China's EU envoy urges tough line against Trump's trade policy

Handelsblatt: What can China do to avoid further escalation of the trade conflict with the US?

Zhang: China has made great efforts to avoid that the trade conflict develops into a trade war. And we are making great efforts to avoid the world economy falling victim to such a trade war. But, as we often say, it takes two hands to clap. If only China makes such an effort and the other side does nothing, this will not be accomplished. If such a trade war would be imposed on China, we will fight back as firmly as we are prepared to prevent a trade war.

Handelsblatt: The U.S imposed a 25% tariff on Chinese products with a volume of 34 billion Dollars. How severe will be the consequences for the Chinese economy?

Zhang: Once the trade war actually breaks out, nobody can be a winner, neither China, nor the EU. America itself would not be a winner either. But a policy of compromise or appeasement would only be counterproductive. We must have the determination to show the initiator of the trade war that this is a wrong thing and it cannot go ahead.

Handelsblatt: President Trump is already threatening another round of tariffs targeting Chinese products worth 200 billion US Dollars. Would China retaliate again?

Zhang: China will not give up any opportunity to prevent the whole world from falling into the danger of a trade war. But if the threat is actually turned into reality, and the trade war is imposed on us, China will fight back firmly as well. The Chinese people love peace, and I think the same is true for Europeans. We don't want to see any kind of war, including a trade war. So, we must let the initiator of the trade war know that it's wrong to do so.

Handelsblatt: The consequences of such an escalation for the Chinese and the world economy would be very serious…

Zhang: Very serious, yes.

Handelsblatt: There are concerns about the financial stability of China. The currency and share prices are under pressure. Is this a serious point of concern for the government?

Zhang: In case of an outbreak of a trade war, the whole world economy would be severely affected. The consequences you just mentioned might happen in many members of the international community. That's why we have to say No very firmly to the initiator of such unilateral and protectionist behavior.

Handelsblatt: Is the European answer to this American unilateralism firm enough?

Zhang: China and the EU have broad shared interests and also consensus on upholding the rules-based multilateral trading system. And the EU's approach is similar to ours. Both sides have strong determination to address the situation.

Handelsblatt: Washington is demanding Beijing to change its industrial policy as outlined in the "Made in China 2025' strategy. Is that negotiable for your government?

Zhang: I think it's groundless for the US to target the "Made in China 2025' policy. The strategy aims to provide strategic and information guidance for the upgrading of China's manufacturing sector. Its nature is therefore very similar to the EU industrial policy strategy released by the Commission last year or Germany's Industry 4.0 strategy. In drafting the strategy, we have made sure that it's consistent with China's WTO commitments. If partners have different views on this, we're open for discussion, but in the multilateral framework and not resorting to unilateral actions.

Handelsblatt: Prime Minister Li Keqiang met the Heads of 16 Eastern European Countries on Saturday in Sofia. Many European officials see this initiative as a way of increasing Chinese influence in the region, as well as in the EU.

Zhang: In the past six years, the "16+1' cooperation has brought important progress in terms of economic and trade cooperation, marked by growing trade, investment, tourism, etc. Both the 16 CEE countries and China are satisfied with the cooperation. We see this cooperation as an important part of China's overall relations with Europe. And we believe greater development in this region will contribute to the integration process of Europe. I also want to emphasize that "16+1' cooperation is open and transparent. It is a tradition that we invite EU leaders to "16+1' summits. Every summit has EU observers.

Handelsblatt: Member States such as Hungary and Greece have blocked unanimous EU decisions targeting China several times. Is China using its strong economic relations to these countries to split the EU?

Zhang: China has strong economic relationship with many countries. But we do not think that economic issues should be politicized. As to the Hungary and Greece cases you refer to, China appreciates the objective positions they upheld. But there is no linkage with China's economic cooperation with these two countries. Business is Business.