Solving Sweden’s China Puzzle

While the commission of inquiry does not explicitly name investment from China or any other country as a focus of concern, the debate in Sweden and many other parts of the EU has clearly been focused on Chinese acquisitions.

The Swedish Security Service, the agency responsible for counter-espionage, has stated that Sweden is “undoubtedly in the Chinese sphere of interest” in terms of strategic investments and acquisitions, but also as a target for intelligence activities. In 2019, Chinese intelligence threats to Sweden had increased further, the agency said.

Lars Fredén, who served as Sweden’s ambassador to China from 2010 to 2016 – the period during which most of the Chinese acquisitions in Sweden were completed – says Sweden lacked an awareness of these threats. “Sweden represents a combination, which is unique in the West, of high technology capability – which often has direct military applications – and limitless naïveté,” Fredén said at a 2019 seminar about the government’s China strategy.

Existential Values

All of these political and economic factors contributed to the formulation of the Government Communication, “Approach to matters relating to China,” which was released on October 2, 2019. This was the outcome of the work on a China strategy that State Secretary Söder had said was ongoing nine months earlier. In the white paper, the government outlined “Sweden’s relations with China and the Government’s approach to matters relating to China.” The approach included all policy areas, from security and defense to culture and media.

This was the first time Sweden had articulated a policy on China since the launch of its “Asia strategy” in 1999. The “Asia strategy” had been updated just once, in 2002 (discussed below). At that time, China’s exports accounted for just five percent of global exports in goods. By 2018, however, China’s share of global exports had risen to over 13 percent.

In 1999, there was still a strong belief among Swedish policymakers that engagement with China on trade, investment and other matters would lead to a more liberal political climate in China. In the previous year, China had signed the International Covenant on Civil and Political Rights (ICCPR) and had vowed to ratify it. The government’s Asia Strategy referred to Beijing’s pledge as “a new foundation (…) for dialogue and co-operation with China in this area of central importance.”  

Already in the updated strategy in 2002, the lead authors had noted that China had not lived up to these expectations. The Chinese government had, in fact, not ratified the ICCPR. (It still has not, and some have now asked whether it shouldn’t un-sign the Covenant). Instead, they noted that developments in China had been negative in many areas, including the enforcement of capital punishment, the prevalence of torture and an apparent deterioration in the rule of law. The situation in Tibet and Xinjiang had worsened, religious groups had been persecuted and banned, and followers of the Falun gong movement had been subjected to detention and torture.

After Xi Jinping came into power ten years later in 2012, Swedish policymakers slowly began to realize that many of the observations made in 2002 were still valid and that political reform was visible nowhere on the Chinese Communist Party’s agenda. The Party’s suppression of individual freedoms in Hong Kong (and the detention of Gui Minhai as part of this clampdown), China’s military build-up and the militarization of the South China Sea, an ever-tightening isolation of Taiwan from the international community, and programs to assimilate Uighurs and other Muslim minorities by force are just a few issues that have exacerbated the sense that Beijing has little interest in the rules-based order favored by Sweden.

Sweden’s main opposition party, the liberal-conservative Moderate Party, has come out as the most vocal proponent of a tougher stance on China. In April 2018, party leader Ulf Kristersson noted in an op-ed that there was a need to defend “existential values” in Europe – even if it this had negative consequences for business and trade with China. His concerns over China’s political development in many aspects foreshadowed the criticisms that would come in the China strategy communication, “Approach to matters relating to China,” in 2019:

The optimistic belief in ’liberal’ political reforms a few years ago has not been met in any way. To the contrary, the Communist Party of President Xi has strengthened its grip on China’s most important institutions, and on business. As a result, some of the world’s most technologically advanced and most valuable internet companies are now living side by side with the world’s most advanced internet censorship. These are new times.

But in its China communication, the Social Democrat Party-led government was more restrained in its depiction of the direction China was heading, characterizing the relationship as a balance of “opportunities and challenges.” The introduction summarized the communication in a single sentence: “China’s development presents both opportunities and challenges that concern an increasing number of the Government’s policy areas.”

The 22-page policy paper described Sweden’s current relationship with China in a relatively diplomatic manner, leaning on statements from the European Union and Swedish intelligence for many of the more critical assessments. After stating that the EU is a cornerstone for Sweden’s China policy, the paper laid out the government’s approach to China in most major policy areas, from security and defense to culture and media, again pointing out what it saw as opportunities and challenges stemming from the involvement of the Chinese state.

With its export-driven economy and a strong values-based identity, Sweden sees unimpeded trade and human rights promotion as vital pillars of its China policy. While the communication stated that the government would push back against China if it challenged those interests, it did not reveal how to balance the two if needed. 

