Spain and China: A European Approach to an Asymmetric Relationship
October 15, 2019
In 2009, then-Chinese prime minister Wen Jiabao called Spain “the best friend of China in Europe.” Spain was the first EU country to have a foreign minister visit Beijing after the 1989 Tiananmen Square protests and later sought to lift the EU arms embargo against China. In the midst of the 2008-2010 financial and economic crisis, which impacted Spain particularly hard, China purchased significant amounts of Spanish debt (about 12 percent of the debt in foreign hands in those years) and became its second-largest international creditor. So far, Spanish policy toward China has been politically bipartisan.
Spain established diplomatic relations with China in 1973 and has had an integral strategic association agreement since 2005 accompanied by 14 practical agreements on issues such as the exchange of cultural centers and cooperation in civil nuclear energy in order to achieve parity with China’s bilateral relations with other EU members. The level of Chinese investment in Spain is comparable to the European average but not with Germany or the United Kingdom. Spanish capital going to China is also low compared to other major European countries. China ranks just twenty-third in Spanish investment in foreign countries (0.7 percent of the total), and Spain ranks seventh for Chinese investment within the European Union (other sources put it ninth for 2000-2018).
The economic relations between Spain and China are asymmetric. Trade with China represented 73 percent of the total Spanish trade deficit but just over 2 percent of Spain’s exports and only 4.7 percent of China’s trade surplus in 2017. But these figures are growing as imports from China in 2018 rose to 26.9 billion euros compared with 6.2 billion euros of exports in 2017.
Despite growing economic relations between Spain and China, Spain’s political appeal for China has diminished somewhat. Madrid has lost part of its naivete toward Beijing, has aligned its views more closely to the positions of France and Germany, and differentiated itself from other southern European countries such as Portugal, Italy, and Greece in terms of its approach to the Belt and Road Initiative (BRI), whose memorandum of understanding (MoU) the Spanish government refused to sign in contrast with the other southern European countries.
Spain is a founding member of the Asian Infrastructure Investment Bank and has participated in the BRI summits. As far as the BRI is concerned, Spanish companies see business opportunities, but there have been some points of contention. During Chinese president Xi Jinping’s state visit in November 2018, Spain declined to sign the MoU in support of the BRI due to concerns over some of its major government partners in the European Union being strongly influenced by China, the lack of guarantees of investment transparency, the questionable economic and environmental viability of some projects, and the excessive debt in which the beneficiary countries were incurring. The decision not to sign was also a gesture of goodwill toward the United States. But 22 European countries (11 from the European Union) have signed onto the BRI, and an important number of countries are participating in the 17+1 (since Greece joined) talks with Beijing. Nonetheless, the joint declaration during Xi Jinping’s visit to Madrid recognizes the potential of the BRI and calls for synergies between it and the EU’s Asia connectivity plan.
Spanish prime minister Pedro Sanchez supported the EU Commission position that declared China “an economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance.” But this does not mean that Madrid is fully on board with the U.S. view of China as a near-peer competitor and its most significant geopolitical challenge. Rather, Spain is pursuing a “third way” for European policy (which will not be easy to conceptualize and implement) and must consider different economic, geopolitical, and security concerns and interests than the United States.
Spanish firms, but not Spanish citizens, are very positive toward investments from China, although less enthusiastic about investments in China as they have experienced difficulties operating in China. Spanish public opinion regarding Chinese investments in Spain is interesting: According to a 2017 poll by Elcano Royal Institute, Spanish citizens perceive that a great deal of Chinese investment has come to Spain, which is untrue. Moreover, according to the 2017 poll, 22 percent of Spaniards disapprove of Chinese investment in Spain while only 14 percent approve of them.
Although the Spanish government encourages greater Chinese investment, it also supports greater strategic scrutiny or review by the European Union. Spain is one of 12 EU members that has a national security screening system. Madrid is more careful about strategic investment after the 2017 acquisition by China Ocean Shipping Company (COSCO) Hong Kong of 51 percent of the container ports of Bilbao and Valencia. COSCO has expressed interest in a similar operation in the port of Barcelona. In addition, the state-owned China Three Gorges Corporation had already acquired a major stake in Energias de Portugal, which is closely interlinked with the electricity and gas market in Spain, and the Madrileña Red de Gas, Madrid’s gas network. An EU-wide investment screening process could have foreseen the consequences for interconnected markets.
