On September 14, 2020, German Chancellor Angela Merkel, European Council President Charles Michel, and European Commission President Ursula von der Leyen conducted negotiations with Chinese President Xi Jinping via video conference. This high-level online meeting took place instead of a summit to be held in Leipzig, where the leaders of the European Union (EU) and China had initially planned to sign the Comprehensive Investment Agreement (CAI). However, the parties were unable to find compromises on key issues, and the signing was not in the agenda of the virtual meeting. At the beginning of the year, it seemed that China was ahead of the United States in signing a trade agreement with the EU. Washington and Brussels have been negotiating the Transatlantic Trade and Investment Partnership (TTIP) for a long time. However, the Trump administration has shown low interest in the TTIP and there is no any information on the approximate date of the signing. Against the backdrop of the evolving confrontation between the United States and China, Beijing is trying to reach a comparative advantage for its exports in the European direction, but the agreement is still to be finalized. It is also important that not only economic disagreements have arisen between China and the EU, in particular, over the access of European companies to the Chinese market, but also contradictions in the political sphere, which will be much more difficult to resolve.
Trade between the EU and China is of key importance to both sides and international trade in general. The parties generate the largest volume of trade in the world. In 2019, the bilateral trade turnover reached nearly $717 billion [UN Comtrade, 2020]. Trade between the two sides has a vast trade surplus in favor of China and ensures supplies of relatively cheap goods to Europe. China received almost $219 billion of trade surplus in 2019. For a long time, both sides were satisfied with the status quo. Trade grew and China became richer, while the West hoped that economic liberalization would lead to political reforms in the country. However, the context started to change after Xi Jinping came to power in 2012 [Pei, 2017]. China’s political elite began to send a signal that the Communist Party is uniting around the figure of the current chairman, whose main goal is to return the great power status to China [Allison, 2017]. The pursuit of this status reflects China’s growing ambitions in the world arena and the end of the West’s expectations about democratization in China. Moreover, the Chinese Communist Party abandoned any form of collective governance and concentrated power in the hands of Xi Jinping.
In 2013, China presented to the world its global transport-infrastructure initiative, which is now known as the Belt and Road Initiative (BRI). Europe took the initiative with a moderately positive attitude. In theory, the BRI was supposed to ensure the growth and liberalization of trade and investment and help economies of the states located on the Eurasian continent. However, gradually the situation began to change. Within the BRI, China significantly increased its economic expansion in the regions that are economically oriented to Europe – the Balkans, Africa, and the Persian Gulf. Unlike the EU, China offered loans and investments without political preconditions. Thus, it became an attractive partner for many anti-liberal forces in Europe itself and beyond. The next step was the creation of the 17 + 1 format [Ciurtin, 2019], where 1 is China, and 17 are the countries of Central and Eastern Europe, both EU members and non-EU countries. Thus, China created a “union” within the EU and used this instrument to undermine the EU’s common policy towards China. Beijing manipulates the EU states by forcing them to choose between trade with China and the need to condemn its policy. As a result, in 2017, Greece blocked the EU statement at the United Nations, which criticized the human rights situation in China. This decision by Greece undermined the EU efforts to counter Beijing on this issue [Emmott and Koutantou, 2017].
Moreover, in Europe, China is acquiring access to strategic technologies, from artificial intelligence to telecommunications networks. For example, in 2016, the Chinese tech giant Tencent bought a majority stake in the Finnish mobile game developer Supercell [Osawa and Needleman, 2016], and the Chinese Midea bought Kuka – the German robotics company. Against this background, China gained access to physical infrastructure in some European countries, including seaports. As a result, the EU calls for measures to restrict the acquisition of assets by non-European companies. In addition, the EU fears that, amid the crisis caused by the COVID-19 pandemic, China will have additional chances to purchase European companies [Gurkov, 2020]. Therefore, for example, the German government has already issued a decree allowing to impose a ban on the sale of strategically important German companies to investors from non-EU countries [Baranovskaya, 2017]. In its turn, France called on Europe to develop a common approach to cooperation with China, emphasizing that the EU countries should not negotiate with Beijing on infrastructure and investment projects on a bilateral basis. Eventually, in 2019, the EU issued the document called “EU-China – A strategic outlook”, where it clearly gave the status of a “systemic rival” to China and stated directly that the growing Chinese military potential already creates security problems for the EU in the short and medium-term [European Commission, 2019].
