Céad míle fáilte for the new Chinese leader
China’s vice President could have chosen state banquets in Berlin or Paris for his recent trip to Europe. This wasn’t just any visit – it was the introduction of Xi Jinping, the man tipped to become the next Chinese leader, to the world. But instead of either of those venues he chose to tour Croke Park in Dublin indulging in a spot of Gaelic games on the way. After heading to the US, en route to Turkey, Jinping went to Ireland.
The official Chinese itinerary is extremely telling. Beijing chose one of the smallest nations in the currency bloc for Jinping’s visit and this will be followed with a trip by Irish Taoiseach Enda Kenny to China scheduled for next month.
So why did China choose Ireland? The official line is that Ireland and China have a history of friendship and have built up important business and trade links, especially in agriculture where Ireland exports more than EUR 200 million worth of produce to China each year. However, bi-lateral trade between Ireland and China is tiny compared to that between Germany and Beijing. If you read between the lines then the visit may have a subtle subtext.
Interestingly, Ireland could teach China a thing or two. Its low corporate tax rate and stable political climate has attracted some of the world’s largest corporations, many of whom – including Google and Facebook – now base their European operations out of Dublin. Just this week PayPal announced that it was creating 1,000 jobs and establishing a major presence in Ireland in the coming months.
Not even the banking/sovereign debt crisis back in 2010 stopped these companies coming to Ireland; in fact more businesses have moved their headquarters there in the past two years, helping to make use of the excess office space generated by the collapse of some of Ireland’s banking giants.
While some of the world’s most innovative corporate names have been making Dublin their home, China is still viewed with suspicion by the world’s biggest companies, especially in the tech sector. Google and Facebook have limited operations there and while they may desire to tap into the huge demand potential that China offers they are not willing to risk their businesses to patent piracy etc.
So if China’s new leader wants to improve relations with the world’s largest corporations then Ireland is not a bad place to associate himself, especially in light of the strong relationships Dublin has with global business heads.
Secondly, Jinping’s visit may have been a show of official support for Ireland’s efforts to reign in its public finances. This is symbolic since China, and most importantly Chinese funds, are considered one of the solutions to stabilising the European sovereign crisis.
Ireland is considered the “poster child” of the crisis. This is far more glamorous than the reality especially since Ireland may find itself in another technical recession when it releases growth figures for the last three months of 2011 at the end of March. However, Ireland has done a remarkable remedial job on its finances in recent months. After recording a budget deficit of more than 30% of GDP for 2010 this is expected to drop to 8.8% in 2012.
Cuts in public spending including public worker salaries and pensions, and a major overhaul of the welfare system, have helped get Ireland over its crisis. In comparison to Greece, which has continually missed deficit targets and eventually required a second bailout, Ireland seems a sea of calm. That doesn’t mean the cuts and fiscal consolidation have been easy, they haven’t. However, the government has stuck to its plan and quietly gone about bringing its finances back on track while using its global corporate connections to draw more business into the country and regenerate the economy. These are the type of results that China want if they are going to pledge money to support Europe in its time of need.
China and Ireland have more in common than some think. Both are trying to reinvent themselves. Ireland can benefit from China transforming itself from the world’s factory to the world’s market place and the source of demand that offers Irish companies and exporters. Ireland can offer China an example of how to develop deep economic ties with the world’s top businesses.
And Jinping’s visit seems to be more than just a passing flirtation now that Kenny has signed up to go to Beijing in March. Talk about friends with benefits.