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Foreign Policy

The European Response to Beijing

Oct 27, 2020

The European Union (EU) and China have intensified bilateral discussions in recent weeks as they both seek ways to navigate a global environment characterised by the coronavirus pandemic, and worsening US-China relations. On 14 September 2020, leaders of the EU and China met via video conference. The summit was chaired by Council President Charles Michel on the EU side and President Xi Jinping on the Chinese side, with Ursula von der Leyen, President of the European Commission, and German Chancellor Angela Merkel, for the Council presidency, among the participants. A few weeks earlier, Yang Jiechi, director of the Chinese Communist Party’s foreign affairs office, visited Greece, Spain and Portugal on a three-day tour, back-to-back with the visit of Chinese Foreign Minister Wang Yi who, beginning on 25 August, spent a week in Europe visiting five countries: Italy, the Netherlands, Norway, France and Germany. The arrival of Yang Jiechi and Wang Yi in Europe served two primary goals: to strengthen ties with Europe and to avert a US-EU alliance against China. 

How China seeks to strengthen ties with Europe

The Europeans welcomed Chinese Foreign Minister Wang Yi as China continues to be seen as an important economic and strategic partner. Beginning his European tour in Rome, Wang Yi met Italian Foreign minister Luigi Di Maio, who described his meeting with Wang as ‘very fruitful’, declaring that Italy and China need to relaunch the Italy-China strategic partnership, in particular in the areas of commercial ties and industrial cooperation.

In the Netherlands, Wang called for building a maritime ‘fast track’ to link to the two countries’ respective port hubs. In Norway, the Chinese Foreign Minister advocated in favour of a China-Norway free trade agreement – in the works for several years now – while also calling for an expansion of maritime cooperation and sustainable use of resources.

In Paris, Wang addressed the French Institute of International Relations where he pledged China’s role in stabilising the post-COVID world economy and hoped for a swift conclusion of the China-EU bilateral investment agreement that has been in the pipeline for more than seven years.

The last - and tone-setting – stop of Wang’s European tour was in Germany, Europe’s biggest economy and the presidency seat of the EU Council. The Foreign Minister called on the need to strengthen economic ties to offset the damage inflicted by the coronavirus pandemic and warned of the possible ramifications and instability that could result from ‘decoupling’, highlighting the risks of a ‘new Cold War’ and of US unilateralism. 

Despite the tour, China’s image in Europe has suffered over the past months. There are criticisms not only surrounding Beijing’s handling of the pandemic in its initial stages, but also Hong Kong’s new security law, ongoing media regarding Xinjiang, and Chinese behaviour in the South China Sea and towards Taiwan. Wang Yi rebuffed some of the accusations, casting doubt on whether the coronavirus originated in China and criticized a Czech politician for visiting Taiwan. While in Norway, Wang warned the Nobel committee not to give its peace prize to Hong Kong democracy activists.

In a way, accepting to discuss contentious issues during Wang Yi’s European tour signalled that Beijing prioritizes strengthening ties with Europe, at a time when Washington is increasing pressure on its European allies to adopt joint actions to counter China’s influence. Yet, with the exception of the United Kingdom, the offensive by the Trump administration has so far been met with little enthusiasm.

On the part of the Europeans, they requested that Beijing increase regulations regarding state-owned-enterprises, particularly on issues of forced technology transfer and on government subsidies, as well as on rebalancing market access in areas such as agri-food, financial services, and the digital sector. On 10 September 2020, the European Court of Auditors (ECA) - one of the seven institutions of the European Union, established in 1975 in Luxembourg in order to improve EU financial management – issued a report warning of the multiple risks that China’s state-driven investment strategy and authoritarian political system pose to the EU.

Europe would prefer to stay neutral in the emerging Cold War between the two superpowers, for both economic and political reasons. The case of Germany – Europe’s most powerful country – illustrates such a stance. 

The role of Germany 

For Germany itself, China accounts for 15% of overall exports outside the EU, the highest percentage among all member states. In terms of overall exports of goods to China in 2019, Germany’s volume, amounting to 96 billion euros, was nearly five times larger than that of the EU’s second-biggest exporter, France, which exported 20 billion euros in goods. Key sectors of the German economy – automobiles, mechanical engineering, chemicals, which are still responsible for hundreds of thousands of jobs in Germany and Europe (through pan-European supply chains) are highly dependent on revenues from the lucrative Chinese market.

As the Chinese economy reopens and production normalizes, German companies have been among the first to benefit. In June, Germany recorded a trade surplus of 7 billion euros, benefiting from increased trade with China: its exports to the Asian giant rose 15%, indicating that the economic interdependence between Germany and China is here to stay. At the same time, transatlantic trade is on a downward spiral. In the period January-July 2020, US imports from the EU decreased by 13,7%, with some German sectors – including automobiles and mechanical engineering – suffering a greater contraction.

For many German and European companies, the Chinese market in the post-COVID age has become increasingly important. This explains the unwillingness across Europe to take a clear-cut position on the question of Chinese telecom giant Huawei. For instance, large parts of the German business community argue that action against Huawei would antagonise China and harm Sino-German ties. Moreover, the global economic downturn has given pause to any plans for a 5G roll-out, which could jump-start the economy, with the most cost-effective suppliers of 5G technology being Chinese ICT companies.

The German government released a rulebook for 5G network security some months ago, but despite efforts of the US government to ban the Chinese company, Huawei was not explicitly excluded. This decision has sparked fierce debate among political and economic decision-makers. While critics mainly argue the dangers of ‘technology dependence’ on a company they say could not be trusted geopolitically, counter arguments often turn again to the narrative of German economic dependence on China and fears of retaliatory measures by the Chinese against German companies investing in - or exporting to - China.

Undoubtedly, a German decision on Huawei would have far-reaching significance for the rest of Europe. Very likely, Germany will adopt a similar approach to the one adopted by France and Italy in July: it will not be presented as a political ban, but rather as a commercial decision, asking telecom networks in Germany to be free of Huawei gear by around 2028 so as to avoid openly antagonising Beijing.

There are compelling reasons for Germany – and Europe as a whole - not to follow blindly the US in its confrontation with China: the worsening of transatlantic relations, and the increase of negative perception of the US among European public opinion, a trend which is most evident in Germany where recent polls show that more than 60% of Germans have lost trust in the United States as a global leader.

Trump has angered Germans on many issues. More recently, the US President announced the intention to withdraw almost 10,000 US troops stationed in Germany, claiming that Merkel’s government is ‘delinquent’ in paying its ‘fees’ to NATO. In July, Angela Merkel refused to attend the G7 meeting in Washington as a rebuff to Trump who continues to undermine the 27-member bloc, threatening punitive tariffs against German cars. In such a situation, no wonder that Germany – and the rest of Europe – does not want to join the US in a ‘new alliance of democracies’ against Chinese authoritarianism.

The Europeans have stepped up criticism of Beijing on many issues related to trade, investment, human rights and democracy. However, Chinese leaders’ recent visits to Europe - coupled with the lure of the Chinese market – seem to have succeeded in strengthening ties with Europe. For the time being, a US-EU alliance against China is not in sight. This, seen from Beijing, can be considered a success - though nobody knows if it will last.

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