China’s view of the world puts Ireland between a rock and a hard place

The message was gloomy at a recent conference on Ireland and China, held in Dublin, with speaker after speaker talking about China’s rapidly deteriorating relationship with the West.

A trade war, a new cold war, even military conflict between the US and China – both nuclear powers – were among the prospects reviewed by experts from Ireland, the US, the Czech Republic, Latvia, Finland, the United Arab Emirates and elsewhere. The Chinese embassy in Dublin was invited to the conference, organised by University College Dublin and Notre Dame University, but did not take up the offer.

The increasingly inhospitable climate in China towards foreign journalists – where The Irish Times is the only Irish media outlet with a full-time correspondent – was another topic aired.

Washington DC-based US-China correspondent with the Financial Times, Demetri Sevastopulo, who is from Dublin, said he was an optimist by nature but not optimistic about the likely direction of relations between the West and China over the coming years. One way in which the situation might improve, he said, would be if the Chinese supremo, Xi Jinping, was replaced by someone less authoritarian, but he does not see that happening.

Xi (70) has been the general secretary of the Chinese Communist Party (CCP) since 2012, and president of the People’s Republic of China since 2013. In 2014, he launched the “strike hard” campaign against Uyghur and other Turkic-Muslim peoples in Xinjiang province, and he has stood by his ally, the Russian president Vladimir Putin, in the wake of the latter’s invasion of Ukraine.

His leadership has also been marked by growing tensions over Taiwan, a clampdown on Hong Kong, and an increasingly aggressive attitude towards the West.

One of the speakers at the Dublin conference, Prof Steve Tsang of the University of London, is an expert on Xi’s thinking. He said the important point to understand when thinking about Xi is that the Chinese leader’s vision is a global rather than a regional one.

“He has a common destiny for humankind. He has a global initiative, for development, for security, for civilisation. The guy is completely thinking in global terms and what he wants is, effectively, to put in place an alternative international order, one that is, from his perspective, vastly better, more equitable, and superior in every way to the existing, liberal international order which, from the Beijing perspective, is an international order of the West, by the West, and for the West.”

Xi’s ambition is, he said, attractive to autocratic leaders in the so-called global south who are being told that no one has the right to tell them what kind of political systems they should have in their countries. Xi’s appeal is to these leaders rather than the people who live under their autocratic regimes, Tsang said.

Trade between Ireland and China was discussed by Alexander Davey, an expert on the CCP who takes a particular interest in Ireland’s relationship with China. Davey, who is also from Dublin, is an analyst with the Mercator Institute for China Studies in Berlin, which was sanctioned in 2021 by Beijing after the EU imposed sanctions on senior CCP figures accused of involvement in repression in Xinjiang.

“My thesis is that Ireland has become a site for US-China competition and it is very important for Ireland to look at how to manage that and deal with that appropriately,” Davey told the conference. Ireland has sought in recent times to reduce dependence on US foreign direct investment by introducing more investment from China. Ironically, this happened just as the rest of the world was diversifying away from China, he said.

One of the issues raised by Davey was the precipitous fall last year in the value of exports from Ireland to China. That decline, from €13.2 billion to €8.9 billion, is largely explained by a drop to €3.6 billion from €8.3 billion in the value of microchip exports, nearly all of which come from Intel’s plant in Leixlip, Co Kildare, and go to Intel operations in China.

Intel, a US corporation, is facing a situation where Washington DC is growing increasing unhappy about exporting technology to China, and China is becoming increasing wary of western technology.

“You have the export restrictions [from] the Biden administration,” Davey told The Irish Times. Meanwhile in China, “they are trying to have greater self-reliance in the production of semiconductor chips. They know that the world is closing its door on China, and they are saying ‘we need to figure this out ourselves. We cannot build the cutting-edge chips but we can build middle of the road type chips’, and they are trying to do that.”

Both these developments create pressures for Intel, which employs about 5,000 people in Leixlip.

According to IDA Ireland, its three offices in China continue to target Chinese corporations involved in business services, software, IT services and industrial equipment sectors. It has, it said, almost 40 Chinese client companies in Ireland which together employ more than 5,000 people. Some of these are at the heart of current tensions between China and the West.

TikTok, which employs about 3,000 people here and disputes its characterisation as Chinese, faces the possibility of being banned in the US unless it is sold to a new owner. Closer to home, the Irish National Cyber Security Centre advised government departments and State agencies against the use of TikTok on official devices.

“It is about a risk to the integrity of the data on the device and risks of other kinds of active manipulation,” the head of the centre, Richard Browne, said. EU officials do not use TikTok on their devices because of cybersecurity concerns.

IDA-supported Chinese medical products and research company Wuxi, a former subsidiary of which collected DNA data from thousands of Irish citizens as part of a research programme, is also the subject of national security concerns in the US, including in relation to healthcare data from Covid test labs.

