There are many aspects of the EU-China relationship where tension is now as prevalent as cooperation. Many European diplomats see renewed Chinese assertiveness across a range of policy spheres, from human rights to the environment. And they ask themselves whether this portends definitive failure of the EU’s efforts at positive engagement. But one policy area especially prominent amidst such calculations is that related to Europe’s on-going financial crisis.

Monetary issues have come to dominate EU-China relations. The European Union has pressed the Chinese authorities to revalue.  European exports to the Asian giant are even more acutely in need of a boost to help recovery from the worst economic crisis in decades. Of course, the US is also trying to press Beijing in the same direction. Chinese president Hu Jintao has promised a reform of the exchange rate system, but has not set a firm agenda and seems unlikely to move forward any time soon. Indeed, the peg to the dollar remains and the renminbi if anything faces some downward pressure.

This will engender tension during this year’s G-20 meetings, but the only thing Westerners can do about it is complain.

For decades, Europe was convinced that the prevalence of its soft power would suffice to attract and convince the Chinese. But after the Copenhagen summit deception, it became obvious that such a strategy was not working. Despite being China’s largest trade partner and an important supplier of technology,  the European Union is not perceived or treated as a single global actor by Beijing. China pays special attention to its international relations with neighbouring countries such as Russia and Japan, and then with the United States, followed by the United Kingdom, France or Germany.  On the other hand, China continues to be the ‘great unknown’ for most people in Brussels.

But the rules of the game are starting to change. According to this week’s headlines, China is planning to invest several billion Euros in Greek strategic sectors such as shipping, airports, and logistics. This is the result of prime-minister Papandreou’s efforts to attract foreign investment from countries with big sovereign wealth funds. It is expected that joint ventures between Greek (some of them state-owned) and Chinese companies will be formed. So far, many joint ventures have been established between European and Chinese firms, but in most cases these were aimed at taking advantage of lower production and labour costs in China, and also to enter the huge and hungry Chinese consumer market. Much has been said about the country’s ‘incursions’ into Africa or Latin American in search of natural resources, but its arrival onto the European corporate landscape had been timid until now.

So let China save the trembling European economies. Foreign investment has always been an efficient way of supporting economic recovery and growth. This happened, for example, in Spain twenty years ago, when markets opened and investors started to buy Spanish companies and stocks. Apart from revamping of the Spanish economy, foreign investment helped to modernise management structures and practices, contributing largely to the modernisation of the country as a whole. This was despite many voices arguing against a foreign capital invasion and the concomitant loss of sovereignty.

Unfortunately, most European reactions to the crisis are pushing in the opposite direction. New regulations disadvantage foreign investment flows. Governments are retreating back into home-country variations in regulatory structures, even as they issue calls for global coordination. Many in the EU feel that the way to take on Chinese assertiveness is through geostrategic toughness more than mutually beneficial interdependence.

They point to the need for more strategically managed trade to reduce the EU’s near-200 billion euro trade deficit with China. Trade talks between the EU and China have atrophied.

Such fears are understandable. But the EU needs to think longer-term and try to extract opportunity from its current economic woes: the opportunity of ensuring that China tie itself fully to the fate of the global economy. This is needed to advance towards the ‘internationally responsible’ China that Western policy-makers have long been calling for.

Cristina Manzano is editor-in-chief of Foreign Policy Spanish Edition
Richard Youngs is director general of FRIDE