Alarmed by inaction in the face of Russian aggression, Europe is reconsidering relations with China

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Russia’s war against Ukraine has prompted a profound reassessment of their individual and collective ties with China in European capitals.

Faced with the need to quickly shed decades of dependency on Russian energy, government officials from Rome to Prague are now reassessing the extent of their economic and political ties to China.

Senior lawmakers in Berlin, who now concede that such proximity to Russia was a historic burden, are beginning to see the danger of repeating the mistake with another authoritarian regime and are ringing alarm bells about Germany’s status as Beijing’s largest European trading partner.

Nations in Central and Eastern Europe are again questioning the wisdom of the so-called 16+1 forum with China. And Italy has just strengthened its veto power over foreign takeovers, a move aimed at China.

At the European Union level, attitudes have soured over Beijing’s refusal to condemn Russia’s invasion and its attempts to undermine the transatlantic unity fostered by the war. A virtual EU-China summit on April 1 took place in the context of what one person familiar with the discussions described as an increasingly challenging relationship.

Against the backdrop of war in Europe, the EU has entered the talks with the top priority of asking China to use its influence over Russia to stop the bloodshed, the person said, adding that there are serious concerns that China’s continued inaction could have a lasting negative impact on EU relations.

After the summit, a Foreign Ministry reading in Beijing said that President Xi Jinping called on Europe to adopt an “autonomous” view of China and that the solution to the conflict was to address the “reasonable security concerns of all parties concerned.”

The EU foreign policy chief Josep Borrell described the exchange with China as “a dialogue of the deaf”.

After Xi met with Vladimir Putin in early February and declared a “borderless partnership,” Beijing sought to remain neutral on the conflict and expressed sympathy for the Russian president’s stance, even as it defended Ukraine’s sovereignty.

Systemic rivalry

Beijing is unlikely to welcome the instability and economic turmoil that Putin’s war has brought. But even if its ability to influence him is limited, the EU argues that China has unique channels it could use to try.

The view of a European diplomat in Beijing is that the war is driving China and Europe further apart and increasing their systemic rivalry. The pandemic and Europe’s realization that it depended on China for essential healthcare was the wake-up call; Russia’s war on Ukraine supports the argument that Europe needs to reduce its dependence on Beijing, the diplomat added.

“This is truly the awakening of the West,” said Lithuanian Foreign Minister Gabrielius Landsbergis, whose Baltic nation suffered a slump in exports to China after falling out with Beijing over Taiwan, the island democracy that considers China its territory. The EU filed a complaint with the World Trade Organization in March over China’s treatment of Lithuania.

“The most important lesson we should learn from Russia’s war in Ukraine is that trade alone does not change how authoritarian countries act,” Landsbergis said in an interview in Vilnius. “When we talk about China, we clearly see that new dependencies are being developed.”

China overtook the US as the EU’s largest trading partner in 2020, with a total trade volume of around US$868 billion last year.

The war in Ukraine has affected the already fragile supply chains on the trade routes between the two countries and has further pushed up the cost of energy and raw materials. But geopolitical considerations also influence companies operating in China.

A majority of German companies there said in late March – ahead of the “COVID Zero” lockdowns in Shanghai and elsewhere – that the crisis caused by the war in Europe was affecting their China strategy, according to a survey of 391 members of the chambers of commerce.

A third of respondents said they expected to put planned deals or investments on hold, while 46% saw the Chinese market’s attractiveness decline. About 10% said existing businesses could be shifted out of China, and 27% said they expect diversification into Asia to accelerate.

According to Jens Hildebrandt, executive director of the German Chamber of Commerce in North China, the trend is away from globalization and toward what he calls “localization,” where companies are building localized supply chains to serve specific markets. The trade conflict between the US and China has fueled this development, “and the war in Ukraine is giving it a further boost,” he said on the phone.

European Commission President Ursula von der Leyen holds a press conference in Brussels following a virtual summit with Chinese leader Xi Jinping in 2020. | SWIMMING POOL / VIA REUTERS

For Jörg Wuttke, head of the EU Chamber of Commerce in China, “the nature of China’s public image in relation to Ukraine really makes a difference”. Coupled with its COVID-zero policy and associated business disruptions, “it’s really important now that China is perceived as unreliable,” he said, calling it a “new dimension.”

EU-China relations have deteriorated sharply over the past year, marked by the imposition of mutual sanctions over the human rights situation in Xinjiang. China targeted members of the European Parliament and put the passage of an ambitious EU-China investment deal on hold. His treatment of Lithuania added to the tensions.

In March, two weeks after the Russian invasion, China warned the US against trying to emulate NATO in the Pacific and dismissed comparisons between the security disputes over Ukraine and Taiwan.

“China-EU relations are already facing growing difficulties on various issues, and it is not in the interests of both sides to create further points of friction on the basis of nothing,” the Chinese Communist Party’s Global Times newspaper said this week a call for the EU not to “fall into Lithuania’s trap”.

‘downward spiral’

Ahead of the April summit, Brussels and member states had hoped Beijing would stop the “downward spiral” in EU-China relations by using its influence over Russia to help end the war, said Janka Oertel, Asia program director at the European Council on External Relations.

“That hope was dashed,” she said in an online comment.

The sense of dismay at China is arguably most evident among the countries in Central and Eastern Europe that have the most restrictive views of Russia. Paradoxically, they are also among the EU nations with which China has had the best relations through its 16+1 forum, which allowed smaller states to have an audience with Beijing’s leadership.

Dissatisfaction with the forum has long been evident, and Lithuania resigned last year. A Chinese diplomat was dispatched to the region last week, fueling speculation that others may now be considering a way out. She has been warned by the Czech government that China’s support for Russia would damage its relations with the wider EU.

business boost

Yet few advocate decoupling.

The Dutch have become aware of the threat posed by China in recent years, but that doesn’t mean they will stop trading with or holding talks with Beijing, people familiar with the government’s mindset have said.

Some European companies are increasingly focusing on China. One of Volkswagen AG’s priorities for 2022 is to “boost our #China business,” CEO Herbert Diess wrote in a Linkedin post.

Italian Prime Minister Mario Draghi with Chinese Foreign Minister Wang Yi in Rome in 2021 |  REUTERS
Italian Prime Minister Mario Draghi with Chinese Foreign Minister Wang Yi in Rome in 2021 | REUTERS

Europe needs China to stabilize the economy as it suffers the effects of war, according to Henry Wang Huiyao, founder of the Center for China and Globalization, a Beijing-based policy research group set up as a bridge to communicate China’s position to the world to explain.

“The message is that if the EU is now more militarily tied to NATO, over time it must be more economically tied to China,” he said.

But political sentiment in Europe’s largest economy seems to be turning in the opposite direction. At the Ludwig Erhard summit last week, German Finance Minister Christian Lindner said Berlin needed an entirely new business model to reduce its economic dependence on China.

end of the era

Lars Klingbeil, co-chair of Chancellor Olaf Scholz’s Social Democratic Party, said at the same conference that there was a need to learn the lessons of Germany’s Russia policy and “end dependence on China”.

In Italy, Prime Minister Mario Draghi has hardened his stance on China following the Russian invasion. Italy this month strengthened its veto power over foreign takeovers by creating a special unit to monitor potential mergers, allowing it to block a transaction if it’s in a strategic sector.

“The war has already sparked intense debates about critical infrastructure and resilience in Europe,” said Agatha Kratz, associate director of the Rhodium Group, and Max Zenglein, chief economist at the Mercator Institute for China Studies, in a joint report this week.

The era of “massive Chinese investment” in Europe may be over, they said.

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