Sino-European relations in 2021 saw collisions and confrontations of sharply contrasting natures. From the harmonious moment when the Comprehensive Agreement on Investment was reached at the beginning of the year to the strange atmosphere of mutual maintenance of sanctions that settled in at the end of the year, the changes have been rapid and flabbergasting. In fact, the upward momentum of Sino-European relations had been sudden and powerful thanks to the rising tide of economic globalization and European integration, and then, with the falling tide of the latter, there followed a very rapid downward slide. China’s accession to the WTO in 2001 put economic globalization in the fast lane, and Sino-European relations consequently experienced a honeymoon. The international financial crisis and European sovereign debt crisis of 2008 and 2009 opened a Pandora’s box, triggering multiple crises in Europe and elsewhere. Frictions gradually arose in Sino-European relations as well. The hostility between China and Europe that had developed by 2021 seemed to complete a 20-year cycle: For the first ten years the roller coaster car kept climbing in high spirits and full of optimism, but in the latter ten years it continually accelerated down the descending track.
On December 16, 2021, the leaders of the EU member states held a summit meeting at the EU headquarters in Brussels.
A Year of Accelerating Deterioration in Sino-European Relations
The Comprehensive Agreement on Investment could not have been reached in early 2021 without the support of former German Chancellor Angela Merkel. About to step down after having served as chancellor for 16 years, Merkel wished to leave an additional political legacy for subsequent generations and to inject some more vigor into the German economy. Therefore, disregarding warnings from the incoming Biden administration and intense internal European disputes, she strove to bring about this agreement between the EU and China. However, she failed to adequately take into account the shift in mass psychology resulting from social rifts and political polarization within Europe, and she had a powerful obsession with the neoliberal ideas which the European political elites had clung to for 30 years following the Cold War—ideas that favored trade liberalization and rejected geopolitical competition. Therefore, her beautiful vision of leaving a legacy of Sino-European cooperation was put into doubt by sudden changes in the situation.
During the ten years following the eruption of the European sovereign debt crisis, multiple crises within European society and elsewhere led to an economic downturn and slower development. China, on the other hand, continued to bound forward. China also kept recording huge surpluses in its long-term trade with Europe. Some production chains within the EU shrank, and the EU’s reliance on China’s production chains intensified. The change in the relative strengths of China and Europe has resulted in an increasingly unbalanced European mentality with regard to Sino-European relations. The outbreak of the Covid pandemic aggravated this imbalance. The enormous influence that China had on the developing nations’ struggle against the pandemic; Europe’s reliance on Chinese medical products; the fact that China maintained its rapid momentum in technological R&D and industrial upgrading in the midst of fighting the pandemic; the continual weakening in Europe of China-bound exports and investments—all of the above caused Europe to experience unprecedented fear. The confusion of European elites over China and their anxious “sense of insecurity” have been growing day by day. As a result, since early 2021, the EU leadership, experts on European strategy, and some politicians in some of the core member states have formed an increasingly negative view of China and have become ever more pessimistic about Sino-European relations. The idea of drawing on the support of the United States to counterbalance China has been growing imperceptibly.
The United States issued the Interim National Security Strategic Guidance in early March 2021, and Secretary of State Blinken at the same time gave a speech providing an outline of the Biden administration’s foreign policy. One week later, High Representative of the European Union for Foreign Affairs and Security Policy Borrell Fontelles gave a reply, in which he indicated that the EU needed to draw up a more systematic Indo-Pacific strategy as a proper response to China’s “increasingly forceful” attitude. On March 22, using the so-called “Xinjiang issue” as an excuse, the EU announced that it would sanction four Chinese officials, thereby initiating a process of rapid deterioration in Sino-European relations. In the middle of April, the EU issued an internal report which was circulated among high-ranking officials. According to the report, it had already become impossible to separate European commercial interests in China from political assessments of Sino-European relations; Sino-European relations had become “more and more challenging.” The report also proposed joining hands with the United States to cope with China. On April 21, President of the European Commission von der Leyen and High Representative Borrell Fontelles jointly signed a letter to the EU’s supreme authority, the European Council. They clearly stated the following: “The EU and China have fundamental divergences, be it about their economic systems and managing globalization, democracy and human rights, or on how to deal with third countries. These differences are set to remain for the foreseeable future.” On April 30, the European Parliament began discussions on the motion “Concerning a New EU Strategy on China.” This motion was passed by a large margin in the middle of September. On September 16, the European Commission introduced the “The EU Strategy for Cooperation in the Indo-Pacific.” Sino-European relations kept going downhill.
