On May 17th Spain’s Minister of Foreign Affairs, Alfonso Dastis, met with his Chinese counterpart, Wang Yi, in Madrid. The meeting, which also included an audience with King Filipe and Prime Minister Mariano Rajoy, was held in order to reaffirm the friendship between the two countries. Over the past several years, Spain has deepened its economic ties with China, with trade, investment, and tourism having expanded considerably since the onslaught of the financial crisis.
Last week’s meeting took place in the context of the 45th anniversary of the establishment of diplomatic relations between Spain and China. While trade between Spain and China dates back to the 1500s, their economic ties weakened in the 19th century and were only lately revitalized. Under the control of Francesco Franco, Spain not only established diplomatic relations with China, but also provided the country with loans in order to help Spanish firms gain access to the Chinese market. This flow of capital has recently been reversed with China now believed to be the largest non-EU holder of Spanish government bonds.
One of the key areas of cooperation discussed between the two foreign ministers was Spain’s participation in China’s One Belt One Road initiative. The initiative was introduced by Chinese President Xi Jinping in 2013 in order to promote trade relations between more than half the world’s population. It includes an ambitious plan to build maritime routes and land infrastructure networks between China, Asia, Africa and Europe.
For Europe in general and Spain in particular, the One Belt One Road initiative provides a potentially lucrative economic opportunity. Spain, unlike some of its European counterparts, has been a supporter of the project from its inception. Madrid hopes to act as a regional hub for trade between the 70 or so countries committed to the initiative. As well, One Belt One Road will expand export markets for Spanish firms and offer opportunities to bid on construction projects. Consequently, Wang and Dastis used the meeting to explore how they could further this mutually beneficial cooperation.
The two ministers also hashed out some of Spain’s concerns relating to the its bilateral trade relationship with China. China is now Spain’s largest non-EU trading partner. While last year, Spain’s exports to China increased by 28%, the former still has a trade deficit with China worth around €19 billion. In response, China has agreed to strengthen its consumer marketplace and open itself up more to Spanish goods and services.
China has become an increasingly important source of investment in Spain. In 2016 alone, China invested around €1.7 billion in Spain. However, this deluge of Chinese funds is a recent phenomenon. Despite being the 5th largest economy in the European Union, Spain was the last of Europe’s major economies to attract Chinese investment. The fourfold increase in investment between 2015 and 2016 means that Spain is now the 7th most popular European country for Chinese investors.
In addition to trade and investment, Wang and Dastis also talked about how they might increase tourism between their two countries. Spain, which is the 2nd most popular tourist destination in the world after France, welcomed more than 700,000 Chinese tourists last year. Tourism is a significant driver of economic growth in Spain. Attracting a larger proportion of the more than 130 million Chinese citizens who travel abroad each year could provide significant financial benefits over the short and long term.
Given the context of rising protectionism and Chinese economic ascendency, Spain’s willingness to expand its economic links with China should be lauded. The relationship between the two countries is mutually beneficial and could provide positive spill-over benefits via the One Belt One Road initiative, investment, and tourism. Overall, there are good reasons to remain optimistic about the future of Spanish – Chinese cooperation.