Since the release of the EU’s latest policy report on China in 2019, Sino-European relations have undergone dramatic changes against a backdrop of major international situations such as the U.S.-China game, the global COVID-19 pandemic, and the Russia-Ukraine conflict. In the face of these unprecedented changes, how will the so-called economic and trade “decoupling” from China, which is being intensely discussed and even promoted within the EU, develop? What are the similarities and differences between European and U.S. policies towards China? In what areas and aspects can China and Europe still carry out or promote practical cooperation? From China’s perspective, where should Europe be placed in China’s foreign strategy, and what role should it play?
Some members of the Fudan Europe Watch academic community (an academic community formed by young scholars of European studies at Fudan University) and some special guests discussed the above questions and expressed their views as follows.
Some of the experts of the Fudan Europe Watch academic community (in alphabetical order by surname)
Jian Junbo – Deputy Director and Associate Professor, Center for China-EU Relations, Fudan University
Ma Bin – Associate Professor, Center for Russian and Central Asian Studies, Fudan University; Deputy Director, Center of Shanghai Cooperation Organization Studies
Peng Zhongzhou – Postdoctoral Fellow, School of International Relations and Public Affairs, Fudan University
Yan Shaohua – Assistant Professor, Center for China-EU Relations, Fudan University
Yao Xu – Assistant Professor, Institute of Development Studies, Fudan University
Zhang Ji – Assistant Dean and Research Fellow, School of International Relations and Public Affairs, Fudan University
Invited guests (in alphabetical order by surname)
Fang Jiongsheng – PhD Candidate, School of International Relations and Public Affairs, Fudan University
Li Anfeng (Andrea Ghiselli) – Assistant Professor, School of International Relations and Public Affairs, Fudan University
Yao Le – PhD Candidate, School of International Relations and Public Affairs, Fudan University
Zhang Ya’ning – Visiting Researcher, Jacques Delors Center Berlin; PhD candidate, Freie Universität Berlin
1. Will the EU really “decouple” from China’s trade and economy?
Fang Jiongsheng: At this stage, the EU has no intention to push for complete decoupling from China, but will adopt the following two means to gradually reduce its “strategic dependence” on China. First, a “China+1” production chain diversification strategy will be adopted, with production and marketing bases in China retained, while setting up second bases in India or Southeast Asia and other regions that have recently carried out key cooperation. Second, with the help of the recently passed Directive on Sustainable Corporate Governance, European enterprises will be required to fulfill their responsibility to disclose environmental and labor rights issues in the production chain.
Jian Junbo: First, in terms of production chains, the EU is seeking to transfer out of China trade and investment that is dependent on China. Although the European Supply Chain Act being promoted is not nominally designed for China, it contains important objectives to reduce economic and trade dependence on China. Other examples include the establishment of the U.S.-EU Trade and Technology Council, the attempt to establish an EU-U.S. rare earth alliance, and the establishment of “investment review mechanisms” for foreign investors, all of which have the purpose of reducing “dependence” on China. The promotion of anti-economic coercion legislation and other technical barriers to foreign trade also partly serves to hinder economic and trade relations with China. It is also relatively obvious that the intention of strengthening economic and trade relations with emerging Asian countries through the “Indo-Pacific Strategy” is to weaken economic and trade relations with China.
Second, European enterprises are still hesitant to disengage or decrease their ties with China’s market, but the willingness of some enterprises to “decouple” is growing. In the context of the U.S.-China game and increasingly complex Sino-European relations, the confidence of European enterprises in the stability and predictability of the Chinese market has declined to a certain extent.
Third, within three to five years, there will be no significant changes in the economic and trade interdependence between China and Europe because one, “decoupling” is not an easy task, two, the Chinese market is still an “immediate need” of Europe at present, and three, China will still adhere to the open policy. In any case, reducing economic and trade dependence on China will be a long-term strategy for Europe.
Andrea Ghiselli: The current situation in Sino-European relations is very complicated. There is no doubt that the situation has deteriorated compared to a few years ago, but it is not clear whether it has bottomed out. If relations between China and the EU are to be improved, it is necessary to pay attention to Europe’s view. It wants China to exert more influence on Russia in the Russian-Ukrainian conflict. This means that for the first time European leaders regard China as a real player in European security issues. In other words, the insulating effect of geographical distance has been weakened.
