IE University Expert Says Companies Are Not Prepared to Take Risks in China

 Manuel Muñiz is the Provost of IE University in Madrid. The former diplomat is also a highly regarded expert in international relations with a range of practical and academic experience. 

JAPAN Forward found him at the IE University jointly organized South Summit global entrepreneurship event in Madrid in early June. There, he sat down with senior reporter Arielle Busetto to discuss the major issues facing the G7 leaders and the implications of their June 13-15 summit in Apulia. 

Excerpts follow. 

On Artificial Intelligence

How do you evaluate the global debate on artificial intelligence governance at a European Union level? 

Aside from the initiatives of UNESCO, the United Nations (UN) Secretary General established a panel of experts on artificial intelligence (AI). They will produce a set of recommendations on AI governance at the global level in the coming weeks. There's not much known, but they might suggest creating a UN agency like the International Atomic Energy Agency, thereby a multilateral agency that will try to foster AI governance. 

[More to the point,] there is the Hiroshima AI Process at the G7 level. There's been discussion at the G20 level. 

Perhaps the most advanced framework is the European Union AI Act, a key piece of legislation passed very recently [in May] under the Spanish Presidency of the EU Council. It is the most comprehensive and binding regulation on AI globally. 

Instead of regulating the technology, it has regulated certain uses. For example, individual profiling and facial recognition are some of the banned uses that could hinder democratic processes. Globally, the debate on multilateral initiatives is still slightly noisy. However, politicians and policymakers have realized how significant this technology is. 

On the G7 Apulia Summit

What are your expectations from this year's G7?

There's a broader question on the continued relevance of the G7. The data on the relative weight on the global economy of the G7 countries and the BRICs (Brazil, Russia, India, China) shows that the BRICs are on track to take over the G7 and its weight on the global economy. This is also a significant shift in the ability of the G7 to have a big impact on global affairs. 

There is an overarching debate now on whether the G7 should expand and bring in new members, particularly members that can bring either directly or indirectly Global South voices, the voices of new growth economies in the world. 

Spain has a big strength on this theme as one of the most southerly countries in Europe. We are looking to the South with a big engagement in Latin America, parts of northern Africa, and Asia.

What about specific topics of discussion?

A key thing to look out for will be the capacity of the G7 to shape the international security agenda. [Conflicts in] Ukraine and Gaza will be very central. The G7's discussions on climate change and governance will also be very important. 

A third key aspect will be technology. The fourth theme will be global economics. Looking at global economic trends there's been growing fracturization of international trade because of geopolitical tensions. This leads to significant questions about global economic integration. 

We're at the beginning of a protracted and structural collision between China and the United States. There is economic competition in strategic tech sectors, such as AI, quantum [computing], and cyber. 

There is a security dimension in the South and East China Seas … [with] US allies in the region, including Japan, South Korea, the Philippines, and Australia. 

There is a systemic dimension, as China's growth and development have been underpinned by a centralized, authoritarian government, enhanced largely by emerging technologies. 

This is beginning to look more like the world before 1990, with many calling it a new Cold War of great power competition.

This global phenomenon is affecting trade. An International Monetary Fund paper analyzed how trade patterns are beginning to align with political affiliation patterns. This hasn't happened since the end of the Cold War. 

The trend is also happening in investment. China published a couple of months ago the foreign direct investment figures for 2023, the lowest figure in over 15 years. Investment in China has completely plummeted. Over the last 12 to 24 months, we entered a new world with big trade and investment implications for everybody. Including firms and consumers. It's a more fragile world, and it's more inflationary. My expectation is for this to continue and for the rest of us to continue to adjust.

Last year a keyword regarding China was "de-risking" rather than the stronger "decoupling." Do you think the trend will continue along these lines? 

De-risking was coined by the European [leaders] and was supposed to sound less contentious. 

But while politics and diplomacy can go in one direction, the corporate world senses the risk ー and it's hedging. This entails thousands of micro-decisions on the part of corporations. [For example,] where do they hire people? Where do they invest, and where do they do M&As (mergers and acquisitions)? A lot of those decisions are already discounting the risk of a China-US collision, say over Taiwan. 

China is not helping with its policies, because the COVID-19 [border and activity] closures were very tough. There was intervention in the private sector through anti-corruption campaigns. These moves have scared a lot of foreign investments, and foreign talent has left China in massive numbers in the last two years. 

In your view is the mood in Europe becoming more skeptical towards China?

People were very skeptical that this could happen because economically, we're moving to a more inefficient world. [It's] more inflationary and less well-integrated. But the politics and the security are trumping the economics into a more geopolitical world. 

When I was a doctoral researcher in 2013, we ran a huge survey across the Atlantic asking political and business elites if the rise of China was a military threat to their country. In the US, 70% of political elites said 'Yes.' In Europe, 70% said 'No.' 

I believe the perception has markedly changed in the space of 10 years. [That's] because of better intelligence and dialogue with partners in the region. All of the messages coming from our partners in NATO are better heard now. 

[Regarding] the direct experiences of unfair competition practices, there have been IP theft issues with China [hurting] a lot of companies in Europe. China issued travel bans and restrictions on several European parliamentarians recently. So the relationship [between Europe and China] has been deteriorating. Therefore, I expect the language of Europe and the US to align [on China]. 

Europe's stance has been quite consistent throughout maintaining a united front on the sanctions policy, mostly on financial aid policy in a way that people including Vladimir Putin couldn't have predicted. 

It's important not to underestimate psychologically how significant this war is for Europe. The EU was founded on the notion that we would not fight wars of imperial control ever again. And that we wouldn't use arguments of language or ethnicity to invade neighboring countries. 

This was a very hard lesson for Europeans after 200 years of history. And it was enshrined after the Second World War into a fundamental structure of the multilateral architecture, and the right of sovereignty of the state [and] of the territorial integrity of states. 

This is about a principle of respect for international law. Thereby, it has fed the European response. We're here for the long haul, and that's the stance you'll find in most of Europe.

About IE University

IE University, a private institution with campuses in Spain, focuses its education on innovation and entrepreneurship. It is also involved in several initiatives on key global issues, including the use of AI and technology. Institutionally, the university is helping the United Nations Educational, Scientific and Cultural Organization (UNESCO) implement its recommendations on the ethics of AI. UNESCO was one of the first multilateral institutions to pass the governance framework on the issue. IE is also implementing the Tech4Democracy, and AI4Democracy initiatives, focusing on ethical applications of technology in democratic practices. 

As an educator and IE provost, Dr Muñiz highlights "the fundamental importance of instilling in those coming out of university a sense of public service and working for the benefit of others."

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Author: Arielle Busetto