Should Europe draw closer to China?

Welcome back. For Europeans, the fear that the transatlantic alliance’s days may be numbered raises an unavoidable question.

Should they try to build a better relationship with China, despite profound disagreements over geopolitics and trade, in order to compensate for US unreliability? Or are the risks involved in such an endeavour too high? I’m at [email protected]. 

What China thinks

The starting point is to consider what China itself says and thinks about Europe. At last month’s Munich security conference, foreign minister Wang Yi put it this way:

“China has always seen in Europe an important pole in the multipolar world. The two sides are partners, not rivals.”

The contrast with the disdainful, hostile language towards Europe of JD Vance, the US vice-president, could hardly have been more stark.

However, official Chinese publications carry frequent, sharp-tongued criticisms of Europe’s defence and security policies, especially in respect of Russia and the war in Ukraine. For example, the China Daily newspaper said this month in an editorial:

“It has been [Europe’s] reliance on Nato and that organisation’s expansionism and relentless roll towards Russia’s border that has been a principal factor in triggering the conflict.”

That is definitely not how most European governments see matters.

Keep in mind that China recently appointed Lu Shaye as its special representative for European affairs. In 2023, he shocked European governments by going well beyond Beijing’s official stance and questioning whether the non-Russian states that emerged out of the Soviet Union’s collapse in 1991 were truly sovereign.

Exploiting the US-European split

Among experts in western countries, there’s a range of views about China’s intentions towards Europe and how to respond — some suspicious, others more pragmatic.

In this commentary for the Berlin-based Mercator Institute for China Studies, Grzegorz Stec argues:

“China increasingly sees Europe as a politically divided and geopolitically challenged actor that can be leveraged for its market and used to gradually bring about a multipolar international order.  

“A gradual process would give China time to further strengthen its geopolitical position. Beijing is betting that pressure from Washington will send Europe into the arms of China to counterbalance transatlantic tensions.”

Ali Wyne, a specialist at the International Crisis Group, tends to agree. He says China sees a chance to exploit the upheaval in the world order sparked by the Trump administration:

“I think on balance, China does discern a window of strategic opportunity, particularly when it comes to the rupture in the transatlantic alliance.

“And we already see that China is positioning itself vis-à-vis the European Union. China is encouraging the European Union to do more to assert its strategic autonomy.”

However, Zsuzsa Anna Ferenczy, an assistant professor at National Dong Hwa University in Taiwan and a former adviser to the European parliament, contends that China’s outreach to the EU will run into obstacles. Radio Free Europe/Radio Liberty reports:

“Ferenczy . . . cautions that years of trade spats between Brussels and Beijing, as well as strained ties from China’s economic support of Russia throughout the [Ukraine] war and the supply of dual-use goods for its war effort, will be difficult to shake.”

China’s Ukraine policies

Should Europe take the plunge and engage with China in pursuit of a peace deal in Ukraine, provided that such an initiative ensures that the Europeans and Ukrainians are at the negotiating table?

Yes, says William Matthews of the London-based Chatham House think-tank:

“While hardly ideal for Europe, China is now the superpower most committed to an international order underpinned by multilateralism. On this point, the two now have more in common than either do with Trump’s US or Putin’s Russia.”

Or do they? European governments clearly dislike what G7 leaders last year called Beijing’s “ongoing support for Russia’s defence industrial base”, enabling its war effort in Ukraine.

True, there are some obvious limits to China’s so-called “no-limits partnership” with Russia — outlined in this analysis by the New York-based Council on Foreign Relations.

It was interesting to see this week that Moscow is imposing curbs on imports of Chinese vehicles, which have soared since 2022 thanks to western sanctions on Russia.

Still, the fact remains that the Moscow-Beijing relationship has grown closer during the war in Ukraine. 

Yu Jie, a senior research fellow at Chatham House, wrote in the FT last month that recent trips by Chinese leaders to Europe haven’t done much to repair Beijing’s image:

“The more Beijing tries to explain its relationship with Moscow, it seems, the deeper the mistrust Europe feels towards it.”

