{"id":33867,"title":"EU-China relations: De-risking is Key, but so is Actively Managed Cooperation","link":"https:\/\/bst-europe.eu\/de\/economy-security-trade\/eu-china-relations-de-risking-is-key-but-so-is-actively-managed-cooperation\/","date":"7. Dezember 2023","date_unix":1701951959,"date_modified_unix":1747997343,"date_iso":"2023-12-07T12:25:59+00:00","content":"

It\u2019s summit time! After a promising meeting between Joe Biden and Xi Jinping in November, the EU and China will convene for their annual summit on December 7 for the 1st<\/sup> time in person since 2019. The cautious rapprochement between the US and China has paved the way for a more relaxed atmosphere between the EU and China, too. The eloquent speechlessness that marked their 2022 summit appears to be pass\u00e9. However, speaking by itself is not enough: The EU should complement its de-risking agenda with a coordinated and concerted approach to actively managing cooperation with China.<\/em><\/p>\n

In the run-up to the summit, cracks have started to appear in the recently icy<\/a> EU-China relationship<\/a>. After the EU\u2019s second complaint to the WTO, China lifted<\/a> the trade measures against Lithuania in late November.<\/p>\n

Starting December 15th, visa-free entry<\/a> into China will be available (on a one-year trial basis) to residents of China\u2019s largest EU export destinations<\/a> – the Netherlands, Germany, Italy, France and Spain. China, it seems, is endeavouring to set a positive tone for the summit with one of its largest trading partners.<\/p>\n

This is also due to the fact that China\u2019s domestic economy is struggling with pandemic recovery and domestic issues, including a troubled real estate sector, and economic relations with the US, China\u2019s largest export market<\/a>, remain strained (e.g. US chip embargo.) Beijing, therefore, hopes for and is indeed in need of better and more reliable EU-China relations.<\/p>\n

The EU, for its part, has shown, by a series of visits by top politicians from the EU and member states to China this year, that it attaches great importance to keeping open channels of communication. As does the US, as was clear with the announcement of the resumption of high-level communication after the Biden-Xi meeting at the sidelines of the APEC summit<\/a>.<\/p>\n

However, in another parallel to US-China relations, it remains a fact that Brussels and Beijing have a range of serious issues to address that will keep straining their bilateral relations, too in the foreseeable future.<\/p>\n

Three things the EU wants from China \u2013 and probably won\u2019t get<\/strong><\/h2>\n

Russia\u2019s war of aggression against Ukraine and the overturning of Europe\u2019s security architecture as a result is a priority issue for the EU. The impact of China\u2019s response to the war on mutual relations cannot be underestimated. A great deal of the deterioration is due to China\u2019s diplomatic shilly-shally<\/a>-ing and how more and more it is openly closing ranks with Vladimir Putin.<\/p>\n

The EU has sobered up in its initial expectation that China might use its leverage over Russia and play the role of intermediator. But it still wants China to play a more active role and especially wants China to really engage with both sides, not just with Russia. Similar hopes exist for the violent conflict in the Middle East, where the EU and China agree on the \u201cnecessity of a political settlement based on a two-state solution\u201c<\/a>.<\/p>\n

Despite China\u2019s mantra-like repetition of its commitment to key principles of the UN Charter, e.g. territorial sovereignty, this lip service will hardly translate into concrete action any time soon. China has as much an interest in keeping Putin\u2019s regime alive and kicking as it has in the two conflicts\u2019 diverting the attention and resources of the EU (and the US) away from the Indo-Pacific and the Taiwan issue.<\/p>\n

The latter is also a central topic, where the EU hopes China will take action – or rather, not take action. The EU has made it very clear before that the situation in the Taiwan Strait is not only an issue in the US-China conflict but is of global importance and touches upon key interests of the EU itself.<\/p>\n

As one of the largest trading blocs, it is crucial to the EU that peace and stability are maintained in the Taiwan Strait, through which, according to one estimate<\/a>, 40 per cent of the EU\u2019s trade passes. While the EU is fostering closer ties with Taiwan in all areas possible, it is still firmly committed to maintaining its One-China policy. But at the same time, the EU expects China to stick to the status quo and not try to change it unilaterally by force.<\/p>\n

However, it is the explicit goal of the Chinese government under Xi Jinping to complete the nation\u2019s rejuvenation by 2049, including \u201creunifying the motherland\u201d, which has even been written into the Chinese Constitution<\/a>. From the Chinese perspective, the status quo has a clear expiration date. The EU has little to no leverage to change this in the long term. China, in turn, has made very clear that it regards the \u201cTaiwan issue\u201d as an internal affair<\/a> and wishes no interference whatsoever.<\/p>\n

A third key issue that has been high on the EU\u2019s agenda for years, yet with little progress made, is market access and a level playing field for European business in China. The Comprehensive Agreement on Investment (CAI) was meant to at least partially solve this issue. But CAI was shelved in 2021 after China sanctioned, among others, members of the European Parliament – and it will remain so for the time being.<\/p>\n

The EU thus needs to find other ways of dealing with unfair competition from China and the resulting lack of reciprocity regarding market access. In the case of EVs, it is trying to do so with an anti-subsidy investigation which might result in punitive tariffs on EVs imported from China. As we have argued before<\/a>, it is questionable if this is the smartest way to address this issue, though it might help a bit in the short term.<\/p>\n

With the WTO not fully functioning, the EU and China could ideally find a bilateral solution<\/a> to address these structural asymmetries in their economic relations. But, the current geopolitical circumstances, given the weakness of the Chinese economy with exports as an apparent panacea, it is highly unlikely<\/a> that China will make meaningful offers in key areas, such as market access and government procurement.<\/p>\n

The EU, therefore, might end up having to choose a tit-for-tat approach, threatening to close market segments to China, where there is no reciprocity. The EU\u2019s overhauled trade defense toolbox<\/a> with enhanced and new instruments offers room for manoeuvres in this regard and should be used courageously, if necessary.<\/p>\n

The EU\u2019s de-risking agenda is strong on paper but hard to implement<\/strong><\/h2>\n

As these major differences will clearly remain for the foreseeable future, the EU will continue to put a strong focus on its de-risking agenda vis-\u00e0-vis China. As we analysed in a blog post<\/a>, de-risking rests on the following four pillars:<\/p>\n