European Commission President Ursula von der Leyen, European Council President Charles Michel and High Representative Josep Borrell are set to arrive in Beijing this week for the EU-China summit. Hopes that the European Union’s power trio can thaw the current ice age with Beijing are not high. However, on closer inspection, circumstances might give reason for a turning point, if only out of necessity for both sides.
The EU-China summit will mark the first in-person meeting since relations deteriorated during the Covid-19 pandemic. Reasons for the downward spiral between Brussels and Beijing range from economic to geopolitical interests. The latest face-off was caused by the EU’s desire to take measures against Chinese subsidies in areas such as wind turbines, solar products and electric vehicles.
The latter particularly illustrates the status quo of EU-China relations. Similar to what it did with household goods in the 2000s and 2010s, China has established itself as one of the leading providers in the electric vehicle (EV) market. Chinese EV exports to the EU increased 112 per cent in the first seven months of 2023 and 361 per cent from 2021.
The latest figures indicate that Chinese EVs will account for 15 to 16 per cent of the European auto market by 2025. However, just like other Chinese products in the past, EVs are too cheap in the eyes of the EU – made possible via government subsidies – which fears that China is meddling with the market for its own cars.
As a result, the European Commission initiated an investigation into the subsidies in October, which caused resentment in China. In addition to these latest disagreements, the European Parliament voted to put the EU-China Comprehensive Agreement on Investment on hold for the time being following a diplomatic crisis that emerged over the treatment of Uygurs.
All of this is happening at a time when the EU is shifting to an approach of “de-risking” towards China. EU countries are expected to reduce their dependence on critical sectors and supplies from Beijing while limiting China’s ability to obtain advanced technologies that could be used for military purposes.
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China’s largest shipment of electric vehicles sets sail from Shanghai port
China’s largest shipment of electric vehicles sets sail from Shanghai port
But geopolitical views also continue to differ. Von der Leyen will be unable to avoid reminding China that it should not support Russia’s war in Ukraine in any way. At the same time, China will be asked to become an honest broker in the matter, especially after it did not participate in a meeting in Malta earlier this year, where representatives of more than 60 nations discussed Ukraine’s peace formula.
China’s tacit approval of the war in Ukraine is seen in many European capitals, particularly in central and eastern Europe, as a crucial element of the future of EU-China relations. The truth, however, is that the EU’s primary interest has been and remains economic, and here both sides must come to a common denominator.
It’s not a binary choice, either. The EU can and must stick to its de-risking approach. At the same time, though, it must also be aware that China is still interested in stability and economic growth within Sino-EU relations and, therefore, be open to advances China might make.
While the prospects for the summit are generally viewed with scepticism, with the aforementioned topics being too controversial, there might be an opening for both sides.
For one, China is faced with a reality check. It will now have to adapt to the fact that Europe is no longer just a market open to Chinese exports without asking any questions or promoting its own interests. No one in Europe has anything against expanding trade relations, but unlike a few years ago, Brussels now insists on reciprocity.
The new European self-confidence is reflected in the Chinese subsidies issue. Geopolitically, the EU is punching above its weight. However, regarding trade and investments, Europe remains indispensable to China – and vice versa.
After all, as a bloc, the EU remains one of Beijing’s largest trading partners. The total amount of trade was almost €850 billion (US$924 billion) in 2022. In comparison, trade between China and the US amounted to more than US$750 billion.
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China vows reforms at annual EU summit amid increased trade tensions
China vows reforms at annual EU summit amid increased trade tensions
It does not help that China reported net negative foreign direct investment for the third quarter last month, the first such deficit since the data started being recorded in 1998. In addition, China’s economic recovery from the pandemic is still sluggish. Changes towards a better understanding of Europe are thus in China’s interest, and a charm offensive by Beijing to restore lost trust abroad is already under way.
This should not go unnoticed or unused by the EU, which faces a dilemma over China. On the one hand, it wants to reduce dependence on Chinese supply chains, but on the other it still relies on green technologies in which China is a major player.
China is by no means perfect, but few countries are. At least with Beijing, the EU knows whom it is dealing with. Moreover, the EU might need China more than ever at some point soon. The US market remains highly unpredictable and could become even more so if Donald Trump returns to the White House after next year’s presidential election, something which could immediately damage European trade with the US.
The EU burning its bridges with China or looking for a replacement with an unknown quantity such as India could be a recipe for disaster. As such, this summit is an opportunity to start a new chapter. Both sides need each other and are better off if EU-China relations not only work but ensure continuous prosperity for the future.
Thomas O. Falk is a UK-based independent journalist and political analyst