Ma Bin: The EU is accelerating the restructuring of its economic relationship with China. While using the term “decoupling” to describe EU policy may be conducive to the political marketing of politicians and the traffic-generating games of the media, the EU’s main goal now is to mitigate risks by reducing dependence on China in key segments of the production chain, rather than to cut economic ties with China. However, if China-EU relations increasingly slide into geopolitical and ideological battles, continuing to reduce economic ties with China will also be a realistic policy option for the EU. While economic cooperation with China is important for the EU, it is also the expectation of EU China policy that China will play a more constructive role in practical cooperation in a broader range of areas, especially in mitigating and addressing the geopolitical risks facing the EU.
Peng Zhongzhou: The U.S.-EU Trade and Technology Council held its second meeting on May 16. Judging from the draft final statement, the EU intends to reduce its dependence on China in the major areas of photovoltaic products, rare earths, and chips. But this goal is still far from decoupling. Unlike the United States with its aggressive separation from China, the EU sees China as a competitor rather than an enemy in the trade arena. The EU is most likely to further strengthen supply chain diversification in key areas and remain guarded against Chinese investment in Europe, but decoupling from China is not an EU policy goal.
Yan Shaohua: “Decoupling” has not yet become a consensus in EU policy circles and industry circles, and it is not in line with the principle of free trade and “open strategic autonomy” advocated by the EU. In terms of economic and trade cooperation with China, the EU places more emphasis on “reciprocity.” After the outbreak of the COVID-19 epidemic, the EU began to pay attention to the issue of dependence on China, emphasizing the reduction of dependence on China in strategic areas, and the Russia-Ukraine crisis has intensified this trend, but the EU will not make decoupling a policy option.
Yao Xu: The EU’s “decoupling” from China is not the direct aim of Europe’s strategic autonomy and “resilient” production chain construction, but there is the possibility of it becoming the end result under the existing security dilemma. The technology war and technology blockades and sanctions unveiled by the United States against China have forced China to seek its own R&D and production capacity in key and core technologies, but this process is often seen from the European perspective as eventually replacing existing European production chains, creating a dilemma in the production chain field. The Russia-Ukraine conflict has opened a Pandora’s box, and the previous calculations of Western multinationals for profits have given way to simple and crude political side-taking. The EU and China both need to do their best to manage conflicts and tensions, seek cooperation and win-win outcomes, and prevent “decoupling” from becoming a self-fulfilling prophecy.
Zhang Ji: We should note that there are different perceptions and differentiation of interests within the EU on the issue of “decoupling.” The arguments for so-called “decoupling” from China mainly come from political figures, while the industrial and business sectors are less likely to talk about “decoupling,” as they still attach importance to the Chinese market. The so-called transfer of production chains to Southeast Asia cannot be achieved overnight, either. But on the other hand, whether in terms of its own development or its foreign strategy, China needs to prevent this political “decoupling” rhetoric in Europe from becoming the common perception and action of industries and enterprises.
To this end, first, China needs to continue to expand its markets and respond to “decoupling” with “binding.” The past history of development is that we cannot do without the European and U.S. markets, and in the future we need to make Europe and the United States truly unable to do without the Chinese market. Second, China should rely on innovation to possess the irreplaceable elements of the production chain, and build a more positive relationship with the outside world. Third, China should consider how to enlarge the common market and achieve “binding of interests.”
Zhang Yaning: First, in the trade and investment area, the EU will continue to promote the development of stable and mutually beneficial bilateral trade, but will be more cautious in investing in China. For the latter, avoiding political and supply chain security risks induced by the turbulent world situation will become an important consideration. Second, in the political sphere, China-EU political relations historically have been dominated and driven by economic and trade relations. In the future, the “ballast” role of bilateral trade and commerce in China-EU political relations will weaken, and ideology will rise to be an important factor limiting the stability of China-EU political relations. Third, in terms of regulating competition, internally the EU is promoting the Regulation on Foreign Direct Investment Screening and the Anti-Coercion Instrument Act (Draft), and externally, together with its allies, it is exerting pressure on China on issues such as WTO reform.