The Swedish government regularly issues country-specific human rights reports, and the communication cited the most recent issue on China published in June 2019, which asserts that “the civil and political rights situation is serious.” It also vowed to raise the human rights situation in China in interactions with Chinese counterparts “in a clear and consistent manner.”

On the topic of trade, the communication posited that China was increasingly important for Swedish employment and economic growth. It noted, however, that many problems remained, such as intellectual property rights violations, forced technology transfers, and state subsidies. While those issues would be addressed by the EU, the government vowed to highlight trade barriers that Swedish companies face in China as part of the bilateral dialogue.

In an interview with Swedish media in which she commented on this China strategy, Foreign Minister Ann Linde again depicted Sweden’s trade relations with China as a balancing act between opportunities and challenges. Linde stressed that, on the one hand, Sweden wanted a “very good” trade relationship with China. “If we increase our exports to China it will create growth and jobs, and we have quite a lot that is of interest to China,” she said. “There are certainly possibilities to increase exports there substantially, and to attract more investment from China.”

On the other hand, she said, China’s refusal to open its market to foreign companies, its lack of protection for intellectual property, and state support of its domestic companies meant that there was no level playing field for Swedish companies. This was a concern for the government that it would raise with the World Trade Organization, Linde said.

The communication also noted Chinese industrial espionage as a concern, stressing that “(…) there are risks and challenges associated with China in the area of innovation.” The document cited inadequate protection of intellectual property rights, industrial espionage, military-civil fusion, inadequate protection of personal privacy and “China’s emphasis on the State’s responsibility for internet security and control.” “Sweden needs sound knowledge of these conditions and the trade-offs that may arise,” it concluded.

As Sweden plans 5G auctions in late 2020, with applications accepted until the end of this month, the government’s Communication also reflects the increasing scrutiny of the Chinese telecom giant Huawei.  Sweden was one of the first EU member states to adopt legislation for screening of 5G suppliers. Apart from Sweden only France, Italy and the Netherlands had similar legislation in place by the first quarter of 2020. On the issue of 5G, Huawei, which has faced strong US allegations that its equipment can be used for spying, is never explicitly mentioned. The strategy does point out, however, that several countries “have issued restrictions on equipment from certain Chinese suppliers, in light of concerns over these companies’ links to, or obligation to cooperate with, the Chinese authorities.”

Back in February this year, the Swedish Post and Telecoms Authority, the government authority that monitors electronic communications and postal services, announced that there would be no outright ban on Huawei as Sweden looked to begin its 5G network rollout. But it said that all vendors would have to submit to an enhanced security review. Sweden is of course home to Ericsson, Huawei’s biggest competitor. With headlines such as “National security is not for sale,” “Watch out for the Chinese offensive,” and “Unhealthy dependence on China,” editorials in Swedish media have for the first time advocated for the need to screen Chinese suppliers and investors.

In a series of reports, Chinese state media responded with glee to the Swedish decision not to exclude Huawei, which has been a focus of ongoing disputes between China and the United States, and which has been a point of tension between the US and other EU member states, including Germany. "No 'Huawei ban' as Sweden takes next step toward 5G rollout,” read a headline from the official Xinhua News Agency in February. However, Xinhua also notes that the Swedish Armed Forces and the Swedish Security Service will review the vendors. Any decision to exclude Huawei will therefore not be made by politicians, but by state agencies, and will to a certain extent be based on classified information. The principles for the agencies’ assessments of vendors were detailed by the Post and Telecoms Authority in April and include criteria defined in the EU’s toolbox. The Security Service stated in April that ”foreign powers have intensified their activities to weaken Sweden,” adding that 5G was a particular challenge for the country’s ability to manage threats to national security. The agency has stated on several occasions that Russia and China account for the main intelligence threats to Sweden.

A New Attitude

On the government’s work going forward, the China communication again stresses that a strong and united EU is crucial for Sweden’s relationship with China, as the union is “our most important foreign policy arena.” It identifies a need to increase dialogue and improve coordination between government agencies, business and civil society on issues relating to China, but also with “relevant counterparts primarily in the EU.”

Ambassador Fredén, a rare Mandarin Chinese-speaker in the Swedish diplomatic corps, described the Swedish government’s hitherto apparent lack of concern over Beijing as being “Alfred E. Neumanesque,” referencing the freckle-faced, gap-toothed mascot of MAD magazine, an image of calm and lack of concern in the midst of world events (his famous line: "What? Me Worry?").  Fredén expressed the hope that the Communication would mark a new beginning for Sweden’s strategy on China.