Conducting Strategic Competition in the Economic Arena
As European decision-makers became increasingly negative in their assessments and appraisals of Sino-European relations, the EU introduced a series of explicit and implicit policy frameworks directed at China with the intention of using the policy tools of protectionism and economic nationalism to implement stricter regulation over, and stiffer resistance to, products and capital imported into Europe from China. On May 5, the European Commission published a notice, the “Updated 2020 New EU Industrial Strategy,” which emphasized the need to escape from “reliance” on Chinese products. The European Commission also brought out on the same day a draft of control regulations aimed at “foreign subsidies that distort European internal markets.” The draft indicated that they would strengthen monitoring and regulation of “foreign-subsidized” foreign capital and clearly mentioned that support provided under the Made in China 2025 program have a “foreign-subsidized” nature. In addition, the EU on August 30 also issued an annual report on the implementation status of the “two antis and one guarantee” trade protection policy. On September 9, it introduced an unprecedently tough new regulation on export controls and technology transfers. On October 27, it issued a report on the implementation of EU trade agreements, and on November 23 it released the EU’s first ever annual investment review report. In these documents and reports, the EU repeatedly emphasizes that it needs to conduct tit-for-tat countermeasures to the “unfair” practices relating to Chinese products and capital. On December 8, the European Commission introduced the draft of a law for protecting Europe from “third country economic coercion.” The target was still China.
At the same time, even when dealing with third parties other than China , Europe is seeking to contest China at every turn, intensifying its fight for leadership and influence over economic cooperation. Because China’s position in the global value chain has gradually risen over the past few years, the technological and industrial development gaps between China and Europe have shrunk. Enterprises from both sides are vying for international market share. They are engaged in an intense rivalry for leadership of cutting-edge technologies and advanced manufacturing in third-party markets such as Russia, Africa, and Latin America. For example, Alstom in France and Siemens in Germany are battling with China’s CRRC Group for the high-speed rail market, and Huawei is in a contest with European enterprises over the communication services market.
In 2021, Europe pressed ahead with decisions aimed at coping with competitive pressure from China. On July 21, the European Council introduced a policy program, “Globally Connected Europe,” based on the “Connected Eurasia: The Touchstone for Building EU Strategies” document that the European Commission had released in 2018, that put forward a vision for providing large-scale support to developing countries. On December 1, the European Commission launched another policy program, “Global Gateway,” whereby it plans to invest 300 billion euros in developing countries over the next seven years in an effort to help them build infrastructure while also promoting “European values and institutions” to them. A bulletin from the European Parliament pointed out that the objective in putting forward these “European programs” was to replace China’s Belt and Road Initiative while firmly establishing European influence over the world.
Teaming Up with the United States to Take on China
U.S.-China strategic competition has already become an important factor shaping the evolutionary direction and operating rhythm of the world economy and international strategies. Europe occupies a highly awkward position squeezed between China and the United States. It cannot escape the double strategic pressure arising from Sino-European competition and U.S.-EU contradictions, both of which are intensifying. You might say that the Europeans find themselves in difficult straits and are quite anxious about it. Over the past few years, Europe has continually wavered between China and the United States. It has been hedging its bets by adopting opportunistic and transactional positions and is trying hard to free itself from economic or strategic reliance on either China or the United States. However, since March 2021, Europe has gradually drawn closer to the United States while handling relations with China.
