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China moves to centre stage

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Mark Rutte
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China is on a roll: it’s only a matter of time before it overtakes the United States and becomes the world’s biggest economy. Chinese companies are spreading their wings and are increasingly active in Europe. The country is going all out to get its hands on valuable technology, and plans to be an independent technological superpower by 2025.

On Saturday 22 March 2014, the Netherlands’ King Willem-Alexander and Queen Máxima welcomed China’s president Xi Jinping and his wife, former singer Peng Liyuan, at Schiphol airport. The couple’s two-day state visit, made at the king’s invitation, was widely described by the media as historic. It was the first such visit to the country by a Chinese head of government.

Later that afternoon, as the presidential couple was escorted into Amsterdam for an audience at the royal palace, a strange incident occurred. In the Dam square a Free Tibet demonstration was in full swing. The protesters brandished posters bearing faked photos of Xi shaking the Dalai Lama’s hand, captioned: ‘President Xi, meet the Dalai Lama’.

It was a rather windy day, and news footage shows Chinese security officials struggling to erect four screens so that Xi would not see the protest as he stepped out of his car in front of the palace, where Willem-Alexander and Máxima stood waiting to receive him. Later, foreign minister Frans Timmermans (Labour Party) denied all knowledge of the screens. The footage shows Dutch police and security staff watching and doing nothing.

Xi was accompanied by a delegation of no fewer than twenty ministers and 249 representatives of 189 Chinese companies. Later, he was received at prime minister Mark Rutte’s official residence for trade talks, where Xi described the Netherlands as ‘the gateway to Europe’.

On the second day of the state visit, Xi and his wife attended a Sino-Dutch Economic Forum at the hotel in Noordwijk where they were staying. In his speech, the king declared: ‘Our joy is made even greater by the select company that has travelled with you. We warmly welcome the members of the Chinese delegation. You represent the dynamic, multifaceted nature of the Chinese economy, admired not only for its size, but also for the speed at which it is growing.’

Willem-Alexander expressed his pride that the Netherlands was one of China’s most important European trading partners. Summing up, he pointed out that 1200 Dutch companies are operating in China, 360 Chinese corporations have subsidiaries in the Netherlands, and that there are 36 twinning arrangements between towns and cities in the two countries: ‘Together, we are creating prosperity, jobs, cultural exchanges, and creative solutions to social issues.’

During the state visit, Dutch companies signed contracts worth €1.5 billion

The king mentioned agriculture, healthcare, transport, logistics, and energy as areas in which Dutch and Chinese people are already cooperating closely. He ended with the following words of praise: ‘Mr. President, under your leadership China is looking for the best ways to secure its decades of unprecedented success for the future. Economic growth and sustainable social development go hand in hand. [..] The Netherlands is delighted to intensify the cooperation that has grown between our countries.This meeting is an outstanding opportunity to do so.’

After the speech, the two couples visited the Keukenhof, where Peng Liyuan christened a new pink and white tulip variety: Tulipa Cathay.

In the days that followed, the media reported that Dutch companies had signed contracts worth €1.5 billion during the state visit. For example, Air France-KLM finalized an aircraft finance deal with the Bank of China.

​Seven years on, it’s apparent that the collaboration between the Netherlands and China has indeed intensified, just as the king had hoped. More Chinese businesses have set up shop in the Netherlands, and Dutch colleges and universities have signed up more Chinese students and doctoral candidates. The Netherlands has rolled out the red carpet for the New Silk Route project linking China to the rest of the world, and boatloads of Chinese tourists clog the narrow waterways in the scenic village of Giethoorn.

From porcelain trade to hired strike breakers

The relationship between the Netherlands and China dates back to the early seventeenth century. The Dutch East India Company (known as the VOC) had long been trying to set up a trading post in mainland China, but had failed. In 1624 however, it conquered large parts of the island of Formosa, now Taiwan, off China’s south coast.

This provided an important source of food supplies for the VOC. From Formosa, it also engaged in a busy and lucrative trade with China, exporting silk, porcelain and other products back to the Netherlands. Thirty-eight years later, the island’s Chinese population rebelled and kicked out the Dutch.

In 1728, the Netherlands finally acquired a trading post in Canton, now Guangzhou, dealing in tea and porcelain, and exchanging the latest in shipping technology. In the second half of the nineteenth century, the Chinese empire was weakened after attacks by British and other troops, and the Netherlands was finally able to sign trade treaties with the country.

