Europe, collateral victim of the Chinese-American war
“Invincibility is in oneself, vulnerability is in the opponent.” One must never underestimate one’s enemy and both Xi Jinping and Donald Trump would have done well to re-read The Art of War during the recent weeks. On the one hand, Trump believes he can extend America’s extraterritorial legal powers to China in order to stem its development model — without realizing that China in 2019 cannot be compared to Japan in 1985. On the other hand, although Xi hopes to reduce Trump’s chances of re-election by a severe economic slowdown, he is in fact dealing him an unexpected trump card, which will be the main platform of the 2020 election campaign: the war against China.
Fueled by false hopes on both sides, this new Chinese-American war of technology looks like being of long duration. It marks the bold return of politics to business, at the precise moment when Europe is facing an unprecedented lack of political leadership. If it does not react quickly, the Old Continent runs the real risk of becoming the “neutral” arena of the haggling between two powers, and being left behind by them.
We can already see this in the way in which the USA is offering up to Beijing on a plate the withdrawal of European companies from Iran; in exchange for the silence of the Chinese, who look on, amused, at Uncle Sam’s succession of arbitrary taxes on European banks, whilst Google is managing to get out of paying taxes in France because of its “absence of permanent establishment”!
It is now difficult for any large European industrial group to forego thinking about the strategic appropriateness of associating itself with the right American or Chinese partner.
Competitiveness. Even Germany, the only European country supposed to be able to play in the big league, now finds itself beleaguered, without putting up any apparent resistance. Berlin is therefore seeing Bayer held to ransom by American courts following its purchase of Monsanto, whilst Daimler is suffering the rise of rampant Chinese control, orchestrated by Geely and BAIC. However, despite its market capitalization of almost 100 billion euros, Siemens seems to have learnt the lesson and is admitting, as a precautionary measure, that it is no longer able to fight back. The German company has just announced the end of its traditional conglomerate model and is changing into a simple financial holding company. By becoming the minority shareholder for its main operations — which it intends to merge with competitors — the former huge industrial empire intends to remain on equal terms within the new world order and maintain its competitiveness.
So it is now difficult for any large European industrial group to forego thinking about the strategic appropriateness of associating itself with the right American or Chinese partner. At this stage, natural preference would tend to the American side, even with a USA under the Donald Trump banner. This is certainly the case as long as Xi’s China persists in the error of pushing European companies out of the country.
Today, China prefers to gamble on the growing weakness of the Old Continent. A post-Brexit attack on the euro would enable it to go industry shopping in the most favorable conditions, which undoubtedly explains why Beijing is looking to sell off its European holdings at a profit. We therefore have to look at the world as it really is: at the other extreme of what European political leaders are saying about an imminent Chinese invasion. Europe must realize this very quickly.
