in Eurasia and the Middle East. Taking on the role of financier, supplier, and contractor, China is aiming to become the biggest beneficiary of the opening up new regional economic corridors.

Nevertheless, China’s agenda provides fresh opportunities for Europe. Despite initially committing significant amounts of resources to finance infrastructures for the OBOR strategy, China now needs these resources to stabilize its falling stock market and carry out domestic economic reforms. The unfulfilled demand in building new rail links, highways, and ports to connect countries along the new Silk Road and the Maritime Belt can create a great amount of potential for European companies.

Also, as new markets open up and mature, demand will increase for technologically sophisticated products. Economic development along a regional corridor will generate demand for machinery and industrial plant infrastructure. Growth-enabled middle class consumers will create a large market for electronics, motor vehicles, and information technologies, which could bring new growth for European companies.

Beyond the Middle East

In the era of rapid development of emerging powers, China’s initiatives in international affairs are causing tremendous concerns for the guardians of the existing international institutions. While the United States “pivoted” to Asia, Europe’s relationship with China has been confined to mutual economic interests and largely at home. The U.S. efforts to counter China’s influence have in fact encouraged it to establish its own parallel international institutions. If Europe is to play a part in ensuring that China’s growing influence contributes to strengthening rule-based global governance, it needs to interact with China on topics ranging from security to development as a major stakeholder. The Middle East provides just such a venue. And the alignment of several strategic interests from both sides makes the region ideal for engagement.

Both Europe and China are keen to promote security and stability in the Middle East, which could stop the torrents of refugees flooding into Europe and create new markets for companies in an era plagued with stalled growth across Europe. A stable regional environment coupled with improved industrial capacity could offer a secure source of energy for Europe and help to lift its energy dependency on Russia. China-sponsored international institutions such as the Asian Infrastructure Investment Bank (AIIB) set up to finance the OBOR strategy will not only provide a chance to test China’s readiness to embrace the leadership role it has strived for, but also allow Europe to promote rule, procedures, and best practices, which could lay the foundation for rule-based institutions that accommodate a significant Chinese voice.

Germany Leads the Way

For Europe, meeting China in the Middle East would require an indispensable German leadership. As Europe’s leading economy and proponent of European integration, Germany has become a focal point for China’s relationship with Europe. Beijing looks to Berlin when dealing with the European Union. China’s courtship of Germany to speed up negotiations in China-EU investment agreements demonstrates the close bilateral relationship developed in recent decades that puts Germany in a representative position to deal with China on behalf of the EU. Government consultations between Germany and China, now anticipating its fourth instance, offer a blueprint for the EU to engage China on mutual concerns and interests in the Middle East.

Germany’s unwavering commitment to a united Europe, demonstrated throughout the refugee crisis as Angela Merkel calls for burden sharing and a collective European solution, is crucial for dealing with conflicting interests and influences in the Middle East. A stronger and more integrated EU is the linchpin to carrying Europe into the center of Middle East. Only through European solidarity can Europe convincingly introduce its principle of democracy and its experience in regional integration and reconciliation. Germany is at the helm of that effort.

The views expressed are those of the author(s) alone. They do not necessarily reflect the views of the American-German Institute.