In the scientific and technological area, Spain has yet to define a strategy as a country toward China. The deployment of a 5G network is a priority for Spain, and Chinese technology dominates the market, which is why the U.S. dispute with Huawei is causing problems for some telecom firms such as Telefónica (the largest), which has invested heavily in Huawei’s 5G equipment. Since the dispute began, Telefónica has observed that other Western or European alternatives, like Ericsson and Nokia, have raised their prices due to higher demand. However, the Spanish government is aware of possible security problems and wants to diversify its information technology (IT) supplies in this field. There is also a concern over cyberattacks from China and its links with 5G and related Chinese equipment. According to the Elcano Royal Institute, Spain is the country that receives the most cyberattacks, and in 2018, China launched the second-most attacks on Spain (after North Korea). Many of these attacks targeted ministries or commercial companies according to the latest public intelligence report. Spain acknowledges the security threat from China but does not view this as a military challenge for the moment. Its military relations with Beijing are at a very low level.
Although Telefónica and other companies operating in Spain are seeking to reduce their dependency on Huawei in Spain, they are not reducing their dependency for their operations in Latin America, which is fast becoming a region of cooperation and competition between Spain and China. Beijing has helped to rescue financially several states in the region in exchange for access to natural resources (e.g., minerals, oil, agriculture). Chinese companies are increasingly interested in Latin America—with an emphasis on Venezuela—and in the activities in the region of Spanish firms, particularly in infrastructure construction and exploitation and in IT (many forget that China’s BRI covers parts of Latin America). The idea that Spain could serve as a bridge to China in Latin America is no longer contemplated as the Chinese deal directly in the region, but China still values Spanish experience. In 2005, the main competitor of China in Latin America was Spain. Presently, it’s Britain and France according to a report by the Brussels-based think tank Bruegel. China has taken over the European Union as the second largest trading partner (after the United States) in the region.
Chinese tourism to Spain is growing and will reach one million by 2020, in addition to the 200,00 Chinese immigrants already in the country. Spanish soccer is also of major interest to the Chinese. Three Spanish clubs have Chinese capital, and Real Madrid and FC Barcelona have millions of followers in that country. Nonetheless, the growth in tourism and soccer enthusiasm are not matched by the same kind of dynamics in economic and cultural relations.
As far as Chinese human rights are concerned, Spain has been careful not to renounce or defend them and has followed the general line of the European Union regarding the importance of the promotion and protection of human rights and fundamental freedoms. Madrid leans on the European Union to maintain a human rights dialogue with Beijing. Spain has also been systematically supportive of all the statements and letters with which the European Union and like-minded governments have reported abuses in China, including the treatment of the Uyghur population in Xinjiang. Due to Chinese political pressure, Madrid renounced in 2014 and 2018 the principle of universal jurisdiction by which Chinese government officials could have been prosecuted in Spain for human rights violations. The Spanish government has been muted on the recent protests in Hong Kong and is satisfied with the mild communique of the EU High Representative. This lack of reaction also has to do with domestic factors. Recently a pro-Catalonia independence party, Junts per Catalunya, has compared the situation in Hong Kong with Catalonia and some pro-independence activists have suggested that the protests may be a model to their future actions.
Even if there is a high degree of economic and technological interdependence between Spain and China, Spanish enthusiasm for Chinese investments has waned, and Beijing has found others in the European Union (Hungary, Greece, and Italy) that are more enthusiastic and politically more malleable. Ultimately, Spain does not wish to be caught in a competition or decoupling between the United States and China; it seeks a European Sonderweg (“special path”) on the basis of reciprocity, mutual benefit, and respect for international law, though internal EU divisions will make it difficult to achieve.
Andrés Ortega is a visiting fellow with the Europe Program at the Center for Strategic and International Studies in Washington, D.C.
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