Why the Chinese economic model appeals to Europeans

Longtime Beijing resident and economist Michael Pettis, a senior fellow at the Carnegie Endowment, considered one of the top experts on China’s economy, recently posted results of a Pew Survey that found the majority of Europeans queried “seem to believe that China is the world's dominant economic power”.

That notion runs counter to real data, which shows the US has a GDP some $6 trillion greater than China along with the biggest stock market in the world, the most dominant currency globally and the wealthiest individuals.

“Do they think China is the world's largest economy or is there some other reason?” Pettis asks.

Among the responses was one from Andrew Haynes, a Canadian working in the energy sector. “They see major (acquisitions) and investments by Chinese companies, and see major sales of commodities related to China, in and from their countries, and they equate that with economic dominance,” he writes.

In Italy, for example, residents could view China as the dominant economic force after purchases of economic and cultural icons such as Pirelli Tires and the Milan Inter football club by Chinese buyers. A high-profile attempt at buying A.C. Milan from former Prime Minister Silvio Berlusconi by Chinese investor Li Yonghong ended in failure, but it was daily headline fodder for months, no doubt further fueling the perception that the Chinese are the world’s top economic force.

And if the source of perceived economic dominance is consumer goods on the store shelves during Europe’s looming energy crisis, China indeed might be the powerhouse. According to the state-run China Daily newspaper, there has been “explosive growth” in exports of heaters and other warmth-generating products to Europe.

It says “statistics from AliExpress, Alibaba Group's business-to-customer site that sells consumer goods to overseas markets, showed sales of heating appliances such as electric blankets in the European market surged nearly 300 percent in September compared with August”.

As well, there is strong demand for heat pumps – devices that gather ambient warmth from the air and ground, then compress it to heat water – especially in Germany, Poland, the Netherlands and the United Kingdom, with orders soaring more than 100 per cent year-on-year in the past 90 days, according to the newspaper.

“With natural gas supplies from Russia becoming volatile and amid continuously soaring energy prices, China's energy-saving heating appliances at reasonable prices are increasingly gaining popularity among European consumers,” Liang Zhenpeng, an independent consumer electronics analyst, told the China Daily.

Consumer demand and perceptions are running counter to increasing efforts by the European Union and individual countries to rein in what they say are unfair barriers to open trade and investment. Today China is the largest exporter in the world and the European Union’s largest source of imported goods. In turn, it is the EU’s third-largest export destination following the U.S. and the United Kingdom.

At the 9th EU-China High-Level Economic and Trade Dialogue last summer, “the EU raised concerns related to the business environment including the lack of a level playing field and the growing politicisation of the business environment in China”, said a communique from the European Commission following the trade summit. “This is leading EU companies to reconsider their existing operations and planned investments in the country.”

Valdis Dombrovskis, the commission’s executive vice president for trade, said he “underlined the need for continued engagement to build more balanced and reciprocal trade and investment relations between the EU and China” at the meeting.

And while consumers welcome affordable products made in China, a survey by the Central European Institute of Asian Studies of 13 European countries found the Covid-19 pandemic has eroded trust in the Asian giant.

More than 50 per cent of those surveyed in Sweden, France, Germany, the U.K., the Czech Republic and Hungary now hold a negative view of the country, with those from Latvia, Serbia and Russia the only respondents with a positive view.

“When looking at various aspects of interactions, only trade with China is perceived predominantly positive in most countries,” said the report’s author Richard Q. Turcsányi. “In comparison, Chinese investments are perceived somewhat more negatively, with only a minority of countries – such as Serbia, Russia, Latvia, and Poland – leaning to the positive.” Chinese investments are the most negatively perceived by respondents from Sweden, France and Germany.

Similarly, the Belt and Road Initiative was viewed somewhat positively in Serbia, Russia, Latvia, Italy and Poland, while the remaining countries surveyed lean towards a negative opinion.

Yet in perceived economic power, among most of the citizens surveyed, China is still seen as more powerful than the US, the EU and Russia. All of which goes to show that people might think globally at times, but they live locally. Few read the latest data from the International Monetary Fund.

And most eschew ideology when it comes to their own pocketbook.

As the world struggles to its feet following the worst pandemic in a century, we see that China is an integral, even indispensable, part of the global supply chain. That might be what the man on the street intuitively mistakes for economic dominance.

- Jon Van Housen and Mariella Radaelli are international veteran journalists based in Italy

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