EU-China Summit: What's in it for both sides? | DW News

Key Concepts:

• EU-China relations: Shifting from economic cooperation to strategic rivalry.
• Trade imbalance: Europe's growing trade deficit with China.
• Overcapacity: Concerns about China's industrial policy and its impact on European competitiveness.
• China-Russia relations: EU concerns about China's support for Russia in the context of the war in Ukraine.
• Rare earth minerals: EU's dependence on China for rare earth minerals and potential restrictions on exports.
• Strategic Autonomy: EU's desire to reduce dependence on China and diversify supply chains.
• Win-Win Situation: China's narrative of mutual benefit in trade relations.
• Tariffs: EU tariffs on Chinese electric vehicles and China's opposition to them.
• Market Access: EU's demand for greater market access for European companies in China.
• Climate Change: Potential area of cooperation between the EU and China.

EU-China Relations: A Shifting Landscape

• Historical Context: The EU and China have marked 50 years of diplomatic ties, initially characterized by strong economic cooperation and trade growth. Many European companies benefited from China's rise as a global actor.
• Inflection Point: Ursula von der Leyen stated that EU-China relations have reached an "inflection point," indicating a significant shift in the relationship.
• Current State: The relationship is currently at a "historic low" due to concerns about China's industrial and security policies, its engagement with Russia, and its impact on European security and competitiveness.
• Strategic Rivalry: China is increasingly seen as an actor with the ambition and capacity to negatively impact European security and competitiveness.

Trade Imbalance and Overcapacity

• Trade Deficit: The EU has a historic trade deficit with China, which it seeks to rebalance.
• Overcapacity Concerns: The EU is concerned about China's industrial policy leading to overcapacity and negatively impacting European competitiveness. This is considered just "a tip of the iceberg."
• Market Access Issues: EU companies in China report not having a good time and want more market access. They don't see their businesses being profitable.
• Chinese Perspective: Chinese companies are seen as more competitive, and the EU is urged to drop prices and be more competitive.
• EU Demands: The EU is pushing for China to open up its markets to European manufacturers, even if it continues to provide subsidies to Chinese companies.

China-Russia Relations and EU Concerns

• EU Sanctions: The EU has imposed sanctions on Chinese banks for allegedly cooperating with Russia.
• Serious Threat: The EU views China-Russia relations as a "very serious, maybe not at this stage existential threat."
• Limited Political Ambition: Despite growing awareness of the close ties between China and Russia, there is limited political ambition within the EU to seriously tackle this problem.
• European Priorities: Europeans have many problems on their plates, making it easier to "brush off" China as a more distant threat, despite the tangible impact of China-Russia relations on European security.

China's Perspective and Strategy

• Win-Win Narrative: China presents itself as a reliable global trade partner and promotes a "win-win situation."
• US Bullying: China seeks to portray the US as engaging in "bullying measures" and wants the EU to join in confronting them.
• Market Access: China wants to keep the European market open but is unlikely to make concrete compromises on trade imbalances or state subsidies.
• Rare Earth Leverage: China may use its dominance in rare earth minerals as leverage to pressure the EU to make concessions or soften its stance on China's position on Ukraine.
• Exploiting US-EU Tensions: China sees the tense transatlantic relationship as an opportunity to woo the EU to its side.
• Standing Ground: China is adopting a similar approach to the EU as it did with the US, standing its ground and not making compromises.

Rare Earth Minerals and Strategic Dependence

• EU Dependence: The EU depends on China for 98% of its rare earth mineral needs, primarily for its defense industries.
• Potential Restrictions: China had imposed restrictions on the export of rare earth minerals, initially hinted as leverage for talks with the US.
• EU Perspective: The EU believes the restrictions are a response to Europe imposing sanctions on some exports by China to Russia.
• Uncertainty: It remains to be seen if those restrictions are going to be lifted by China or not.

Potential Areas of Cooperation

• Climate Change: Both the EU and China seem determined to cooperate on climate change.
• Multilateralism: China is talking about how the Chinese and the Europeans are holding free trade world order and multilateralism.
• EU Interest: The European side is keener to cooperate on climate change, especially since the US withdrew from the Paris Agreement.

Trade Tensions and Tariffs

• EU Tariffs on EVs: Chinese electric cars imported into the EU have been hit with tariffs ranging from 27 to 45%.
• Chinese Opposition: Beijing opposes these levies and restrictions on Chinese companies participating in EU energy initiatives.
• EU Concerns: The EU feels the playing field is unfair, with restrictions on exporting rare earths from China and Chinese companies facing restrictions in EU energy initiatives.

Trust Deficit and the Way Forward

• Missing Trust: Trust is currently missing between the two sides.
• Negotiations and Action: Trust can only be rebuilt through negotiations that lead to concrete action.
• Complex Relationship: The deeply intertwined economic relationship makes outright escalation tricky.
• Competitor and Rival: China is both a competitor and a strategic rival to Europe.

Conclusion:

The EU-China relationship is at a critical juncture, marked by growing trade tensions, concerns about China's support for Russia, and strategic rivalry. While there are potential areas of cooperation, such as climate change, fundamental issues of trust and market access need to be addressed through negotiations and concrete action. The EU is seeking to rebalance the relationship, reduce its dependence on China, and ensure a level playing field for European companies. China, on the other hand, is seeking to maintain access to the European market and leverage its economic power to achieve its strategic goals.