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A Middle Path?

In the midst of shifting geopolitical dynamics, the European Union finds itself at the forefront of the rivalry between the US and China

By Yu Xiaodong Updated Jul.1

During a meeting in Sweden on May 12, European Union (EU) foreign policy chief Josep Borrell presented a paper to the bloc’s 27 foreign ministers, outlining the necessity to “define” and “re-calibrate” the EU’s stance toward China. Borrell emphasized that while the EU continues to view China as a partner, competitor and rival, the adjusted policy aims not to decouple from China but to achieve a balanced relationship with the world’s second-largest economy. He highlighted the importance of reducing reliance on China while still engaging with the country.  

Since US President Joe Biden came into office in January 2021, he vowed to confront China more forcefully, and his administration has focused on forming a “united front” to contain the rise of China. After the breakout of the Russia-Ukraine war, which exposed European countries’ dependency on Washington over security issues, the EU has been under increasing pressure to join the US’s decoupling strategy against China.  

The meeting of EU foreign ministers represents the bloc’s latest endeavor to formulate a united yet balanced approach to its China policy, as member states appear divided. 

Calls for Independent Policies 
The beginning of 2023 saw European leaders beat a path to China. The most notable was the state visit paid by French President Emmanuel Macron to China from April 5 to 7. During this visit, Macron and Chinese President Xi Jinping signed a comprehensive 51-point joint declaration. The two sides also signed 15 business contracts encompassing sectors such as nuclear energy, wind power, poultry, cosmetics and a US$20 billion deal for 160 Airbus planes. 

Macron echoed the sentiments of German Chancellor Olaf Scholz, who during his November 2022 trip to China emphasized “we must not decouple from China.” In an interview with US and French journalists on his return flight, Macron argued against following a more aggressive US approach on China, warning that such a course would reduce European countries to becoming American “vassals.”  

Macron further stated that the EU must decrease its dependency on the US and avoid getting dragged into a confrontation between China and the US over Taiwan, warning that if tension between the US and China heats up further, the EU will not have the time and resources to maintain its “strategic autonomy.”  

Macron’s remarks immediately saw pushback both from Washington and European politicians for causing divisions, not only across the Atlantic but within the EU itself. However, many EU leaders have since expressed their support for Macron’s call for an independent policy on China, separate from the US.  

Spanish Economy Minister Nadia Calvino, who chairs the International Monetary and Financial Committee which advises the International Monetary Fund (IMF) Board of Governors, said on the sidelines of the IMF spring meeting on April 11 that Europe cannot ignore China’s role as a key trading partner and important geopolitical player that could help put an end to the war in Ukraine, or provide debt relief for low-income countries.  

European Council President Charles Michel told the US-based news outlet Politico on April 14 that “quite a few” EU leaders share Macron’s viewpoint, adding that the EU-US alliance does not mean that the bloc should “blindly, systematically follow the position of the US on all issues.”  

During a conference held in Florence, Italy on May 11, Josep Borrell emphasized the need for the EU to develop its own approach toward China, despite the bloc’s alliance with the US. He stated that China is a rival, but is not in a “systematic rivalry” with the EU, and the bloc should not be against the rise of China. “The important thing is how China will manage its power,” Borrell added. 

French President Emmanuel Macron (center right) and European Commission President Ursula von der Leyen (center left) arrive at the Great Hall of the People for a working session with Chinese President Xi Jinping, Beijing, April 6, 2023 (Photo by VCG)

EU-US Divergence 
According to Ding Chun, professor and director of the Center for European Studies at the Shanghai-based Fudan University, the flurry of visits by European leaders underscores their acute awareness of the necessity to maintain ties with China. “They know the EU can’t afford to decouple from China,” Ding said, “It is in both sides’ interests to cooperate wherever they can.” 

China is currently the EU’s second-largest trading partner behind the US. According to data from the Ministry of Commerce of China, total trade volume between China and the EU in 2022 amounted to US$874.3 billion, up 2.4 percent from 2021.  

While China overtook the US to become the EU’s largest trade partner in 2020 and 2021, the US regained the position in 2022 as the EU substantially increased imports of energy products from the US in the wake of the Russia-Ukraine conflict.  

Despite increased tension in recent years, China and the EU maintain close ties in the investment domain. In 2022, investment flows from the EU to China totaled US$12.1 billion, a 70-percent increase from 2021. Reuters reported on May 10 that Germany’s direct investment flows to China had risen by an estimated 11 percent in 2022, similar to the increase witnessed in 2021, but considerably stronger than the growth observed from 2016 to 2020. Meanwhile, investment flows from China to the EU reached US$11.1 billion, an increase of 21 percent from 2021.  

Apart from the strong economic and trade ties between the EU and China, the EU’s reluctance to follow the US’s more aggressive policy on China stems from Washington’s apparent disregard for European interests. European leaders have repeatedly accused the US of capitalizing on the Russia-Ukraine war through its high-priced gas sales.  

