By P K Balachandran
Held against the background of the Ukrainian crisis, the EU-China virtual summit held on April 1, ended in a stalemate as expected. While the EU wanted discussion on the Russian aggression against Ukraine, China demanded concentration on the development of economic relations between China and the EU. The meeting ended with both sides stating their conflicting positions.
European Council President Charles Michel, Commission President Ursula von der Leyen and EU foreign policy chief Josep Borrell sought signs from Chinese President Xi Jinping and Premier Li Keqiang that Beijing would help to end the war in Ukraine. Recalling the EU’s and China’s responsibility as global actors to work for peace and stability, the EU called on China to support efforts to bring about an immediate end to the bloodshed in Ukraine, consistent with China’s role in the world as a permanent member of the UN Security Council, and its uniquely close relations with Russia. The EU said that Russia purposely undermined Europe’s security architecture, including the Helsinki Final act, the Charter of Paris and the Budapest Memorandum, to which it is party.
The EU maintained that the international sanctions against Russia were imposed with the sole purpose of stopping Russia’s aggression and despite a significant economic impact on the EU and its partners globally.
Sino-EU Bilateral Ties
On Sino-EU relations, the EU noted its “disappointment with China’s unjustified sanction, including against Members of the European Parliament, and coercive measures against the EU Single Market and Member States. It called on China to cease such actions for a more productive engagement that would benefit both sides.”
The EU raised the importance of a transparent and competitive environment for the digital economy, as well as trustworthy and ethical uses of artificial intelligence. It expressed concerns about increased cybersecurity threats and called for responsible state behavior in cyberspace.
“The business sector is watching very closely the events and evaluating how countries are positioning themselves,” Ursula von der Leyen said. “This is a question of trust, of reliability and of course of decisions on long-term investments,” she explained.
China’s Case
On its part, China renewed its criticism of Western sanctions against Russia. The Chinese Foreign Ministry laid the blame for the war at Ukraine’s door, and at least partially on the United States for pushing to expand the NATO military alliance closer to Russia’s borders. China’s Foreign Ministry spokesperson Zhao Lijian had earlier warned that China “disapproves of solving problems through sanctions, and we are even more opposed to unilateral sanctions and long-arm jurisdiction that have no basis in international law.”
“As the culprit and leading instigator of the Ukraine crisis, the US has led NATO to engage in five rounds of eastward expansion in the last two decades after 1999,” he said, adding that NATO membership almost doubled from 16 to 30 countries, and pushed “Russia to the wall step by step.” China further said it is not taking sides in the conflict but it has declared a “no limits” partnership with Russia and has refused to condemn the invasion.
Global Times quoted Chinese analysts to warn that China-EU relations cannot be kidnapped by the Ukraine crisis, and Europe should no longer be abducted by the US in foreign policy, as it will greatly undermine the EU’s own interests, making it difficult to ensure economic recovery and people’s livelihood, and runs counter to Europe’s aim of pursuing strategic independence.
China Deeply Involved in EU
But there is an important element which cements EU-China ties, making it difficult to break them. China is EU’s third-largest export destination and the largest import partner. Between 2011 and 2021, both exports to, and imports from, China increased.
In this period, EU exports to China were highest in 2021 (€223 billion) and lowest in 2011 (€127 billion), registering an average year on year growth rate of 7%. As for imports from China, they were highest in 2021 (€472 billion) and lowest in 2013 (€239 billion). The average year on year growth rate for imports was 6% in that period.
In 2021, China was the third-largest partner for EU exports of goods (10% of extra-EU exports), trading mainly machinery and vehicles (52% of exports to China), other manufactured goods (20%) and chemicals (15%).
In 2021, China was the largest partner for EU imports of goods (22% of extra-EU imports) in the same product groups: machinery and vehicles (56% of imports from China), other manufactured goods (35%) and chemicals (7%).
EU’s Fears About China
Although the EU has substantial trade and investment links with China, it has deep-seated fears about China. A reading of Liisi Karindi’s July 2020 article will show this clearly. She points out that the EU has issued a warning, “requesting the Member States to be vigilant and use all tools available at Union and national level to avoid that the current crisis leads to a loss of critical assets and technology.”
Karindi says that the above mentioned fear is based on the experience from the 2008 financial crisis when Chinese investors started to buy up European companies, among which were many strategically important assets.
“Today, China again tries to present itself as a responsible great power coming to help Europe in crisis, under the banner of building a community of common health for mankind. But there are reports of Chinese firms getting ready for discounted deals in Europe.”
However, the EU is on guard, she points out. “The EU has started to request more reciprocity, a level playing field and fair competition across all areas of co-operation. In order to better protect its strategic assets the EU introduced a new framework for the screening of foreign direct investments. Today this framework has become very useful to fend off potential threats to common EU interests in the form of foreign investment from third countries, such as the People’s Republic of China.”
A blacklist system was put in place to curb the investment risks and illicit capital outflows, she points out. “As a result, Chinese FDI in Europe declined, with the share of state-owned investors plummeting and private companies focusing on less politicized sectors such as consumer products and services.”
Lure of the Chinese market
One way in which China “buys” influence in Europe is through giving access to its growing and increasingly lucrative market (which also includes access through investment as targeted by the EU-China Comprehensive Agreement on Investment).
The average effectively applied tariff for EU products entering China in 2017 was 8.75%, compared to 3.6% for Chinese products entering the EU. Although China has been willing to reduce tariffs on automobiles and parts as well as luxury goods and apparel products, these changes would most benefit its current largest trading partners such as Germany, France and Italy. It is therefore, not surprising that Germany is seen as one of the most vulnerable EU countries to Chinese influence, “well-demonstrated by the debate concerning Huawei’s 5G infrastructure in Europe.”
Privately-owned companies from China can also constitute a risk as they are frequently considered to be subject to the authority of the Chinese government. This is best demonstrated by the case of Huawei. To keep an eye on these, EU Member States have been advised by the EU to develop their own national-level investment screening mechanisms.
According to scholar Andrea Kendall-Taylor, China’s goal is to undermine Western cohesion by creating a rift between EU countries and between the EU and the US.