Huawei, another IDA-supported Chinese corporation which has extensive research links with Irish universities, is the subject of international concerns that the use of its products in telecoms systems constitutes a security risk. (Prof Ben Tonra of UCD told the Dublin conference that Ireland simply does not have a system for giving Irish people or Irish organisations security clearance.) Earlier this month the US banned the export of Intel microchips for use in Huawei laptops and hand-held devices.

Earlier this week, Huawei said it makes an €800 million economic contribution to Ireland annually, according to a report by research firm Amárach.

The tensions are not restricted to tech products. The rapidly growing online retail businesses Shein and Temu, which facilitate online sales globally from Chinese clothing manufacturers, have established corporate operations in Ireland in recent years against the backdrop of rising anti-Chinese sentiment in the US. When the US Select Committee on the CPP wrote to the two companies in relation to a US law that bans Chinese cotton produced with the use of forced labour in Xinjiang, the letter to Temu was sent to 25 St Stephen’s Green, Dublin, site of Temu’s executive offices.

In an interim report in June last year the US committee, citing the response received from Temu, said the retailer does not try to prevent third party sellers from selling clothing made in Xinjiang.

Concerns about forced labour in Xinjiang have also been raised in relation to clothing produced for western clothing brands and western retailers, and in non-clothing sectors such as car manufacturing and solar panels.

Just as the US authorities are concerned about western technology being exported to China, the Chinese are worried about western technology being used in China. The Beijing regime has imposed restrictions on the use of Tesla cars near resorts where top CCP officials take their vacations for fear that the data collected by the cars might constitute a security risk. Military personnel and people employed in key state companies have been banned from using Tesla cars for the same reason.

“Last month the Chinese government talked about the removal of western chips from government devices like desktop computers, laptops and phones that are within their civil service,” said Davey. “This is part of this national securitisation [phenomenon]. America’s national security sphere is expanding, China’s is expanding, Ireland’s is starting now. What does this mean? Everything becomes a national security risk, and this is impacting Ireland’s trade with China.

“The US is saying it is dangerous to export these chips [because] they have dual-use technology that will make them useful for weapons, for missiles and drones, and they say we can’t let the Chinese have these chips. And then you have the Chinese saying we can’t trust these chips, we don’t know what they can do and what kind of access they can get to our devices. And Ireland is in the middle of this because of its FDI model.”

The growing interest among larger western countries in financially supporting key sectors and key corporations as trade tensions mount creates huge challenges for Ireland, Davey believes, and threatens its strategy of using low corporation tax rates to attract FDI.

“It is a threat to the whole model because we are moving towards this industrialised, subsidised, model.…We went towards opening our economy but now [the world] is moving in a different direction.” Ireland may end up have to provide financial support to US multinationals to encourage them to maintain operations here, he said.

One of the current flashpoints with China is in respect of electric cars, with news likely next week as to whether the EU will impose tariffs to address what it alleges is the subsidisation by China of its e-vehicle sector. Cheaper Chinese e-cars are flooding into the European market, causing concern in Brussels.

Central Statistics Office data shows that the value of electronic car imports from China into Ireland went from €19 million in 2022, to €244 million last year, and €106 million in the first three months of this year.

The EU, which has greater overall exposure to China than does the US, is anxious not to get into an all-out trade war but it is determined to protect its car industry. It believes its failure to protect its solar panel sector from subsidised Chinese imports allowed that sector to be destroyed and does not want to see the same happen with car manufacturing.

The objective of any tariffs will be to level the competition playing field and the hope in Brussels is that China will recognise that it has got away with acting unfairly for quite some time and will avoid a trade war out of self-interest.

If China does respond, Ireland, as a small, very open economy with huge pharma and tech sectors, has a lot to lose.

So too, perhaps, have more domestic sectors, including agriculture. One of the issues discussed at the Dublin conference was China’s practice of targeting the agricultural products of countries that have annoyed it, knowing that angry farmers are a problem for politicians in democracies. When China imposed tariffs on European cognac earlier this month it was widely seen as a way of targeting France which Beijing perceives as being gung-ho in relation to tariffs on Chinese e-cars. Chinese tariffs on Australian wine some years ago had a devastating effect on the sector.

The Chinese embassy in Dublin in a statement said China’s strengths in the electronic car and new energy sectors are the result of reduced production costs brought about by technological innovation, and not government subsidies. China and the EU are each other’s second largest trading partners, it said. “It is important for both sides to handle specific economic and trade issues through dialogue and consultation.”

At the Dublin conference Theresa Fallon, director of the Centre for Russia, Europe and Asia Studies in Brussels, resisted cold war framing in relation to the deteriorating relationship between China and the West. “The Soviet Union didn’t trade with the rest of the world,” she said. China is a top trading partner for countries around the globe. “The cold war was like a cake walk compared to all the entanglements we have today.”