It should be noted, however, that accusations of naïveté have come from all sides of the political spectrum, and should not apply to any specific government. Moreover, the “naïveté” towards China that has prompted concern from Fredén and many others may already have given way to a markedly different attitude. No one following the debate on national security in Sweden will have missed the repeated calls for vigilance towards Chinese actors. In Sweden’s Parliament, the Riksdag, few issues generate such strong consensus as those related to China. The rare disagreements tend to relate to what some see as insufficient criticism of China, such as the omission of Gui Minhai’s name in the Statement of Government Policy in 2019, and the Moderate party’s refusal to support recent calls for the Chinese ambassador to be declared persona non grata.

Considering the prominence of China-related issues in the Swedish political debate, there was surprisingly little criticism of the strategy. The main complaints were that it did not provide sufficient detail, and that it lacked specific action points for how to manage the relationship with China.

In a discussion with this author, former State Secretary Söder hinted that Sweden’s deliberations about China in fact tend to be deeper than what the strategy was able to reflect, saying that “a public country strategy cannot be as explicit as an internal one.” After all they form part of Sweden’s diplomacy and going public about its strategic choices may rarely serve national interests. She also stressed that it is always easier for the political opposition to sound tough on China than it is for the government.

In the next few years, China is likely to remain a prominent feature in the domestic Swedish debate. For many of Sweden’s priorities – such as economic growth and national security at home, and a rules-based system internationally – China constitutes a growing challenge. As officials make decisions on issues including Sweden’s 5G rollout and the need to screen foreign investment, China may, however, not always be mentioned explicitly in the public debate. This is not only due to the thematic nature of such security-related matters, which tends to be agnostic to the specific country involved. There are also concerns about possible Chinese repercussions, a general feeling that unspecified actions might antagonize China and impact trade and other relationships – one of the most efficient of the Communist Party’s foreign policy tools – which most Swedes have now been made aware of.

There will be times when Sweden needs to stand up to China in order to defend its interests, on trade, norms and values, or whatever those may be. As Sweden lacks the clout to be able act on its own, it is often dependent on Brussels for the implementation of certain foreign policy objectives.

“The EU is the backbone when it comes to China,” Söder said, citing the strategy. “It stresses that the EU is the most important actor for Sweden to coordinate and cooperate with on China.”

Being mindful of the EU’s difficulties in staying coherent in its policymaking on China, Sweden not only emphasizes the need for joint action with fellow EU member states, but also attaches high value to the international system under the United Nations. China’s determination to increase its influence in these institutions has already showed Swedish officials that many of the universal norms and rules that they have pledged to defend are bound to be challenged by Beijing.

Sweden may also want to push for its interests vis-à-vis China with like-minded democracies. Such an alliance of shared interests could include most of the EU and countries such as Canada, Australia, and Japan, where concerns over Beijing’s international influence is high. Sweden is represented in one such initiative, the Inter-Parliamentary Alliance on China (IPAC), which was launched in June.

Similar initiatives could also involve Taiwan, with which Sweden wants to develop closer ties and wishes to see included in international bodies such as the World Health Organization.

More than twenty years ago, the lead authors behind Sweden’s 1999 “Asia strategy” proposed a deepening and broadening of knowledge of Asia in Sweden, and the strengthening of academic research on Asia. They suggested that Sweden should take full advantage of “the knowledge and understanding of China that many Swedes have acquired, not least in the form of language skills.” This was a precondition for constructive dialogue and meaningful exchange with Beijing, the strategy said.

Today, more than twenty years later, there remains a shortage of officials with China expertise in government, and there has been no clear increase in the number of students learning Mandarin Chinese in Swedish universities. On this front, the 2019 Communication does signal one welcome change, noting that the government will establish a “national research-based knowledge center on China.”

The government's aim in setting up the center, which will be localized within the Swedish Institute of International Affairs in Stockholm, is, simply put, to increase knowledge about China in the Swedish system. The intention is that the staff at the center will amount to as many as nine people, focusing on “matters of particular importance to Swedish interests, China in Sweden and China in the Swedish neighborhood and the European Union.” Thematically, the center’s research coverage is kept intentionally wide: Chinese balance of power, foreign policy, international relations, research, technology and innovation, investments and corporate acquisitions, as well as matters of security and Sweden’s immediate neighborhood.

In order to manage such a wide-ranging set of issues, it will not only be crucial for the new center to exchange information with international counterparts including within the EU. It will be as important for all actors within the Swedish system – government agencies, civil society and business – to improve coordination on issues relating to China, as the strategy correctly points out.