Odd Arne Westad is the S.T. Lee Professor of U.S.-Asia Relations at Harvard University, where he teaches at the Kennedy School of Government. A world-renowned expert on what he has termed the “Global Cold War,” he is an analyst of contemporary international history and an expert on the eastern Asian region. Noted for his keen appreciation of global shifts, he has long insisted on the imperative that policy-making be informed by history. Before coming to Harvard in 2015, Westad was School Professor of International History at the London School of Economics and Political Science (LSE) where he directed LSE IDEAS, a leading center for international affairs, diplomacy and strategy. Professor Westad won the Bancroft Prize for The Global Cold War: Third World Interventions and the Making of Our Times. His book, Restless Empire: China and the World since 1750, won the Asia Society’s book award for 2013. Against the backdrop of Europe’s current political and economic volatility, we asked Professor Westad for his perspective on China’s increasing engagement on the continent. He believes that Europe, as a singular investment region, is of increasing importance to China not only in economic and commercial terms, but also very gradually, in strategic terms.
EuropeNow China’s foreign investment in Europe has increased from one billion euros in 2008 to thirty-five billion euros in 2016. What is behind this?
Odd Arne Westad The change in China’s FDI in Europe reflects the growth of the Chinese economy. It would have happened with any major economy growing at the rate that China’s has been over the past thirty years. But Europe is an interesting area to invest in. Many Chinese, including Chinese companies, see clear opportunities in future commercial development in Europe also understood as a key part of a much larger economic area.
The Chinese government views the world in broad strategic terms. It wants to create an integrated economic area that goes from the Atlantic Coast all the way to Japan, understood as its Belt and Road Initiative. Chinese leaders believe that this economic area will be the future center point of the global economy.
EuropeNow In immediate terms, does Britain’s Brexit pose an opportunity for China?
Odd Arne Westad Without any doubt. If you look at what’s happening today with Chinese economic interest in Europe, a lot of it is in fact centered on Britain, much more than generally recognized. I would not be surprised if, as a result of Brexit, Britain receives the greatest amount of Chinese interest and investment in Europe in the immediate future. On paper, London real estate is of course a very significant part of it. But it also has to do with the relative stability of the UK, despite Brexit. Obviously, the currency fluctuations that have taken place as a result of the Brexit decision has strengthened the Chinese position overall. The UK government has put itself in a much weaker position in economic negotiations relative to where it would have stood as a member of the EU. So, that’s certainly a relationship to watch.
EuropeNow Would you isolate any region, or bilateral relationships, that are particularly intriguing currently for China in Europe?
Odd Arne Westad The big story at the moment is Southeastern Europe.
In Greece, investments in communications, and infrastructure in Piraeus harbor are important. The Piraeus arrangement is interesting, because it’s obviously an economic interaction that has been cleared by the Chinese government. From the Chinese view, in extended Belt and Road terms, you could hardly get a better position than to invest in the biggest harbor in the inner Mediterranean. From the Greek perspective, the lack of foreign investment has been pretty glaring over the last decade because of Greece’s own economic difficulties, and the Piraeus arrangement is a tremendous opportunity.
It is, without a doubt, a strategic investment for the future, far beyond the immediate commercial transaction and interaction. From the Greek side, and similarly for Serbia and Malta with comparable arrangements, it is a safe bet, unless one creates a situation with one’s economic interactions on the global scale where the Chinese become too predominant.
EuropeNow If you were an advisor to the Greek government, would you have advised in favor or against the transaction as it has now transpired?
Odd Arne Westad I’m not too worried about Chinese investment, even in the Greek context, but it’s all a question of balance. Getting into a situation where most Greek ports, and therefore the instruments with which Greece expands its foreign trade, are dominated by China would not be good. That’s not the kind of situation that anyone wants to be in.
I probably would have advised against the form it has taken, because it is borderline in making China too predominant in Greece’s infrastructure. But it is not a question of yes or no – it’s a question of scale and degree. Saying, “No! We don’t want the Chinese taking any stake in Greek infrastructure!” would be a very bad line for Greece to take in terms of its own economic development.
EuropeNow Looking beyond Greece, what do you foresee?
Odd Arne Westad In the longer run, what’s happening between China and Serbia, Bulgaria, and to some extent Hungary and Croatia – although those are slightly different in terms of the actual framework for Chinese activities – may turn out to be more important for Europe.
With Serbia there is a real issue. As an applicant state to the EU, but not yet a member state because of their situation with Kosovo, Serbia presents China with a real opportunity to try to work with a country that is within Europe, but still not a part of the EU. Here China can leverage its political support on the global stage against economic advantages. Again, this is the kind of opportunity, or lucky break, that almost any major country would be looking for elsewhere. It certainly is one to watch from an EU perspective.
EuropeNow How do you understand China’ relationship with Hungary?