Chinese peacekeepers on European soil?

Despite its refusal to blame Russia in any way for the war in Ukraine, and despite Lu Shaye’s off-script comments in 2023, China has held back from officially recognising the Kremlin’s annexation of Crimea in 2014 and four eastern Ukrainian regions in 2022.

Moreover, Beijing does not disguise its ambition to burnish its credentials as a global power by having a role in any peace settlement. This has even led to speculation that China might be willing to deploy a peacekeeping force in Ukraine in the event of a ceasefire.

For the Ukrainians and their European supporters, a vital question is whether such a Chinese force would be genuinely neutral. Many have deep reservations.

Economic competition

Closely connected with these geopolitical frictions is Europe’s trade and investment relationship with China, which is extensive but riddled with disputes and, on the European side, anxiety.

This week Northvolt, a Swedish company that was once Europe’s big hope for reducing its reliance on Chinese imports of vehicle batteries, declared bankruptcy.

The chart below, provided by Eurostat, the EU’s statistical agency, shows that China is the 27-nation bloc’s biggest import partner, but only its third-largest market for exports.

This trade imbalance owes much to a steady rise in Chinese competitiveness vis-à-vis the EU, as discussed in this useful blog on the European Central Bank’s website.

The blog attributes the trend to three factors:

1.    A downturn in China’s real estate market, which has lowered prices for certain goods sold abroad such as steel

2.    Chinese government subsidies for advanced manufacturing sectors

3.    Excess domestic capacity in China, which has reduced profit margins at home and made exports, including to Europe, a vital source of profits

Tariff wars

As a result, the EU and China are starting to impose tariffs on each other, albeit in a more limited, less disruptive way than is true of the US-inspired tariff wars with Europe, China and Canada.

An important question is whether the EU’s tariffs on Chinese-made battery-powered electric vehicles will do anything to help the nascent European EV sector.

In this deeply researched analysis for the Centre for European Reform think-tank, Anton Spisak contends that the benefits of the tariffs may not amount to much:

“European carmakers face structural pressures that go far beyond subsidised foreign imports.”

No united European front

For the Europeans, it often turns out to be difficult to present a united front on economic relations with China, as powerful business sectors in some countries are heavily reliant on Chinese consumers and suppliers.

A case in point is Germany. All the tensions over trade and Chinese support for Russia did not stop German investment in China from soaring in the first half of last year — much of it driven by big German car manufacturers.

Andreas Fulda, a UK-based German scholar, published a book last year — Germany and China: how entanglement undermines freedom, prosperity and security — which argued that policymakers in Berlin are far too complacent about the risks that Chinese policies pose to Germany.

But other countries are no less reluctant to sacrifice close commercial and investment ties with China on the altar of European unity. One example is Spain.

Another is Italy, which in 2023 withdrew from China’s Belt and Road Initiative, but has subsequently sought to relaunch relations with Beijing — as explained here by Giulia Longhi on the China Observers in Central and Eastern Europe website.

Finally, we shouldn’t forget the UK’s recent efforts to rebuild economic and financial ties with China. Byford Tsang, writing for the European Council on Foreign Relations, describes this initiative as a “high-level political signal of openness to Chinese trade and investment” that “stands in sharp contrast to the EU’s more cautious stance”.

All in all, the rupture with the US — if that’s what it truly is — will present some hard choices for Europe with regard to China.

What do you think? Should Europe draw closer to China?

Vote here.

More on this topic

Russia-China economic relations: Moscow’s road to economic dependence — a research paper by Janis Kluge for the Deutsche Institut für Internationale Politik und Sicherheit

Tony’s picks of the week

• The plans of Masoud Pezeshkian, Iran’s reformist president, to negotiate with the US over the country’s nuclear programme appear to be falling apart under pressure from hardliners in the Islamic republic, the FT’s Najmeh Bozorgmehr reports from Tehran

• Democracy across the world is in decline, touching levels last seen in the final years of the cold war, according to the Democracy Report 2024 of the V-Dem Institute at the University of Gothenburg