2. There is convergence of EU and U.S. China policies, but they are also very different
Fang Jiongsheng: The core difference between Europe and the United States is that, since the United States is a hegemonic state, its China policy toolbox is far richer than the EU’s. The United States holds strong rule-making power in global finance and other fields, and controls core technologies and markets in cutting-edge technology fields such as chips. This has led the United States to objectively have isolation, cutting off supplies, and other “stranglehold” capabilities when formulating policies toward China. Compared with the United States, the EU’s interdependence with China’s is more reciprocal, and it lacks “killer apps” that can have a significant impact on China. Therefore, the EU is unable to have a “showdown” with China. This provides us more ample policy space for handling relations with Europe.
Jian Junbo: European and U.S. policies toward China are rapidly converging in some areas, but the objectives of European and U.S. policies toward China are not all the same. At present, U.S. policy toward China mainly seeks to contain the rise of China in order to maintain its international hegemony, while Europe aims to safeguard its economic and trade interests and normative advantages. While there is a risk of security confrontation in U.S. China policy, the security confrontation cast of European policy toward China is weaker.
Andrea Ghiselli: The differences between European and U.S. views of China have narrowed significantly in recent years, but some important differences remain. First, European interest in the “Indo-Pacific” region is still rather limited. Second, European leaders are certainly more reluctant to harm trade relations with China, although the impact of the COVID-19 epidemic on European companies trading and investing in China should not be underestimated.
Ma Bin: There is more consistency than disparity, and more coordination than conflict, between the EU and U.S. China policies. The two sides have extensive and close strategic, security, economic, cultural, ethnic, and historical ties, and when facing China, it is more a difference in roles than a difference in directions. After the outbreak of the Russia-Ukraine conflict, the EU quickly reconciled its internal differences and endured huge economic costs to work with the United States against Russia, indicating that its pursuit of strategic and security goals is more urgent.
Peng Zhongzhou: Under the leadership of President Biden’s values-based diplomacy, the EU and the United States have trended towards unity in the ideological aspects of their China policies. In practice, however, there are differences in the strategic priorities of the EU and the United States towards China. For the EU, responding to Russia’s military action in Ukraine is the sole focus of its strategy, while with China it strives to avoid expanding the political conflicts. In contrast, although the United States has increased sanctions against Russia in the wake of the Russia-Ukraine conflict, China has always been its primary target for containment. Therefore, except in terms of ideology, the EU does not focus on containing China’s influence in political, economic, technological, and other areas as the United States does, and competition—without excluding cooperation—will be the main direction of EU China policy.
Yan Shaohua: The United States has actually followed the EU’s “three-fold division” positioning of China, that is, it regards China as a partner, an economic competitor, and an institutional adversary, but the order of emphasis is different. In the speech on China policy given by Secretary of State Blinken last Thursday, the United States proposed a new policy framework for China, namely, “investment, alliance, and competition,” setting the main tone and means of China policy. This actually opened up some distance from the EU’s policy positioning on China.
Yao Xu: There are still different internal viewpoints underlying European and U.S. China policies. In the United States, the forces and voices for friendly and enhanced cooperation with China have gradually diminished in recent years, with tough confrontation becoming the new “political correctness.” There remain different voices behind Europe’s policies towards China, with organizations including European manufacturing giants such as Volkswagen and other automobile companies, and EU chambers of commerce, still calling on various occasions for further deepening cooperation between China and the EU. Therefore, with their different internal supports, the European and U.S. policies towards China may produce different directions in the future.
Zhang Yaning: The similarities between the two are that their foreign policies are strongly guided by ideology, and their strategic perceptions of China are fundamentally close. The differences lie mainly in the different perceptions of the relative weight of “economic interests” and “competitive threats.” Specifically, economic interests are the most important interest of EU diplomacy with China, as well as the most important means. Diplomatic objectives that are less related to economic interests or cannot be achieved by economic and trade means are not core diplomatic interests of the EU. The aforementioned differences depend fundamentally on two factors: On one hand, in contrast to U.S.-China relations, there is no obvious geo-security conflict between China and the EU; on the other hand, the EU is essentially still an economic actor based on a unified market and regulation. Therefore, its foreign policy objectives and diplomatic abilities are both relatively single-faceted.
