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Course Correction for China, EU

Jan 02, 2024
  • Zhang Monan

    Deputy Director of Institute of American and European Studies, CCIEE

Chinese and European leaders recently met offline for the first time in three years in an attempt to correct their frayed relations. The two sides agreed to strategically maintain stability and jointly address global challenges. In the ever-changing international situation — and given the severe challenges that come with the ups and downs of their interactions — China and the EU must actively explore a new paradigm of bilateral relations and shape a new framework to accommodate their interests.

Amid the great changes unseen in a century and in light of the games being played by major powers, Europe is a critical third party. Its strategic significance to China is self-evident. However, in recent years, European integration has run into more obstacles as the game between China and the United States has deepened and the balance of economic strength and the political influence of China and Europe has changed. As such, the EU has been readjusting its views regarding China’s global role and now defines the latter as a negotiating partner with which the EU needs to find a balance of interests. It's an economic competitor in the pursuit of technological leadership and a systemic rival promoting alternative modes of governance.

The previous approach of handling economic ties apart from politics has given way to combining economic and political considerations. The EU’s China policy and its relationship with China have thus reached a new turning point.

In recent years, China-EU relations have become even more mutually beneficial and strategic, but they have also become more competitive. They now feature interwoven issues across economics and trade, science and technology, security, human rights and values. For example, values are now part of economic and trade interactions, and security factors are part of scientific and technological exchanges — all of which increases the likelihood that minor differences could escalate into bigger frictions, rendering bilateral relations significantly more complex and the resolution of differences visibly more difficult.

In general, the EU maintains a multifaceted China policy and defines the latter as a partner, a competitor and a systemic rival. More specifically, it has demonstrated a tendency to incorporate ideology, geopolitics and collective decision-making into its China policy.

There are complex reasons behind this. In terms of the international order, market competition is giving way to major power competition. The former features win-win logic, while the latter is more of a zero-sum or even negative-sum game. Nowadays, the global economic and trade system has increasingly fallen victim to interventionist competitive policies.

In Europe — which has been confronted with intensified China-U.S. gaming, the COVID-19 pandemic and the Ukrainian crisis — a fortress mentality has grown, leading to more conservative industrial, investment and trade policies. The pursuit of strategic autonomy is not yet an agreed target. The Ukrainian crisis, in particular, has boosted the European tendency to bundle China with Russia politically. The EU has taken the lead to de-risk and sped up the materialization of the hawks’ China agenda, such as multilateral export controls and foreign investment restrictions.

On the other hand, China’s trade surplus with Europe has been expanding rapidly, while its market access has been below European expectations. Moreover, COVID-19 revealed the fragility of the supply chain. All these have contributed to increased European concerns over the prospects of economic and trade relations with China, especially with respect to trade imbalances, market distortions and strategic dependence in key areas.

We should not regard each other as rivals because of differences in our systems and should not reduce cooperation because of the existence of competition. Nor should we engage in confrontation because we hold different views. Both China and Europe need to correct their courses. Relations have weathered storms over the past decades mainly because the two sides share broad common interests.

China and the EU have been important trading partners for a long time, with highly complementary industries. The EU has always been the largest source of technology for China, and the EU market needs Chinese goods and services. Through the decades, the two sides have developed a strong symbiotic economic relationship, with particularly close ties in mechanical equipment, automobiles, chemical engineering, precision instruments, electrical machinery and metals (and their processing). In short, China-EU cooperation has been comprehensive and wide-ranging, and it has occurred at all levels.

At the recent leaders’ meeting, both sides responded positively to the other’s concerns. For example, they agreed to speed up market access reviews to bring more high-quality EU agricultural products to the Chinese market and increase agricultural trade volume. They also had an in-depth and candid exchange of views on the trade policies adopted recently by the EU, such as international procurement tools, foreign subsidy reviews and a carbon border adjustment mechanism.

China hopes that Europe will use trade remedies prudently, encourage deeper cooperation in the new energy sector (such as electric vehicles) and create a good environment for normal trade exchanges and green, sustainable development. The two sides remain willing to deepen bilateral economic and trade cooperation as the ballast of a stable relationship and expand their shared interests by properly managing their differences.

To enhance strategic mutual trust, the two sides must start with areas and issues where there is little resistance and more common understanding. From there they can strengthen cooperation both bilaterally and multilaterally. Green development and digital technologies are the key areas of cooperation. China and Europe can make use of their respective advantages to jointly promote practical cooperation in renewable energy investment and R&D, energy storage technologies, the circular economy and biodiversity protection, and they can develop standards and rules for carbon footprints, carbon certification and ESG to jointly promote the innovative development of a green economy.

In the digital field, the two sides should take the opportunity of China-EU high-level digital cooperation dialogue to create a series of institutional cooperation frameworks that promote industrial development and rule-making. They may want to deepen their rules cooperation in the fields of artificial intelligence, 6G, intelligent networked vehicles, fin-tech and digital currency.

Strengthening multilateralism is also an important objective of China-EU cooperation, and there is still a lot of room for cooperation in maintaining the multilateral order, promoting WTO modernization and reform, tackling climate change, climate financing and debt relief in Africa.

This year marks the 20th anniversary of the China-EU comprehensive strategic partnership. Looking forward to the ways China and Europe will work together to build a bilateral relationship with a firm strategic focus will involve a shared challenge and task for the two sides.

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