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Radio France Internationale
Radio France Internationale
World
Jan van der Made

EU struggles to come out on top in systemic rivalry with China

Chinese and EU flags fly near the Chinese embassy in London, on 11 September 2023. AP - Kin Cheung

From human rights to technology, the European Union's relationship with China is a key issue for the bloc as voters in 27 countries prepare to cast their ballots in EU elections in June.

A large trade deficit, human rights questions and worries about Beijing getting the latest tech are among Europe's concerns about China.

For years the EU has been increasingly economically dependent on the Asian powerhouse.

But EU exports to China decreased in 2023 for the first time in a decade, while total Chinese imports into the EU nosedived to €516 billion – down from €627 billion the year before.

Is it a sign that Brussels is taking steps to fight the bloc's dependency on China? Not according to Alicia Garcia-Herrero, a senior fellow with economic think tank Bruegel.

She told RFI that the decrease is due to China's drive to localise production to reduce its reliance on other countries.

The country "entices foreign companies' interest to localise in China as it gives them access to tenders", she says.

For instance, medical companies can't access hospital tenders to sell their devices unless they subcontract production to local Chinese firms.

As a result, EU companies hardly use European suppliers to serve their needs in China, which pushes down EU exports.

Made in China

The strategy forms part of President Xi Jinping's "Made in China 2025" masterplan, first announced in 2015, which is intended to develop China's high-tech industries and reduce reliance on foreign technology.

The problem is that most – if not all – of the EU's largest multinationals have been investing in China since it opened up to the outside world in 1978.

"They've already invested so much," says Garcia-Herrero. "They are captured by the sunk costs of what they've been doing for so many years."

She says China's localisation policy has helped it rapidly secure a foothold in new sectors by forcing foreign companies to engage in joint ventures with local partners and share the latest technology.

For foreign companies, this means they "cannot compete anymore", she says.

Meanwhile the EU does not make the same demands of Chinese companies operating within European borders.

"When [China's biggest car maker] BYD goes to Hungary or Spain to produce cars, nobody [in Brussels] forces China to localise its production," Garcia-Herrero says.

Construction proceeds on a battery factory for electric vehicles built by China-based Contemporary Amperex Technology Co. Limited (CATL) in Debrecen, Hungary, on 23 May 2023. © Denes Erdos/AP

As a result, China employs its own Chinese subcontractors and often manpower to produce goods, contributing less to the EU economy than if they were using local resources.

"Somebody has to make it more expensive for them to invest in China," Garcia-Herrero argues.

Since the EU declared China a "systemic rival" in a 2019 policy paper, Brussels favours "de-risking" its dealings with Beijing, or decreasing its dependence on Chinese imports and cutting down exports of sensitive technology.

"De-risking doesn't necessarily mean that we produce everything ourselves," says Garcia-Herrero.

"But I think it that it should mean that we have other alternatives. You have huge countries out there where Europe can operate."

Hardening EU stance

Brussels may have grasped too late the competitive edge that China has been building over the decades.

"France has been at the forefront of getting the EU to wake up to the geo-economic risks of being outpaced both by China and by the US," says Nicholas Becquelin, a senior fellow with Yale Law School's Paul Tsai China Center.

"The EU lags far behind when it comes to economic growth, energy dependence, innovation and AI."

Europe is split between countries that are critical of China and those that favour cooperation, he explains.

"President [Emmanuel] Macron and France have been very active in getting the EU very early on – from 2009 onwards – to forge a consensus that Europe must evolve and become more careful about investments and trade with every country," says Becquelin.

He pointed out that Brussels gradually started to adopt a "firmer stance" toward China "because of the size of the trade deficit, intellectual property theft and Beijing's support to Russia".

And gradually, over the last decade, China started to lose the propaganda war.

Divide and conquer

"China's strategy has always been to have a divided Europe because a divided Europe cannot take measures to protect itself from China's economic aggression, security threats and so on," says Becquelin.

In the early to mid-2000s, he says, Beijing was extremely successful at maintaining that.

Its Belt and Road infrastructural project extended deep into Europe, enlisting 16 Eastern European countries and even some core EU members including Italy, Portugal and Luxembourg.

They "were really on the verge of building sort of a pro-China block within Europe and within the EU", Becquelin says.

China's growing influence even compelled the EU to abstain from expressing concern about China's geopolitical moves or violations of human rights. In 2017, for example, Greece – a Belt and Road partner – blocked an EU statement criticising China's rights record.

"China's strategy has always been to have a divided Europe because a divided Europe cannot take measures to protect itself from China's economic aggression."

01:32

REMARK: Nicholas Becquelin

But those times are over.

"The pandemic made Europe realise how vulnerable it was to dependency on China for its supply chain, from everything from pharmaceuticals to masks to anything that was manufactured in China and critical," says Becquelin.

Europe increasingly started to limit the export of sensitive equipment to China, while the United States pressured ASML, a Dutch company that produces the world's most advanced microchip printing machines, to halt exports to Chinese counterparts.

Now when Xi visits Europe, the welcome is limited, says Becquelin.

French President Emmanuel Macron shakes hands with China's President Xi Jinping as he arrives for a meeting at the Elysee Palace in Paris as part of the Chinese president's two-day state visit in France, on 6 May 2024. © REUTERS / Gonzalo Fuentes

The Chinese president's tour this month – the first in five years – began in France, where Xi has a good relationship with Macron.

It concluded in Serbia and Hungary – two of the most pro-Russian countries on the continent.

Propaganda war?

Meanwhile, public opinion on China has nosedived in Europe in recent years.

"The five biggest political groups inside the European Parliament supported anti-China resolutions with support of at least 85 percent of the votes throughout the last mandate," Grzegorz Stec, an EU-China expert with German think tank Merics, told RFI.

But "far-right and far-left groups are more supportive of Beijing's stances", he points out. Some may even have been directly targeted for interference – like Germany's extreme right-wing AfD party, which is currently mired in scandal after an aide to a top MEP was found to be a Chinese spy.

More broadly, China's efforts to manipulate public opinion include establishing media mouthpieces such as the multi-language TV channel CGTN and newspapers the China Daily and Global Times, which echo the official line of the Chinese Communist Party (CCP).

Brussels makes efforts to counter such propaganda. The EU Commission's External Action Service runs the EUvsDisinfo portal, a site that analyses and rebukes information from countries hostile to the EU.

For now its main target is Russian propaganda, says Stec, but even though there is no mandate to look into China's operations, "this is to a certain extent being done and we've seen that in the official publications".

But when it comes to disinformation, he warns, "there is no silver bullet".

"It's really about building resilience, given the fact that we want to stay true to our democratic roots," he says. "We don't want to out-CCP the CCP in terms of the response to China's management of information space."

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