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Published on Nov 19, 2020 Updated 13 Days ago
At a glance: 5 factors at play between Europe and Beijing

Attention peaked on EU-China relations in March 2019, when the EU Commission put out a “strategic outlook” report naming China a ‘systemic rival’ to the EU. The EU is China’s second largest trade partner, yet serious concerns have emerged over Chinese investment ambitions across the European continent, as well as domestic human rights issues. Increased investments in Southern and Eastern Europe through the Belt and Road Initiative (BRI) posed as an initial challenge towards a united European strategy on Beijing.

However, post the 5G debacle and the onset of the COVID-19 crisis, EU members have found themselves becoming increasingly sceptical of Beijing’s intentions. China’s growing unpopularity not just with a majority of EU member governments, but also their populations, is indicative of widening cracks in the EU-Beijing relationship. All eyes are on the US for potential changes to the Washington-Beijing relationship at the onset of the Biden presidency. However, it is worth taking a look at the current state of affairs between Western European nations and Beijing, as the former will look towards working closer with the Biden administration in addressing challenges posed by the latter. As a Biden official recently said, the US will be looking “to get on the same page with allies regarding China”. What does that page look like?

1. 5G

The 5G conundrum is very much an ongoing phenomenon in Europe. Forty one EU Members of Parliament (MEPs) have denounced the use of Huawei and ZTE, by branding them as “high-risk” companies posing a security threat to European networks.  Being watched as closely as a nail-biting election result, European states have steadily been switching out of Huawei for European companies Ericsson and Nokia.  Latest to join the bandwagon were Sweden and Estonia who have barred both Huawei and ZTE from their 5G tech. This was followed by Bulgaria, Kosovo and North Macedonia, demonstrating a convergence amongst present and aspiring EU nations. Either by opting for domestic 5G providers or by declining to renew equipment licenses with Huawei, EU countries seem to be politely steering it out of the continent.

2. EU investment deal with Beijing

President Xi recently announced he would speed up negotiations of the China-EU investment treaty. The investment treaty negotiations have been through 33 rounds over the past seven years. What are the main points of contention? Market restrictions from the Chinese side seems to pose as the main challenge to reaching the deal, with Chancellor Merkel warning China of restricted EU market access if Beijing does not start opening up further by the end of 2020. According to a survey published by the EU Chamber of Commerce, if China granted greater market access, 62 percent of European Chamber members would be more inclined towards increasing their investment in China. China has made concerted efforts more recently to improve their business environment for foreign investors. The Foreign Investment Law (FIL) introduced in 2019, aimed to level the playing field for foreign businesses competing with domestic private firms, by spelling out restrictive requirements and legal liabilities. However, the FIL has not appeased the sentiments of EU investors, who demand the same free market conditions that Chinese firms have access to. With the introduction of China’s Unreliable Entity List (UEL) with its new Export Control law, the Chinese State Council is now in a position to use its discretion to investigate and penalise private foreign investors. This does not inspire confidence in EU investors.

The nature of the demands Brussels calls for mirrors those of Washington in the ongoing “Phase Two deal” for the trade war. This brings potential for a joint EU-US attempt at pushing Beijing to introduce these reforms. On the other hand, Chinese FDI in the EU has been on a steady decline. It dropped by 33 percent in 2019, bringing the total back to where it was in 2013 (12 billion USD). As of  October 2020, the EU put in place its Screening Regulation, tightening the rule book further on Chinese FDI.

3. COVID-19

Chinese Foreign Minister Wang Yi embarked on a five-country diplomatic tour during the final week of August, in what was perceived as an attempt at “damage control” post the criticism of China’s handling of the initial stages of the pandemic. This was following hardened European stances on China as a direct result of China’s lack of transparency at the beginning of the pandemic. Talk was made of collaboration on vaccine development, green energy and post-pandemic recovery. Still reeling from the effects of the first wave of COVID-19, the trip was not received well by Wang Yi’s European counterparts, who questioned him on Hong Kong, security and transparency. Choosing to make a trip to Europe soon after the pandemic let up demonstrates how important Europe is to China. However, any attempt to put a wedge in Transatlantic relations might have been unsuccessful, even more so with the new Biden presidency.

Public opinion on China has soured across the continent, as Chinese state media continually deems “the West” incapable of dealing with the second wave. A study conducted by the European Council on Foreign Relations has revealed that perceptions on China have vastly changed for the worse since the beginning of the COVID-19 crisis. Forty eight percent of respondents in Western Europe stated that their view of Beijing has worsened. The study also showed that this has led to an increased convergence amongst EU member states on demanding transparency from Beijing, unimpressed by neither Chinese “mask” diplomacy, nor any other aid efforts subsequently made.

4. Hong Kong and security

 The UK and EU members have openly condemned the National Security Law introduced in Hong Kong, as well as Beijing’s act of disqualifying pro-democracy Hong Kong lawmakers. Describing it as a “severe blow” to Hong Kong’s autonomy, the EU called for the resolution to immediately be reversed. When Beijing introduced the National Security law in Hong Kong, the EU imposed sanctions in July 2020. The EU Council has continually expressed grave concern over increased Chinese repression in Hong Kong, emphasising their support for the “one country, two systems” principle which governs Hong Kong. The European Parliament has regularly challenged China’s actions in Xinjiang, Tibet and Hong Kong, demonstrating EU members states’ desire to recalibrate their relations with China.

Sweden and Finland are two countries that have most recently experienced soured relations with China, while Germany attempts to maintain its position as leader in EU-China relations when it comes to trade and security. France and Germany have expressed newfound interests in articulating their own Indo-Pacific policies by strengthening relations with QUAD members. The priority for EU nations is to strike a balance between cooperating with China, and holding it accountable for unacceptable actions.

5. A divided Europe?

From an assessment of the above, an increased convergence in Europe against China may be apparent. However, it is important to note that some European countries have experienced closer ties with Beijing over the last three years. Eleven out of the seventeen members of the 17+1 dialogue with China are EU members who have benefited from Chinese investment. China has been credited for its institutionalised relations with Central and Eastern European (CEE) countries, creating potential for interconnectedness in the region.

However, are 17+1 members happy with the current state of affairs with China? Not according to a report published early this year by China Observers in Central and Eastern Europe. The report reveals that with the exception of Hungary and Serbia, there is no proof that CEE countries have become politically forthcoming with China as a result of this format. Simultaneously, trade deficit with China has increased since the inception of the format in 2012 to $75 billion in 2018. As even some CEE countries opt out of Huawei for their 5G networks, China will have to re-evaluate the challenges to this arrangement. Nevertheless, EU countries must look to involve the interests of CEE nations in any efforts to create a common EU strategy on China.

In conclusion: 

As its relations with the US have steadily worsened, China has increasingly been vying for Europe’s attention politically and economically. In braving geopolitical headwinds, it is imperative for European leaders to exercise autonomy in areas of defence, technology and trade interests. Demonstrating an increased convergence on China is one way for Europe to assert itself, opting to separate itself from the ongoing political dogfight between the US and China. Seeking cooperation where applicable, and drawing clear lines in the sand when not will be a strategy the EU will turn to.

Europe, best described by Gerry Shih of The Washington Post, is now a swing state. Caught in a strategic contest between Beijing and Washington, it is viewed by Beijing as a reasonably ‘neutral’ player that needs to be prospectively won over. Considering the most recent direction the 5G rollout has taken and the potential for strengthened Transatlantic relations with the Biden Presidency, this prospect might just be too slippery a slope for Beijing to climb.

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