Therefore, Brussels sent to Beijing the clear signal that the EU values are very important. During the EU-China negotiations in June and September 2020, the President of the European Commission made a clear statement that for the EU the issue of human rights is “non-negotiable”. Brussels has two main complaints against Beijing on this issue – the treatment of minorities in Xinjiang and Tibet, and a new security law in Hong Kong [European Council, 2020]. Moreover, the EU provides asylum to people who have suffered from actions of the Chinese authorities in Xinjiang [Kruglova and Aisarov, 2019]. The Chinese leadership perceives these statements negatively, which certainly slows down negotiations between the two sides on the trade agreement. At the same time, China is driving itself into a difficult situation, since the more it tries to prevent a common EU policy on human rights, the more Brussels will regard Beijing as a threat. At the same time, the trade leverage that China uses is limited because exports to the EU help Chinese companies to compensate losses from the trade war with the United States.
In conclusion, it is clearly noticeable at the moment that the EU is increasingly at the forefront of the U.S.-China trade war. It is obvious that Brussels, despite all Beijing’s actions, has clearly defined its values, which have key importance for the EU. Under these conditions, it is difficult to predict how relations between China and the EU will develop because the ambitions of the Chinese leadership will prevent it from both making concessions in internal affairs and softening its policy towards Brussels. The parties agreed that as soon as the epidemiological situation allows a full-fledged offline summit will be held. However, we should not wait for any breakthrough since, apparently, the parties are now in a deadlock.
References:
Allison, Graham (2017). What Xi Jinping Wants. Retrieved from https://www.theatlantic.com/international/archive/2017/05/what-china-wants/528561/. Accessed on 25.09.2020.
Baranovskaya, Mariya (2017) Germany complicates the sale of strategically important firms outside the EU. Retrieved from https://p.dw.com/p/2gNnj. Accessed on 28.09.2020.
Ciurtin, Horia (2019). The “16+1” Becomes the “17+1”: Greece Joins China’s Dwindling Cooperation Framework in Central and Eastern Europe. Retrieved from https://jamestown.org/program/the-161-becomes-the-171-greece-joins-chinas-dwindling-cooperation-framework-in-central-and-eastern-europe/. Accessed on 26.09.2020.
Emmott, Robin and Angeliki Koutantou (2017). Greece blocks EU statement on China human rights at U.N. Retrieved from https://www.reuters.com/article/us-eu-un-rights-idUSKBN1990FP. Accessed on 26.09.2020.
European Commission (2019). EU-China – A strategic outlook. Retrieved from https://ec.europa.eu/commission/sites/beta-political/files/communication-eu-china-a-strategic-outlook.pdf. Accessed on 26.09.2020.
European Council (2020). EU-China leaders’ meeting via video conference. Retrieved from https://www.consilium.europa.eu/en/meetings/international-summit/2020/09/14/. Accessed on 26.09.2020.
Gurkov, Andrei (2020). The European Union fears the purchase of European companies by China. Retrieved from https://p.dw.com/p/3cdYg. Accessed on 27.09.2020.
Kruglova, Dana, and Daniyar Aisarov. (2019) Sairagul Sauytbay flew to Sweden with her husband and children. She received a refugee pass. Retrieved from https://informburo.kz/novosti/etnicheskaya-kazashka-iz-kitaya-sayragul-sauytbay-vmeste-s-semyoy-uehala-v-shveciyu.html. Accessed on 27.09.2020.
Osawa, Juro and Sarah Needleman (2016). China’s Tencent to buy Clash of Clans creator for $ 8.6 billion. Retrieved https://www.wsj.com/articles/tencent-agrees-to-acquire-clash-of-clans-maker-supercell-1466493612. Accessed on 25.09.2020.
Pei, Minxin (2017). China’s Return to Strongman Rule. Retrieved from https://www.foreignaffairs.com/articles/china/2017-11-01/chinas-return-strongman-rule. Accessed on 24.09.2020.
UN Comtrade (2020). EU-China trade data. Retrieved from https://comtrade.un.org/data/. Accessed on 24.09.2020.
Note: The views expressed in this blog are the author’s own and do not necessarily reflect the Institute’s editorial policy.