The United States has always had a major influence on Europe’s understanding of China. U.S. political elites and the U.S. strategic studies community have always exerted a subtle influence over—or have even shaped—the conceptual architecture, discourses, modes of thought, and foci of attention of the European understanding of China. Again and again, the United States will put forward an important assessment or “novel” idea about China, and Europe will then right away blindly follow suit.
After the Biden administration took power in 2021, Europe and the United States developed closer communication and coordination when handling relations with China. A preliminary mechanism has already formed, and it includes three collaborative structures. First, on September 29, the two sides established the U.S.-EU Trade and Technology Council stating that they would launch R&D collaboration in cutting-edge technologies, such as AI and information and communications technologies, and that they would communicate and collaborate on important issues involving international strategic competition on the economic level, such as digital service platform management, semiconductor supply chain security, export controls and investment reviews, and global trade competition. There is an obvious intention here of cooperating to compete against China. Second, the EU continues to participate in the mechanism for carrying out tripartite talks among the leading trade officials of the United States, Japan, and Europe. This serves as a platform for discussions and the expression of public opinions, whereby pressure is put on China. This coordination structure appeared in December 2017. On November 30, 2021, using a video format, the three sides held talks for the seventh time and continued to criticize the “non-market economy” practices of China without actually naming China. Third, the EU continues to move forward with a U.S.-EU bilateral, high-level dialogue mechanism concerning Chinese issues. This dialogue platform was established in October 2020. In May 2021, the United States and Europe held their first high-level talks after Biden took office and institutionalized this structure. The United States and Europe again held high-level talks on December 2 in which they communicated on issues concerning Hong Kong, Taiwan, “human rights,” and the maritime rights and interests of the Chinese periphery.
Future Trends of Sino-European Relations
At present, the understanding that the EU and its main member states have of Sino-European relations is still founded in the framework established by the “EU Strategic Outlook on China” document of March 2019. This framework defined three identities for China: Europe’s institutional opponent, economic competitor, and possible partner within specific fields. In other words, the Europeans still regard China as neither friend nor foe; rather, they see it as an entity with which they can have dealings, but which constitutes a challenge and a threat to Europe in certain contexts. Thus, Sino-European relations will inevitably face the following problems in the future:
First of all, the EU will continue to press forward with protectionist and economic nationalist strategies directed at China; it will strengthen cutting-edge technology and advanced industry protections, trade protections, and investment reviews; it will build a tougher and tighter “defensive” policy system against China. Therefore, with regard to issues such as the acquisition of European technology transfers by S&T enterprises, mergers of Chinese-owned enterprises in Europe, and Chinese exports to Europe, the disputes between China and Europe will increase in number, and they may even trigger an intensification of contradictions leading to a further deterioration of Sino-European relations on the strategic level.
Secondly, the EU will continue to waver back and forth between China and the United States. In particular, when direct confrontation occurs between China and the United States and the United States adopts a tough attitude towards China, the EU and its member states may hedge their bets and adopt a mindset of seeking to profit from both sides. On the one hand, the EU will stand behind the United States and push it to keep toughening its attitude towards China so as to force China to make concessions with regard to systems and mechanisms or even at the fundamental institutional level. It will let the United States “pull Europe’s chestnuts out of the fire,” that is, do things on behalf of Europe that Europe itself is unable or unwilling to do. On the other hand, it will seek to use the considerable pressure placed on China by the China-U.S. confrontation to force China to make further concessions to the EU.
Furthermore, the EU may further intensify its diplomatic activities in the Indo-Pacific region, with the intent of establishing free-trade frameworks and reaching strategic security understandings with some countries on China’s periphery. It may even seek to carry out symbolic security and defensive cooperation with them.
Europe’s China policy will remain opportunistic. While riding a roller coaster, Sino-European relations will await the next spring.