It set up a diplomatic mission in Peking, which got damaged around 1900 during an occupation by members of the nationalist Yihetuan Movement, who caused the Boxer Rebellion. After an intervention by international troops, China was forced to pay substantial penalties to the eight countries involved. Although the Netherlands played only a minor role in the intervention, it received 0.17 percent of the fine, equivalent to €400 million in today’s money and payable in 39 years.

Ten years later, the first Chinese people began appearing in the streets of the Netherlands. Their arrival was prompted by a strike that hit the Dutch merchant fleet in 1911. It was broken when Dutch shipping companies hired workers in Guangdong province to replace the strikers. These ‘water Chinese’, as they were called, worked mostly as coal handlers and stokers on the long-haul trade and were housed near the harbours of Rotterdam and Amsterdam. Many of the boarding houses in which they lived, run mostly by Chinese people, gradually expanded into restaurants.

Large numbers of Chinese workers lost their jobs in the crash of 1929 and were forced to go from house to house selling peanut cookies (tengteng) and other items. The ‘peanut men’ became the subject of many novels and songs, including Willy Derby’s 1932 hit Pinda! Pinda! Lekka! Lekka!, roughly meaning ‘Peanuts! Peanuts! Yummy yummy!’.

From 1934 onwards, Rotterdam’s Chinese population fell foul of the city’s chief of police, Louis Einthoven. He detested the poor immigrants, making a distinction between Chinese who had economic value and those he deemed ‘surplus to requirements’. According to him, the latter had no rights, and he shipped them unceremoniously off to China, reducing the number of Chinese people in Rotterdam from around 3000 to 1200. Even after the large-scale deportations were over, Einthoven continued putting small groups of poor and sick people on boats to China, where they spent the entire journey on deck and were dumped ashore without a penny to their name.

After the second world war, there was a second wave of immigration as Chinese Indonesians were repatriated. Many set up restaurants serving a combination of Chinese and Indonesian cuisine, because they missed their home cooking.

More Chinese people arrived in the 1960s, 70s and 80s, primarily from Hong Kong, later on followed by mainland Chinese. Some ended up working illegally in the many restaurants, where working conditions were often poor, due to the increasingly competitive market.

Growing influence

Since the turn of the century, another group has been arriving, consisting mostly of highly skilled and educated students and workers. In 2000 there were a total of 185 Chinese students in colleges and universities; by the 2018/19 academic year there were 4875, plus 400 doctoral candidates, the latter mostly at Delft University of Technology, Eindhoven University of Technology, and the universities of Wageningen and Twente.

In August 2011, the Netherlands Bureau for Economic Policy Analysis (CPB) published a detailed study entitled Honderd jaar Chinezen in Nederland, according to which there were some 100,000 Chinese people in the country by that year. Significantly, it found that second-generation Chinese Dutchmen were highly educated, and women more so than men. The children in this group tend to perform very well at school, reflecting the Chinese culture’s emphasis on hard work and good grades. While many first-generation Chinese still have problems speaking Dutch, one in five of their children speaks no Chinese.

The study does not deal with developments in China, where the CCP is keeping an ever-closer eye on Chinese people abroad. In their 2020 book Hidden Hand: exposing how the Chinese Communist Party is reshaping the world, Australian professor Clive Hamilton and German China watcher Mareike Ohlberg reveal how the party has set up a series of organisations to bring the Chinese diaspora into its sphere of influence.

These include the Confucius Institutes, one of which is associated with the University of Groningen and has been criticised for its close ties with the Chinese government. The AIVD, the Dutch security and intelligence agency, warned in its 2002 annual report that its Chinese counterpart is interfering with the Chinese community in the Netherlands.

The recent Statistics Netherlands’ Internationaliseringsmonitor China 2020-II shows how important China has become for the Netherlands. Xi Jinping was right to say during his state visit that the Netherlands is China’s gateway to Europe: in 2019, it imported goods worth €43 billion from China. More than two thirds of this was re-exported, largely unprocessed, to other (European) countries. In the same year, Dutch exports to China amounted to some €12.8 billion: high-tech machinery, meat, and baby milk sold particularly well. By way of comparison, the Netherlands imported €37.7 billion in goods from the United States in 2019, and exported €26.6 billion. In 2018, we earned €5.6 billion from direct exports to China, which provided some 51,000 jobs.