Odd Arne Westad I don’t quite know what to read into that. I think, from a Hungarian perspective, building relations with China is a way of showing dissatisfaction with how political directions in Hungary have been seen by major EU countries. From a Chinese perspective, I’m not so sure. There are few potential investments in Hungary that would interest China commercially. In terms of strategic infrastructure, when compared to the Southern parts of Southeastern Europe, Hungary plays a much less significant role. What Chinese companies would be looking for in Hungary, with some support from the Chinese government, are extraordinary opportunities that open up if the relationship between EU Central, let’s call it, Brussels, and Hungary actually deteriorate further. But that deterioration has to go quite a bit further, I think, before people in Beijing or commercial centers in China think to go for this.
In Hungary, and sometimes elsewhere in Europe, the idea prevails that China’s economic influence can somehow balance what they see as the EU, which is of course all other European countries but themselves. I think that this is a pipe dream, so far. It’s not going to happen. Or it might happen with time, but now we are thinking in the very long term, as the Chinese do themselves. The only exception is Southeastern Europe – Bulgaria, Greece, Serbia, and the smaller countries in that region.
EuropeNow How does conditionality, or quid pro quo in their transactions, work?
Odd Arne Westad The conditionality issue is complex. It appears in some specific cases and is absent in others when it comes to trade and especially to investment. You will see a lot of conditionality, at least proposed, during negotiations with countries that are relatively isolated and weak, where China can have an outsized influence in its economic interaction. That’s not all that different from what you saw in the behavior of Europe and the United States in the first half of the twentieth century. So the Chinese haven’t discovered conditionality. You could say that they have rediscovered it, and they are trying to make use of it where they can see it having a benefit.
EuropeNow What is the extent of China’s political leverage in Europe? Can it be obstreperous within the EU over issues it cares about?
Odd Arne Westad I don’t think that we are even close to the stage where it would be possible for China to try to exert predominant leverage against European attitudes on human rights issues, on the South China Sea, or on broader economic issues and world trade arrangements, which are probably even more important.
One needs to watch this going forward. It is very clear that the leverage of the Chinese government within Europe – particularly in ways that EU cannot easily attempt to control, as in the case of Serbia – will increase, allowing China to have more influence in the bigger picture on these kinds of issues. This would happen as the economic interaction between Europe as a whole and China increases, and there is no doubt that it will increase for a whole set of really good reasons that are mutually beneficial to both sides in economic terms. China hasn’t yet achieved this kind of leverage, but I can easily see it developing five to ten years down the road.
EuropeNow Looking more long range, can you explain how the Chinese think about their Belt and Road Initiative?
Odd Arne Westad It goes back to the idea of trying to tie in Europe, the Middle East, Central Asia, and East Asia, into one large economic region. The BRI is why, in China’s view, Europe is so closely related with what happens in the Middle East, in Russia, and in Central Asia. The Chinese idea of sending trains from Tianjin to Brussels, even though it’s a stunt, is a sign of how China wants economic integration to work, not least infrastructure-wise. The Chinese are fully aware that this could take one generation, perhaps two.
EuropeNow How do you see its future?
Odd Arne Westad If you want to anticipate the future of the BRI you have to look at China’s infrastructure investments beyond just ports and airports, which have seen a lot of the emphasis so far, and examine rail transport developments, which would be really indicative of how far China is looking to go in spending its own money to tie together the whole region.
Given the relatively low capacity of the EU to invest itself in these kinds of infrastructural developments, I would not be surprised if many people across the EU, including Germany, France, and Italy, began to say that we should welcome what the Chinese put in. That’s the point where I think one has to be very careful in balancing good Chinese investment with the need to diversify the funding sources for bigger projects.
It is very interesting to think about the direction that this seems to have taken. I was in Beijing a few weeks ago discussing it – not just because of who is included, but also because of who is excluded. China doesn’t want to see Southeast Asia as part of the BRI. It wants to have its own separate economic arrangements with Southeast Asia, that are in part influenced by what China wants to do in this broader sense, but also for political reasons. India plays almost no role, because China sees it as a potential political and security problem in the long term.
EuropeNow What is the distinctive Chinese perspective on the Mediterranean? Why does Malta matter?
Odd Arne Westad Malta is becoming very important. China is investing in Malta as an EU member state that is a relatively small country, but one that holds a key position in the Mediterranean. It is perfect in terms of investment and coordination, interaction, integration, and communications further afield.
EuropeNow Do China’s investments in the Mediterranean have implications beyond trade?
Odd Arne Westad Any kind of investment in harbors elsewhere may have a concrete strategic use in the long run. Of course, it is not accidental that you find China investing in ports in the Mediterranean, particular the inner Mediterranean, just as you find Chinese investments in Djibouti, or building an entirely new port in Gwadar, Pakistan, and in Sri Lanka. All of these activities can be seen from a commercial perspective, but also eventually in a broader strategic sense, as China’s effort to increase its influence. The important thing for me is that we are quite far away from that now, with the exception, perhaps, of Djibouti because China, like everyone else, has had problems with pirates and various other threats to its trade along the East African Coast.
