Do you want to know how Beijing would like Europe to act? Take a look at Switzerland.
Switzerland and China have been close for decades. It was the first Western nation to establish diplomatic relations with the People’s Republic of China (PRC) in January 1950. Bern wanted to protect investments in the new People’s Republic from nationalization and hoped Swiss industry could lend a hand in rebuilding China’s infrastructure after the civil war.
Being friendly to China paid off, but only 30 years later, once reformer Deng Xiaoping took the reins of the Chinese Communist Party (CCP). In 1980, Swiss elevator producer Schindler was the first foreign company to do a joint venture in China. Today, Switzerland is the only continental European country to have a free trade agreement (FTA) with China.
Beijing set the terms of the agreement signed in 2013, which was signed in only two years. Key priorities for developed economies, such as services and intellectual property protection, were scantly covered. Nevertheless, the FTA contains some juicy nuggets for the Swiss. Beijing scrapped or reduced tariffs for Swiss machinery, watch, and pharma producers. And in some sectors, Beijing has significantly relaxed joint venture requirements.
Give and Take
China’s perks do not come for free, however.
Switzerland doesn’t fuss too much about human rights violations in China. While Swiss diplomats condemn the “re-education camps” in Xinjiang, when Switzerland’s President Ueli Maurer went on a state visit to Beijing, he made shollow statements, such as “The peoples of Switzerland and China have many things in common, as they are both very humble, hardworking and intelligent.”
And Bern lets China help itself in Switzerland’s economy. The largest foreign acquisition by a Chinese company to date was Swiss. In 2016, state-owned ChemChina bought Basel-based Syngenta, one of the world’s largest seed producers, for $43 billion. This was a normal business transaction, not a political decision, Bern said.
Traditionally mindful of cultivating an image of discretion and trustworthiness, Switzerland has no issue with Chinese technology company Huawei setting up the country’s 5G network. Switzerland will be the first European country to offer 5G commercially on a large scale. More importantly, Swiss multinationals, such as industrial ABB, are keen to use Huawei’s private 5G networks in their production sites. Even Swiss farmers are testing Huawei, hoping to know in real-time how much their cows have slept and when it is best to milk them.
Divide et Impera
Good business makes for good friends. And for Beijing, the Swiss relationship also serves a propaganda victory at home by showing that China is welcomed and admired in Europe. More importantly, the Swiss partnership is an element of Beijing’s divide et impera strategy in Europe.
The FTA undermines Western efforts to build a common front that seeks to force Beijing to yield more significant trade concessions, in areas such as services or state aid. It also increases pressure on Brussels to negotiate its own trade deal with Beijing, as the FTA gives Swiss companies a competitive edge over their European rivals. There is evidence of trade diversion from Europe to Switzerland prompted by the FTA in the pharma sector.
Switzerland allows Beijing to showcase to Europeans and beyond that there is a prize to win if you stay friendly. Another European country—Sweden—serves as an illustration of what happens when politics puts you on a collision course with Beijing.
Book of Discord
Like Switzerland, Sweden has traditionally been close to the PRC. Deng’s China was intrigued by the so-called “Swedish model.” In the early 1980s, Wen Jiabao was sent on a mission to Stockholm to uncover “the Swedish secret” of mixing market economics and socialism.
As Premier, Wen again sent CCP and think tank delegations to learn about Sweden’s brand of “democratic socialism.” Stockholm was happy to share its experience setting up dialogues on transparency in bureaucracy, while seeking closer trade ties for its vibrant export economy. Trust was so high that Stockholm even allowed Chinese multinational Geely to take over Swedish auto producer Volvo in 2010.
But everything changed when Gui Minhai, a Swedish book publisher critical of the CCP, was abducted in 2015 while on holiday in Thailand and only resurfaced in mainland China. In February this year, Gui was sentenced to 10 years in prison for “providing intelligence” to foreigners. Sweden tried in vain to secure his release.
And when free speech organization PEN International announced that it would award a prize to Gui, Beijing’s ambassador made a veiled threat on Swedish public radio: “We treat our friends with fine wine, but for our enemies we got shotguns.” He later added Sweden’s Prime Minister would not be welcomed in China if a Swedish government representative attended the award ceremony as is customary.
Sweden’s culture minister showed up regardless, and escalation continues. Beijing canceled business delegations visits to Sweden and threatens trade restrictions. China, citing gun violence, warned its citizens of traveling to Sweden. For its part, Sweden ordered the closure of all Confucius Institutes, China’s state-run language and cultural institutes, in April. Gothenburg terminated its 34-year friendship city agreement with Shanghai.
Switzerland is China’s model partner in Europe, geopolitically unambitious and focused on business. Until 2015, so was Sweden.
The contrast between the Swiss and Swedish case demonstrates that Western countries’ relationships with China remain inherently fragile. A single national vocally criticizing the CCP prompting Beijing to extend its repression beyond its borders can ruin a relationship.
Once the conflict has become public, it is difficult for democracies to back down. Seventy percent of Swedes now have a negative view of China, polls show. And for Beijing’s leaders, as for all autocrats, political survival trumps economic considerations. It is a cautionary tale for the leaders of Western nations that continue banking on China for economic salvation.
The views expressed in this article are those of the author alone and do not necessarily reflect the position of the Foreign Policy Research Institute, a non-partisan organization that seeks to publish well-argued, policy-oriented articles on American foreign policy and national security priorities.