What are the key takeaways from the EU-China summit? | DW News

Key Concepts:

EU-China diplomatic relations, trade deficit, systemic rivalry, China's support for Russia, electric vehicle (EV) tariffs, rare earth export restrictions, economic coercion, derisking, second China shock, excess capacities, economic security, secondary sanctions.

50 Years of EU-China Relations: A Tense Inflection Point

• Historical Context: 50 years ago, the EU (then with 9 members) was the senior partner. Now, with 27 member states, the EU sees itself as more of an equal partner with China, which has experienced unprecedented economic growth and is asserting itself politically and militarily.
• Current State: The relationship is at a "difficult spot," shifting from "partner, competitor, and rival" to primarily a "systemic rival." This rebalancing is due to China's backing of Russia's invasion of Ukraine and significant economic shifts.

Trade Imbalance and Economic Tensions

• Trade Deficit: The EU's trade deficit with China has more than doubled in the last decade, reaching €306 billion, though less than the 2022 record of €397 billion. In 2014, it was -138 billion euros.
• EU Concerns: The EU warns it cannot keep its markets open to Chinese goods unless Beijing addresses the trade imbalance.
• "Second China Shock": The massive scaling up of Chinese capacities in sectors crucial to Europe's industrial future is causing diminishing sales in China, increased export pressure on the European market, and pressure in third markets.
• EU Commission President Ursula von der Leyen's Statement: "Europe keeps its market open to Chinese goods... However, this openness is not matched by China... for trade to remain mutual beneficial, it must become more balanced."

China's Support for Russia and Geopolitical Implications

• Enabling Role: China's support for Russia is the "biggest enabling role that any outside actor has played for this war."
• Dual-Use Goods: The overwhelming majority of dual-use goods vital for Russia's war campaign come from China.
• Security Concerns: China's support for Russia raises concerns about China enabling Russia's defense capabilities, potentially threatening Europe's security order.
• Derisking Imperative: This situation necessitates derisking from Chinese technologies and dependencies, especially in the context of potential conflict scenarios with Russia.

Rare Earths and Critical Raw Materials

• Export Limits: China's export limits on rare earths used in electric motors and sensors are causing concern, potentially forcing some European companies to halt production.
• Immediate Impact: This has translated into situations where companies in Europe have been potentially having to shut down their entire production because they don't have the requisite access to the critical raw materials that they need.

EU-China Summits: Limited Deliverables

• Summit Goals: EU-China summits should ideally produce a few significant deliverables through negotiation and compromise.
• Derailment: The rare earth issue and China's approach (demanding concessions from Europe) derailed hopes for progress.
• Outcome: The summit became an "exercise in message delivery" with "very little beyond a joint climate statement."

US-China Trade Dynamics and Their Impact on the EU

• Bandwidth Problem: The EU is overwhelmed with US negotiations, potentially giving less attention to the EU-China relationship.
• Scale of Impact: The "second China shock" has a greater impact on Europe than US tariffs.
• China's Strategy: China restricted rare earth exports to the US, forcing the US to back down in talks. This success emboldened China to redeploy this tactic against others, including Europe.
• Economic Intelligence Gathering: Even when providing rare earths, China demands customer lists, industrial processes, and other economic intelligence.

EU Leverage and Potential Responses

• EU's Firm Stance: The EU did not back down on EV tariffs, export controls, or sanctions on Chinese banks dealing with Russia.
• Holding Firm Against Coercion: Europe needs to hold firm against coercion, as the current steps are "modest" and "proportionate."
• Economic Dependence: The Chinese economy is currently more dependent on exports to Europe, giving the EU leverage.
• Potential Actions: The EU could further restrict China's access to its market, including key technologies.

China's Influence on Russia: Limited Impact

• Failed Efforts: EU efforts to influence China to exert pressure on Russia have largely failed.
• Sanctions Ineffectiveness: Increased pressure through sanctions, including on Chinese entities, has not changed China's support for Russia's war efforts.
• Economic Security Linkages: The EU is increasingly linking security questions to trade, with economic security becoming a key topic.

No Rapprochement Despite Transatlantic Tensions

• No "Pushmore": The EU is not turning to China due to transatlantic tensions on trade.
• Structural Issues: Structural issues need to be solved with China to move forward on the strategic partnership.
• Market Access Disparity: China benefits from the openness of the European market, while European companies face barriers in the Chinese market.

Conclusion:

The EU-China relationship is at a critical juncture, marked by trade imbalances, China's support for Russia, and concerns over economic coercion. While the EU is holding firm and exploring its leverage, the path forward requires addressing structural issues and ensuring a more balanced and mutually beneficial partnership. The focus is shifting towards economic security and finding ways to use economic tools to influence China's behavior on security matters.