European populist protectionism against China is economic self-harm

"They are taking over our strategic industries."

"They are taking our jobs and our industrial base."

Such old and tired protectionist arguments are being heard around the globe once again. The situation in the U.S. is well-known. Indeed, Peter Navarro, the author of a book and film entitled "Death by China," is now a leading adviser to President Donald Trump.

And the same sentiment is rising in Europe too. In Germany, for instance, the acquisition of robotics firm Kuka by China's Midea Group caused an outcry and months of regulatory delays. This is far from the only example.

I believe that protectionists shouting about the dangers of foreign takeovers are, at best, misguided and, at worst, a serious threat to the very economies they seek to protect.

The dangers of shifting blame

David Freund | E+ | Getty Images

Across Europe, different scenarios are playing out but all point to a deeply misguided attempt to shift blame for internal problems.

Countries such as France and Italy clearly have serious work to do to get their economies back on track and improve living standards. But they have hesitated in carrying out necessary structural reforms. Such reforms are essential to long-term economic health but often painful in the immediate term. With elections looming, it can be much easier to whisper sweet populist nothings into the electorate's ear and blame the problems on someone else.

Germany faces a somewhat different situation; its economy is far more robust but we see wider geopolitical factors at play. Last October, the German government withdrew clearance for the planned takeover of chipmaker Aixtron by Fujian Grand Chip Investment. Of course, Chancellor Angela Merkel too faces rising political challenges, both from Alternative for Germany on the right, as well as from a resurgent left, following the recent change of leadership in the Social Democratic Party.

As we find ourselves in a time of uncertainty and are witnessing a clear rise in populism, we must beware. To appease the populists, or even adopt key elements of their agenda, would simply worsen the situation.

In seeking to scapegoat China as a means to deal with other challenges, the leaders of the three largest economies in the euro zone are in danger of making an historic mistake.

Why China is key to the survival of the EU project

For the first time in its history, the European Union is being openly challenged from both Moscow and Washington – and then there are the problems from within. Because no sovereign state has left the EU before, Brexit is a minefield for all concerned.

At present, China, alone among the big powers, is the one unambiguous friend of the EU and of greater European unity. This is despite the fact that there are a number of bilateral issues to be worked through between Beijing and Brussels, including market economy status, steel exports and the arms embargo, which affects a whole number of goods and technologies deemed to be of dual use.

Earlier this year, it was reported that the EU was sounding out Beijing on an idea to bring forward the annual EU-China Summit by several months in order to cope with the perceived challenges of the Trump administration. If Brussels is truly serious about this, then discordant voices from Berlin, Paris and Rome will not help.

Protectionism does not pay

Lest we forget, China is not only now the one remaining external big power unequivocally in favor of the EU project, it is also the only major power unequivocally in favor of globalization and free trade. Furthermore, it is the world's second-biggest economy and is one of the biggest overseas investors.

Here, President Xi Jinping's speech at Davos in January is particularly pertinent:

"Any attempt to cut off the flow of capital, technologies, products, industries and people between economies, and channel the waters in the ocean back into isolated lakes and creeks is simply not possible... Pursuing protectionism is like locking oneself in a dark room. While wind and rain may be kept outside, that dark room will also block light and air."

We can be encouraged by signs of this message being better received in the UK than in continental Europe. Prime Minister Theresa May has said several times that a post-Brexit Britain will be a global one. Britain has long since welcomed Chinese investment in a whole range of sectors and has seen real benefits. It is irrefutably in the national interest that we continue to do so – and other countries would be well advised to take note.

Dr. Johnny Hon is founder and Chairman of Global Group, an international venture capital and angel investment business, Executive Chairman of Gate Ventures Plc, an investment company specialising in the media and entertainment sectors, and a Director of Infinity Creative Media. You can follow Global Group on Twitter @GlobalGroupHK

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