China’s economic relations with Europe span decades, but, since the onset of the global financial crisis, they increasingly seek each other’s support in economic recovery and development. Hu’s journey to the West reflects increasingly sophisticated Sino-European comprehensive strategic partnership. 

Sino-European relations now occur on three levels. 

 

Level one, bilateral relations between China and individual European countries, are the oldest layer. These have remained largely pragmatic and non-ideological, skirting around areas of divergence like arms sales and human rights violations. These constitute the bulk of Sino-European relations pre- and post-crisis. China sought to engage Europe on a bilateral basis because the EU lacked a common security and foreign policy. 

 

In France, Hu Jintao signed deals on trade, investment, and technology transfer that will double trade by 2030. Hu and Sarkozy issued a joint statement agreeing to enhance cooperation beyond economic ties to include environmental protection, climate change mitigation, and sustainable development. Wen Jiabao cut similar deals with Germany, Greece, Belgium, and Italy during his European tour last October for the Asia-Europe Meeting (ASEM) and the EU-China Summit.

 

At level two, regional relations, the EU increasingly leads Sino-European cooperation on behalf of Member States. As the EU continues its integration process, China sees growing value in engaging Europe on a regional basis. Hu and Sarkozy reaffirmed commitments to end the EU’s arms embargo against China and to cooperate on managing E.U.-China immigration affairs. 

 

Level three, engagement on the global stage, reached new heights in the wake of the financial crisis and is perhaps the fastest growing layer of the relationship. China and Europe face an expanding array of global challenges requiring enhanced cooperation on economics, sustainable development, transnational security, and global redistribution of wealth and power. The two must cooperate to reform global governance mechanisms, and both must work with other global players, including nation-states, regional organizations, and inter- and cross-regional cooperation mechanisms.

 

The Sino-French joint statement outlines China’s commitment to actively back France during its 2011 G20 chairmanship and reaffirms previous Sino-European pledges to cooperate on reforming global governance mechanisms, such as the UN Security Council. Beyond Hu’s visit, China and Europe also seek to further cooperate on economic and environmental sustainability strategies and increase economic interdependence. 

China’s rationale is simple: it needs European investment, technology transfers, commodities, trade, and support on global governance affairs. At this stage in its development, China appears to be reaching market saturation with America and its neighbors. Post-crisis America cannot consume Chinese goods at pre-crisis levels, and strategic suspicions have brought cooperation to a standstill. China’s neighbors also expect it post-crisis rebalance its uneven trade with them. Neither America nor Asia can fully satisfy the trade needs of China’s development. 

 

Even pre-financial crisis, America effectively had set limits on China’s investments in the U.S. and on U.S. technology transfer to China. The bellwether was China National Offshore Oil Company’s (CNOOC) failed 2005 bid to purchase the American oil firm Union Oil Company of California (UNOCAL). That deal’s outcome was a wake up call to China. America would not let China invest in or purchase major American companies (though that may now be changing), particularly in the energy industry. Shortly after the UNOCAL debacle, China began seeking other opportunities in Asia, Latin America, Africa, and Europe on an unprecedented scale. 

 

Other markets exist through South-South trade for Chinese goods and investment. China’s South-South export growth is significant, and its investments yield high returns. It is building and financing much of the Third World’s new infrastructure in exchange mostly for access to energy resources and other raw materials. But China’s development requires greater investment, high-value trade, and most importantly technology transfer and cooperation on new technology RD&D from developed nations. 

 

From 2005-2008, China had a "going-out" bilateral trade strategy with European states. The E.U. itself was largely uninvolved. Private sector agreements between European multinationals, large Chinese firms, and Chinese and European governments drove bilateral trade. 

 

The EU first had to further develop its common foreign and security strategy and muddle through the financial crisis before it began to develop its relationship with China. The E.U.’s blossoming China strategy is post-Lisbon Treaty ratification and post-financial crisis. Although America remains Europe’s chief trading partner, this too may be reaching its upper limits. As with China, the U.S. cannot consume European goods on pre-crisis scales. Europe must look elsewhere. Europe needs engines of growth (read emerging markets) to fuel its recovery.

Despite sharing similar economic interests, EU-China relations are not all sex and chocolate. Fundamental ideological differences remain black thunderheads on the horizon. For strategic partnership to mature, both sides must address misperceptions of each other’s security strategies. European states share America’s suspicions of China’s military modernization. China worries that NATO eventually may seek to contain it. Apparent incongruities between each other’s core sociopolitical values linger, although a growing body of research by Transatlantic and Chinese experts indicates China is becoming increasingly pluralistic both in and outside the Communist Party. China and Europe fundamentally disagree on linking sociopolitical values to economic relations with developing nations; neither side will budge on foreign development assistance and sanctions policies. Overall, each misperceives the other as a strategic threat because the two do not share "universal" values of the rights of man, though Wen Jiabao gave a speech at the 2009 National People’s Congress in support of such values.

 

Without conducting candid dialogues to reduce these gaps and increase strategic reassurance, both sides could face a future "Sino-Americanization" of their relations. A stalemate could develop in which the two can maintain a tense working relationship born out of interdependence’s vice-like grip, but unshakable doubts and misperceptions will render progress near impossible, making relations increasingly frustrating and confrontational.

Patrick deGategno is Associate Director of the Atlantic Council’s Asia Program. Photo credit: Getty Images.