Luxembourg has followed Italy by becoming the second EU member state to sign an agreement with China to cooperate on its controversial Belt and Road Initiative. Italy was criticised earlier in the week when it became the first G7 member to support the investment and infrastructure project. CNBC asked whether the Rome government was “playing with fire” by signing a memorandum of understanding last Saturday.
French president Emmanuel Macron has called for a united EU approach to China and on Tuesday said that “for many years we had an uncoordinated approach and China took advantage of our divisions.” German chancellor Angela Merkel has also urged the EU to adopt caution and said that any decision to support the Belt and Road Initiative “must lead to a certain reciprocity, and we are still wrangling over that bit.”
As Bloomberg explains, the Belt and Road development strategy has “caused concern about China’s increasing reach and influence.”
Mersch says EU is open
Former Luxembourg Central Bank chief Yves Mersch, now a member of the executive board at the European Central Bank, seemed to reject French and German calls for more protective policies. In an interview with CNBC Mersch said that the European Union is “still the most open economy that exists around the globe” and argued that the it should continue to be committed to “multilateral global frameworks”.
He did, however, admit that other jurisdictions would not always play fair. “If the whole world is playing rugby we cannot continue to play football,” he told CNBC’s Annette Weisbach. “That makes it one reason why we have to reflect a little bit on where our bottom lines are for certain [European] values.”
Watch the Mersch interview here:
Bilateral relations
But Xavier Bettel was eager to play up the strengthening of bilateral relations between the grand duchy and China. Just last year, the Bank of China listed €700m in bonds in Luxembourg as part of the Belt and Road initiative. And in 2018 finance minister Pierre Gramegna said that the Chinese authorities clearly view Luxembourg as the ideal base for Chinese banks to develop in the European Union.
“The signing of this agreement represents a new stage in the development of Sino-Luxembourg relations and our cooperation in economic, commercial, academic and cultural activities, as well as research and development,” the prime minister said.
Bettel was in China to attend the Boao Forum for Asia, which is styled on the Davos World Economic Forum and takes place on Hainan Island. “The presence of a Luxembourg delegation at the Boao Forum for Asia is testament to the quality of our ties, Bettel said. “The aim of our participation in the forum is to deepen them, especially in the economic, finance and logistics fields.”
On Thursday morning Bettel addressed the opening plenary of the forum, which has as its theme “Shared Future, Concerted Action, Common Development”. He followed speeches by Ban Ki-moon, Chairman of the forum and Chinese premier Li Keqiang. Bettel was also scheduled to meet his counterparts from South Korea and Laos for bilateral talks.