In the autumn of 2019, Statistics Netherlands published an analysis of foreign companies in the Netherlands. It found that the number of Chinese companies almost doubled in five years, from 245 in 2012 to 470 in 2017 – hardly a tsunami, but still equal to the number of Japanese and Swiss companies in the Netherlands combined. The United States still has the largest number of companies in the Netherlands, at 2875, but the importance of Chinese businesses is clearly on the increase.

Politically controversial

The Dutch government has been working hard on expanding its economic ties with China since Xi Jinping came to power in 2013. And it’s not only the national government : many cities and regions have dispatched delegations in pursuit of lucrative contracts with Chinese companies.

However relaxed these relationships may seem, the issue of human rights is always the elephant in the room. As Amnesty International points out, China has signed ‘a whole series’ of international treaties, but is seeking to circumvent its ensuing obligations by formulating a ‘vision’ of its own. Back in 1991, the Chinese government published a white paper, Human Rights in China, stating that such rights are dependent on a country’s political, economic, social, historical, cultural, and religious situation – a frontal attack on the idea of universal human rights.

According to China, basic human needs must be met before civil and political rights can come into play

In the decades since, the regime has introduced the concept of ‘human rights with Chinese characteristics,’ in which basic human needs must be met before civil and political rights can come into play. Furthermore, collective rights are more important than individual ones, and obligations are as important as rights, or even more so.

In 2017, Xi told the party’s nineteenth congress that China wants to develop a worldwide system of government in which there is no place for universal, indivisible and binding human rights.

The situation has worsened under the current party leadership. While China has for decades oppressed Tibetans and dissidents, in recent years the Uyghurs have been added to the list. An estimated one million members of this Muslim minority have been transported to ‘reeducation camps’, and many have reportedly been subjected to forced labour in factories.

Add to this the persecution of the democratic movement in Hong Kong, strict censorship, an immense surveillance apparatus and the persecution of the Falun Gong and other beliefs, and it is clear that China and western democracy are poles apart. In February, a majority of the Dutch House of Representatives described the Chinese treatment of the Uyghurs as genocide. That same day, a Chinese embassy spokesperson called the accusation ‘an absolute lie’, and said ‘the motion smears China’s reputation and interferes with domestic matters’.

Leaked documents show China‘s detention camps for the Uyghurs | The China Cables / CBS News: The National

A flourishing economy doesn’t necessarily entail more democracy

China is growing by leaps and bounds. Its economy has expanded by an average of 10 percent per year over recent decades, and in 2011 it overtook Japan to become the world’s second largest economic power. It’s only a matter of time until China replaces the United States in pole position.

It was long thought that this growth, and the rise of the middle class, would make China more democratic. But the opposite has happened: with Xi Jinping at the helm, it has become even more of a dictatorship, with the communist party controlling every aspect of life, including what people think and say, and how and where they do business.

And no one is ‘too big to jail’, as Jack Ma discovered. He founded the e-commerce giant Alibaba, and controls its financial partner, the Ant Group. When he left Alibaba in September 2019, the flamboyant Ma decked himself out as a rockstar, complete with leather jacket, chains, wig, and guitar, took to the stage with his A Band, and treated Alibaba’s 80,000 employees to some tunes. After leaving Alibaba, Ma planned to focus entirely on the flotation of the Ant Group, worth an estimated $313 billion, but this was abruptly halted just before the event.

​According to the Wall Street Journal, president Xi personally intervened after Ma had openly criticised the country’s financial watchdog and was distancing himself from the party, of which he was a longstanding member. At the end of October 2020, Ma disappeared off the radar. For months, China’s most successful businessman was nowhere to be seen. Footage of him surfaced three months later, but no official explanation was given for his absence.

China’s boom in the eighties and nineties came on the back of its massive output of cheap clothing and consumer goods. But like Korea and Japan, Xi wanted more than this. In 2015, the party launched its ambitious programme Made in China 2025, with the aim of turning the country into a smart superstate that would take the lead in advanced technology such as robotics, artificial intelligence, chip production, and clean energy. China’s space programme is part of this effort.