For the other investments, that will depend on what the host country allows China to do, which is where one has to be very careful. Coming back to a European context, it’s particularly important for the EU to think about these things jointly. China has never liked multilateral institutions of any kind, be it the ASEAN, the EU, whatever. China prefers, and there are historical reasons for this, to negotiate with individual countries. Again, one has to be very careful not to make this into a simple power play kind of issue. It’s not just about that. It’s also that China, with its enormous emphasis on sovereignty and the strength of the nation-state, prefers to deal with other countries that see things similarly. They do not want their relations to go through international organizations.
EuropeNow How do Chinese and European visions of the Mediterranean and the Middle East differ?
Odd Arne Westad For China, the Mediterranean and the Middle East form a single region. This is particularly important for Europeans to think about. The idea that the links between Europe and the Middle East are of a purely commercial character, which is very much the European approach, is very different from the Chinese conception, where Southeastern Europe, the Mediterranean, North Africa, the Black Sea, and the Middle East are all connected into one region.
The importance of this region for China began with oil and energy resources, but has grown far beyond that, especially with the BRI. Its importance now encompasses infrastructure and communications as well. In part, its future will be centered on what happens to the Iran issue, which is probably the only Middle Eastern conflict in which China has a real stake. China relies on Iran as one of its biggest oil suppliers, and its Iranian investments are significant. It would strongly oppose further Western, particularly US, confrontation against Iran. That would be very different from the Iraq conflict, or in the larger Gulf region with Yemen.
China would like to see the current crisis with Iran to blow over and to move back to a perspective where Iran is one “bookend,” with the Mediterranean being the other, of a larger region in which China could play a very significant commercial role.
EuropeNow Ideologically, how does China understand the emerging disdain for liberal democracy and human rights that’s emerging right now in some countries in Europe?
Odd Arne Westad This is one of the biggest problems right now with China in Europe. That is, parts of the Chinese leadership would be looking at these illiberal developments as a sort of justification for an increase in authoritarian tendencies within China itself. This is problematic for the European-Chinese relationship, because, with a few exceptions, the general tendency in Europe is evidently not towards authoritarian government. EU countries tend to strongly emphasize what sets European-style institutions apart from most of the world, namely their focus on inclusion and democracy. This is a problem for China. The perception of China as becoming increasingly authoritarian is not something that is serving China well within Europe.
In overall terms, though, you can get a different impression sometimes when you are in Beijing. The idea that authoritarianism equals efficiency in dealing effectively with big economic problems doesn’t necessarily have that much of a resonance in Europe. This may change over time, but at the moment the general perception, and we have some really good public opinion data on this, of China and authoritarian rule are far more negative in Europe than what they are, for instance, in the United States.
EuropeNow What is the U.S. impact here?
Odd Arne Westad It depends on what the United States does on many of these international issues. If the United States wants to be, as it has been until recently, a leader in international affairs, not least with issues that have to do with international trade, then I think China’s room for maneuvering vis à vis Europe is dramatically reduced. If the United States moves in a direction of gradual withdrawal, then of course China’s leverage will increase.
EuropeNow How has the Trump Administration coming to power affected China’s thinking?
Odd Arne Westad That’s an interesting issue. I think some of the changes that have taken place in the US under the Trump presidency haven’t quite sunk in yet in China. When I was in Beijing a few weeks ago, I still heard the same old litany of complaints about the real problem with US-China relations being American disapproval of China’s form of governance and goal to change China from within. I kept telling them that Donald Trump doesn’t care two cents how China is governed internally. That’s not the issue. Things have changed.
Is that an opportunity for the Chinese government? Probably, in many ways, for dealing with many issues that are more important to them. But it’s also a huge challenge, because I can so easily see how Trump’s open admiration for authoritarian rule could end up intensifying conflict rather than reducing it. If the Chinese authoritarian government acts in ways that the current administration here does not like, the potential for misunderstandings and conflicts of various sorts increases. The idea that strongmen across the world will be in a better position to solve problems among themselves is not how the world has worked in the past. They are much easier to get into some kind of bigger conflict, because there are so few mechanisms that are holding them back.
Click here to read Syllabus: Restless Empire – The Past, Present, and Future of Chinese Power by Odd Arne Westad.
Odd Arne Westad is the S.T. Lee Professor of U.S.-Asia Relations at Harvard University. He teaches at the Kennedy School of Government based at the Ash Center for Democratic Governance and Innovation. He served as general editor for the three-volume Cambridge History of the Cold War, and is the author of the Penguin History of the World. Professor Westad’s newest book is The Cold War: A World History, a history of the global conflict between capitalism and Communism since the late 19th century, it provides the larger context for how today’s international affairs came into being.