The EU is also rattled by Washington’s passing of the Inflation Reduction Act (IRA). Aimed at undermining China’s dominance in the electric vehicle (EV) sector through providing massive subsidies worth US$369 billion for EV products to be manufactured in the US and in countries with free trade agreements with the US, the act also puts EU-based producers at a disadvantage as there is no trade agreement between the US and the EU.  

“Europe has shown a strong willingness to engage with China, as major European powers have come to the realization that it is not feasible to view China as a strategic adversary and pursue decoupling, as the US has done, which clearly goes against European interests,” Ding said. “On the other hand, in recent years Europe has consistently emphasized its strategic autonomy, and the foundation of this autonomy lies in the strengthening of its own capabilities. From this perspective, Europe has a greater need to cooperate with China.” 

Chinese State Councilor and Foreign Minister Qin Gang (right) inaugurates the Maison de la Chine (House of China) of the International University Campus in Paris, France, May 11, 2023 (Photo by Xinhua)

‘De-risking’ Approach 
In recent months, the EU has apparently started to adopt a “de-risking” approach – reducing its dependence on China in strategic sectors – rather than the decoupling suggested by US policy. 

This concept of “de-risking” was raised by European Commission President Ursula von der Leyen in her speech delivered in Brussels on March 29, ahead of her visit to China with Macron from April 5 to 7. Emphasizing that it is of vital importance to keep communication lines with China open, von der Leyen urged the EU to put economic derisking at the center of the bloc’s China strategy.  

Although von der Leyen, known as a so-called China hawk, told the European Parliament on April 18 that decoupling with China is not “viable” nor “desirable,” her depiction of China as posing a systemic threat to the international system and her vision of the de-risking strategy appears more in line with US policy.  

During a press conference following a meeting between Chinese Foreign Minister Qin Gang and his German counterpart Annalena Baerbock in Berlin on May 9, Qin expressed his concerns over the EU’s de-risking agenda. “If the EU seeks to decouple from China in the name of de-risking, it will decouple from opportunities, cooperation, stability and development,” Qin said.  

Qin added that one must first consider what and where the risks are when they talk about de-risking. Without naming the US, Qin stressed that the real risk the world faces stems from the “new Cold War” launched by “certain countries.”  

Qin made the comments during his visit to Germany, France and Norway from May 8 to 12. During his stop in France on May 11, Qin told his French counterpart Catherine Colonna that China has always regarded Europe as a comprehensive strategic partner and that the China-Europe relationship should not be subjugated to or controlled by any third party. At a press conference in Oslo with his Norwegian counterpart Anniken Huitfeldt, Qin noted he deeply felt the European side’s strong willingness to strengthen communication and coordination and promote mutually beneficial cooperation with China.  

In an opinion piece published by the South China Morning Post on May 11, Zhou Xiaoming, a senior fellow at the Center for China and Globalization in Beijing and a former deputy representative of China’s Permanent Mission to the United Nations Office in Geneva, warned that de-risking is just a euphemism for decoupling.  

Zhou noted that given the unpopularity of the term “decoupling,” Washington itself has begun substituting the term with “de-risking.” US National Security Adviser Jake Sullivan, for example, said in a speech at the Brookings Institution that “we are for de-risking and diversifying, not for decoupling.”  

While these remarks may send some relief, such optimism could prove to be a false hope, Zhou said. “The truth is that this is nothing short of decoupling in action,” as Washington continues to blacklist Chinese companies and restrict investment both to and from China in key areas, Zhou added. 

‘A Scalene Triangle’ 
Amid the EU’s ongoing process of “re-calibrating” and “balancing” its policies toward China, it remains unclear how its de-risking approach will align or diverge from that of the US. In March, the EU introduced the Critical Raw Materials Act, aiming to reduce its dependency on China in critical raw materials like rare earths related to renewable energy and batteries. Under this act, if a foreign country has more than 65 percent of the market, its companies will be ineligible for public contracts within the EU. China currently holds an 80-percent market share in the EU’s solar sector.  

In the same month, the EU also unveiled the Net-Zero Industry Act, viewed as a response to the protectionist subsidies offered under the US’s Inflation Reduction Act. The EU aims to relax strict state aid rules to prevent investments leaving the continent and heading for the US.  

According to Ding, relations between China, the EU and the US will form a “scalene triangle.” Despite its alliance with the US and the US-China rivalry, the EU still has much to gain from its cooperation with China. Ding suggests the EU will also use its China policy as leverage in handling disputes with the US, which will lead to the formulation of a new type of China-Europe relationship.  

Zhou Bo, a senior fellow of the Center for International Security and Strategy at Tsinghua University, said the EU holds the key if the US-China rivalry leads to a new Cold War.  

“The competition between the two giants won’t be in the Global South, where the US has already lost out to China, while in the Indo-Pacific, few nations want to take sides,” Zhou commented in an opinion piece published on May 2 by the South China Morning Post. “The true battleground in the US-China Cold War will be in Europe,” Zhou added.

A freight train bound for Europe embarks from Xi’an International Port, Xi’an, Northwest China’s Shaanxi Province, December 31, 2022 (Photo by VCG)