Existing companies were merged into vast state-owned corporations that were to be competing globally, and were backed by the government’s overflowing coffers and by state banks.

In his 2019 book The Silk Road Trap: How China′s Trade Ambitions Challenge Europe, Brussels-based lecturer international politics Jonathan Holslag describes the enormous challenges facing western businesses. For example, Dutch and Belgian dredging companies have operated almost worldwide over recent decades, but are now having to compete with the China Harbour Engineering Company, the world’s largest dredging operation. And while government aid is taboo in the west, Chinese companies receive generous state support.

Apart from this unfair competition, Holslag also points out the magnitude of the trade imbalance with China. Europe imports far more Chinese products than it exports its own, and this surplus has already cost EU member states €1.4 trillion. The New Silk Route project, involving heavy Chinese investment in Europe, will make China’s economic and political influence even greater.

Although the European Union has for years been negotiating with China to secure a level playing field, and China has made improvements, their relationship is still unequal. To put it simply, while Chinese companies can do business in Europe with hardly any restrictions, European corporations in China are subject to all kinds of rules. After seven years of laborious talks, the two sides signed a new investment agreement in December 2020, which will be debated in the European Parliament later this year. It is doubtful whether this will level the playing field: China’s reputation for compliance with international agreements isn’t great.

According to intelligence services and think tanks, China’s efforts to become a technology superpower include widespread espionage, theft of intellectual property, and acquisitions of western companies with unique know-how. A recent report by the Dutch security services warned that Dutch companies and academic institutions make an attractive target for spying by, amongst others, China and Russia.

Erik Akerboom, head of the AIVD intelligence service, said bluntly in Het Financieele Dagblad that the Dutch economy is under threat from Chinese and Russian digital espionage. The security services need more money to combat this: they catch Chinese and Russian hackers trying to infiltrate companies and universities on a daily basis, and there are also regular attacks on energy and water companies, banks, and telecoms networks. Akerboom says the danger from China is ‘underestimated’: threatened sectors include shipping, agriculture, aerospace, artificial intelligence, and quantum technology.

Akerboom’s story is nothing new. The AIVD has been warning of the threat for years; its 2010 annual report devoted an entire page to Chinese economic and other espionage. Its 2008 report mentioned ‘digital attacks on government and business computer networks in the Netherlands directed from China’.

​The Dutch government, too, has long been aware that trade relationships with China are complicated. In a 2013 report called Investing in Values and Business, the ministry of Foreign Affairs warned of increasing competition with Chinese companies in third markets, and ‘even in the Netherlands’ itself: ‘They are often subsidized, so there is no longer a level playing field for things like dredgers and green buses.’

Ministry of Foreign Affairs, 2019

In cooperation with China, it has proved difficult, for example, to uphold freedom of expression and respect for property and data privacy

Six years later, in May 2019, the ministry of Foreign Affairs published another policy paper, entitled The Netherlands & China: a new balance. The government is now ‘constructively critical’ of China: it wants the two countries to work together in pursuit of their shared interests, but also wants to make the Netherlands more ‘resilient’ to the risks the relationship exposes it to. ‘It is only logical for China to claim its place in the world, but the government believes that this should occur in a fair manner, on a level playing field and according to internationally agreed rules. We must [..] not accept actions that put European and Dutch companies at a competitive disadvantage.’

This report paints a much more realistic picture than that of 2013. The government sees that China has ambitions and interests which directly affect the Netherlands: ’These involve real threats that can affect national security and corporate interests, such as intellectual property.’ According to the paper, China ‘remains relatively opaque and has different values, and its words and actions do not in our experience always correspond. We must therefore make the risks manageable.’ However, ‘In cooperation with China, it has proved difficult, for example, to uphold freedom of expression and respect for property and data privacy.’

The report continues: ‘A great deal is said and written about China. Some Dutch people are very critical, while others are mainly interested in seizing opportunities. It is important to continue basing our actions on facts, knowledge and nuances, not on gut feelings.’

And that is precisely what Follow the Money plans to do this year, and perhaps for longer. We will be publishing a series of articles examining China’s role in the Netherlands, and its ties with the Netherlands and the EU. We’ll be looking at many different facets, including education, business, diplomacy, human rights, knowledge sharing, cybersecurity, corporate and other espionage, religion, tourism, infrastructure, and transport.