3. Is there currently still room for pragmatic cooperation between China and the EU?
Fang Jiongsheng: Coping with the shortages of key products and runaway inflation caused by international conflicts and the epidemic is a common concern for both China and the EU at this stage. Through mechanisms such as the financial dialogue established with core EU member states and specific consultations at the implementation level, the Chinese government can reach a consensus in principle on containing the relevant risks, adopt similarly oriented policy tools to hedge the risks of global market turbulence, provide necessary support to small and medium-sized countries to maintain the stability of their economic systems, and defend the livelihood and well-being of people around the world.
Jian Junbo: First, in the bilateral arena, there is still room for further progress at the economic and trade level, even if a partial “decoupling” phenomenon exists, but in the near term there is still a need to open markets to each other in order to resolve the economic development dilemmas caused by the epidemic and the Russia-Ukraine conflict. In the energy shortage situation, China can utilize its advantages in solar panels, wind power equipment, and lithium batteries to strengthen energy cooperation with Europe. Second, in the multilateral arena, it can jointly promote poverty reduction in underdeveloped countries and regions, and anti-drug, anti-crime, and peacekeeping cooperation, as well as cooperation on climate change and addressing the current epidemic and the looming global food security issue. Third, it can promote economic and trade cooperation with third parties in energy development and transportation, green development, and other projects and programs. In addition, a substantial push by China to end the Russia-Ukraine conflict would help greatly to improve China-EU relations.
Andrea Ghiselli: From climate change to the Iranian nuclear deal, the positions of Chinese and European leaders are similar on many important international issues. However, global economic and political tensions have long undermined successful cooperation between the two sides. In the current situation, European and Chinese leaders should focus on pragmatic and viable cooperation. For example, enhanced cooperation on how to deal with the epidemic would be very important, and a mutual easing of travel restrictions after the long interruption of contacts due to the epidemic would do much to facilitate trade and cultural exchanges between China and Europe. This could greatly improve the future prospects of China-EU relations.
Peng Zhongzhou: In addition to maintaining stable growth in bilateral trade in the economic sphere, China and the EU should also be able to further develop cooperation in addressing climate change through the High Level Environment and Climate Dialogue on the 2021 basis, including further implementation of the Paris Agreement’s emission reduction commitments and strengthening green finance. In addition, China and the EU also have extensive opportunities for cooperation in helping Africa deal with the COVID-19 epidemic and maintain sustainable development. Chinese enterprises can also carry out digital infrastructure cooperation with European countries through competitive bidding in key regions of the Global Gateway initiative, such as Southeast Europe and the Western Balkans.
Yan Shaohua: First, on the Russia-Ukraine crisis, which is most urgent, China and the EU still need to maintain dialogue, narrow differences, expand consensus, and promote a cessation of hostilities and peace through diplomatic efforts. Second, China and the EU should cooperate to deal with the energy and food crises caused by the Russia-Ukraine crisis. On the path of transitioning to new energy in particular, China and Europe are a community of destiny. They should get rid of zero-sum game thinking, and strive together for a green transition from the vantage point of a community of human destiny. Third, in view of the fact that the current COVID-19 epidemic situation is still severe, China and the EU should strengthen cooperation and coordination in dealing with the epidemic, and in particular, strengthen cooperation on mRNA vaccines, so as to provide strong assurance for dealing with the epidemic and for economic recovery.
Yao Le: China and the EU can cooperate in the following areas: First, they can carry out third-party market cooperation in a wide range of developing countries and regions. In practice, micro-level interaction and cooperation are not necessarily influenced directly by bilateral political relations at the macro level. Commercial interests, mutual trust accumulated through long-term cooperation, networks of relationships between personnel, and common goals are important factors that promote pragmatic cooperation at the micro level. Second, China and the EU can actively participate in international multilateral cooperation in the global governance and sustainable development fields. China and the EU can make good use of international multilateral mechanisms and platforms to share knowledge on sustainable development, exchange and promote best practices, and create opportunities and space for pragmatic cooperation on global governance issues.
Yao Xu: China and the EU need to grasp the key thread of practical cooperation, create a more favorable atmosphere for cooperation, and fashion more practically significant footholds for cooperation, among which the field of digital governance could become an important entry point. With the continuous improvement of China’s regulatory system for network security and data protection, China and the EU have more basis for dialogue and room for cooperation in the fields of online content regulation of large enterprises, cross-border data flows, data protection, and personal privacy protection. In the digital governance field, China and the EU should strengthen exchanges, cooperation, and mutual learning on standards, and jointly promote the regularization and implementation of the China-EU High-Level Digital Dialogue and its supporting mechanisms.
4. How important is Europe to China?
Fang Jiongsheng: The bottom line and the upper limit of the China-EU relationship should be clearly defined. The bottom line is to avoid making the EU think that there is no longer room for reconciliation in the China-U.S. relationship. French President Emmanuel Macron and some European think tanks have begun to advocate a “bipolar theory of China and the United States” in recent years. If this view gains wide acceptance, it will no doubt force the EU to choose sides more clearly, leading to the loss of the necessary strategic ambiguity in China-EU relations, which will have an extremely negative impact on China’s coordination of relations with the United States and Europe. The upper limit is that the China-EU relationship cannot surpass the China-U.S. relationship. The EU’s strategic autonomy has inherent limitations, and it is unable to be completely independent and equal when facing the United States. The EU’s strategic role should be positioned within the scope framed by the aforementioned bottom line and upper limit.
Jian Junbo: There is a discrepancy between China and the EU in their positioning of China-EU relations. The EU has since 2005 emphasized the competitive relationship between China and Europe, despite the establishment of a “comprehensive strategic partnership” in 2003, and the EU’s positioning of China in 2019 as simultaneously playing three roles—partner, competitor and adversary. In this situation, does China position Europe as an all-round “strategic partner,” or as a partner, competitor, and adversary at the same time, or as a highly anticipated independent force to balance U.S. hegemony? This is worth studying in depth. The positioning of Europe’s role in our foreign strategy, as one of our perceptions, should conform as much as possible with its real position in the international community and the EU’s self-perception. In any case, in the current international situation, Europe should become a long-term partner in our foreign strategy.
Peng Zhongzhou: In the context of the confrontation between China and the United States, Europe is for China a counterparty with which it needs to maintain a cooperative relationship. However, the natural ideological convergence between Europe and the United States means that it would be difficult for Europe as a whole to become China’s partner in geopolitical competition. At the same time, the direction and outcome of the Russia-Ukraine conflict will have a significant impact on Europe’s strategic position. If the EU can play a leading role in negotiations to end the Russia-Ukraine conflict, it will significantly strengthen its strategic autonomy in geopolitical competition and will also enhance its importance in China’s foreign strategy. Conversely, if the EU is unable to keep the war from developing in a direction unfavorable to Ukraine, its importance in the post-war European and global geopolitical landscape will decline significantly, and it will be marginalized in China’s foreign strategy. Therefore, the extent to which the EU can lead the resolution of the Russian-Ukrainian conflict will be a weather vane of its strategic autonomy, and it will also determine where China will place the EU in its geopolitics.
Yan Shaohua: China’s strategic positioning of Europe should be in line with China’s own strategic interests and acceptable to the EU. A positioning that is in line with this principle at present could be that of “partner in multilateralism.” The current mainstream policy of the EU for addressing the challenges of multilateralism and multipolarity is strategic autonomy. Therefore, to become a real “partner in multilateralism,” China needs to support the EU’s strategic autonomy with more practical actions, not just words. In a world that is in between multipolarity and multilateralism, a strategically autonomous EU is in China’s strategic interest.
Yao Xu: In the existing international landscape, Europe’s importance for China’s foreign strategy has been further heightened. It is a crucial influencing factor in the process of deepening our reforms and expanding our openness. In various aspects such as mutual learning on standards, technology exchanges, and market interoperability, Sino-European relations will directly determine the strength and depth of China’s opening up. This deserves our further attention.
Zhang Yaning: The importance of the EU in China’s diplomatic strategy is reflected in three points. First, the EU is the world’s largest unified market and has a pivotal position in the world economy. Second, the EU remains one of the leading forces in global scientific research and innovation. Third, the EU’s policy towards China has a certain degree of independence. In this context, the development of relations with Europe is of great significance for China’s economic development and industrial upgrading, and for promoting the building of a new international order. In the context of intensified strategic competition between China and the United States and the Russia-Ukraine conflict, the importance of maintaining strategic stability between China and Europe has risen sharply, and China should put the improvement of Sino-European relations on the same level of importance as preventing the “strategic competition between China and the United States from getting out of control.” From an operability point of view, the practical significance of maintaining strategic stability between China and Europe is even greater.