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DEVELOPMENT OF RELATIONS BETWEEN CHINA AND THE EUROPEAN UNION
Zhang Taichang1, Student
Lin Xizhen2, Student
Xie Xiaochen1, Student
1Lomonosov Moscow State University
2University of Nottingham
1(Russia, Moscow)
2(China, Ningbo)
DOI:10.24412/2500-1000-2022-11-5-102-108
Abstract. Relations between China and the EU have developed in the face of significant geopolitical turbulence. This has caused earlier areas of cooperation such as trade, investment and infrastructure ties to become politicized and instrumental within the bilateral relationship and beyond. China continued to implement its Belt and Road Initiative in Europe, but the lack of specificity and clarity prevented EU partners from coherently responding to it. Pressure from the US and a growing view that China poses a major threat to the rules-based multilateral order have also contributed to a more assertive EU stance towards China. China continues to emphasize that its relationship with the EU is based on a comprehensive partnership and that it supports a multilateral system, while there is a growing view within the EU that the very nature of China's political and economic system may represent an alternative and even competitive form of global governance. Thus, different expectations about what each side is trying to achieve, different approaches and different standards associated with cooperation need to be updated.
Keywords: China, EU, One Belt One Road, economic cooperation and conflict
1. Strategic Plan for Cooperation between China and the EU
On 16 September 2021, the European Parliament adopted the Report on the New EU-China Strategy. The report outlines six pillars on which the European Union should build a new strategy for engagement with China: cooperation to address global challenges, engagement on international norms and human rights, identifying risks and vulnerabilities, building partnerships with like-minded partners, promoting strategic autonomy and protection of the EU as a geopolitical actor and its interests on the world stage.
The EU report says that the bloc's strategy is to involve China in dialogues to solve global problems. Issues include human rights issues, nuclear disarmament, climate change, economic recovery from COVID-19 and other global health issues, student exchanges, and reform of international organizations. In terms of geopolitics, the events in Afghanistan, Hong Kong and North Korea have been celebrated by the European Parliament.
The European Parliament condemned the sanctions imposed by the Chinese authorities,
which undermine confidence and impede bilateral cooperation. The EU report also highlights that the ratification process for the EU-China Comprehensive Investment Agreement (CAI) cannot begin until some sanctions against EU institutions and members of the European Parliament (MEP) are lifted.
The market opening agreement proposed in 2013 and reached on 30 December 2020 has yet to be finalized and ratified by CAI. CAI is designed to further open China's domestic markets to EU companies by bringing about changes in the business environment in which most EU businesses operate. China should also lift forced technology transfer, capital restrictions, joint venture requirements and a range of other restrictions.
The European Parliament has also asked the European External Action Service (EEAS) and the Commission to complete the development of a supply chain business advisory with guidance for companies on the risks of alleged forced labor and support on how to find alternative sources of supply.
The EU report identifies the political, social, technological and economic risks associ-
ated with China. Among other things, the European Parliament suggests that "closer coordination" is needed between the Blue Dot Network and the EU's Engagement Strategy as an alternative to China's Belt and Road Initiative (BRI).
The EU report calls for a pan-European audit of the EU's dependence on China in certain strategic and critical sectors (including pharmaceutical supplies) and based on a recent comprehensive analysis called "Strategic Dependencies and Opportunities" that outlines plans to mitigate the risks associated with unwanted addiction while maintaining common relations with China.
Another identified strategic area is 5G and 6G networks. The European Parliament considers it important to ensure that companies that do not meet established security standards are excluded from participating in the development of 5G and 6G networks in the EU. Concerns have been raised about security issues, including concerns about cyberattacks, cyberespionage, disinformation campaigns, and intellectual property theft.
Another key point of the EU Report was the desire to build partnerships with like-minded partners such as the US, UK, Canada, India, South Korea, New Zealand, Taiwan and Australia, and to strengthen relations with ASEAN and the African Union.
The EU is seeking to reduce dependence on China by investing in research and innovation in areas such as telecommunications, cloud computing, rare earth mining, semiconductors and microchips. It also aims to explore the possibility of pooling resources with other countries.
The EU report states that the level of mutual investment has not yet reached its potential. However, while the EU Parliament believes that there are economic benefits to trade with China, this will require a foundation based on values and a commitment to human rights issues.
With regard to trade relations between the EU and China, the emphasis is on establishing mutually beneficial relations. The European Parliament aims to ensure that the EU becomes a more effective geopolitical player by working with more countries and ensuring
they can secure business activity, investment and loans that compete with China.
2. Cooperation between China and the EU under the Belt and Road Initiative
The One Belt, One Road Initiative is China's most ambitious geo-economic and foreign policy initiative in recent decades, bringing together the terrestrial Silk Road economic belt and the 21st century maritime Silk Road, which together connect China to Europe through Southeast Asia.
The stated goal of this grandiose project is to improve communication and trade between China and the more than 70 countries through which the Belt and Road passes. China's total financial commitment from this initiative is expected to exceed $1 trillion over the next three decades.
Beijing has already committed about $300 billion in infrastructure loans and trade finance, an amount that includes a $40 billion contribution to the Silk Road Fund for Infrastructure Development and a $100 billion seed capital earmarked by China for the Asian Infrastructure Investment Bank (AIIB).
The BRI is presented to potential partners as an open and unconditional plan, with a focus on economic considerations and infrastructure. Unlike the US, which opposed it from the start, the Europeans showed interest in China's initiative.
All EU member states have joined the China-led AIIB, which aims to provide financial support for BRI initiatives. Several AIIB-supported projects are co-financed by the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD).
However, China's connectivity initiative has drawn criticism from the EU. In April 2018, the German business newspaper Handelsblatt reported that 27 of the 28 EU ambassadors in Beijing had compiled a report accusing the BRI of restricting free trade and giving subsidized Chinese companies unfair benefits.
The Hungarian ambassador in Beijing was the only one who refused to sign the document, possibly due to two factors:
- high level of Chinese investment in Hungary (as a percentage of GDP);
- sending a message to Brussels, with which the Hungarian government at that time had a number of claims.
The EU is concerned that with the BRI, China is trying to solve the problem of excess industrial capacity in its country by dumping goods at a price below cost. This strategy could bring some industries across Europe to their knees.
Moreover, Brussels fears that Beijing wants to revise global trade and investment rules, fearing that the Chinese initiative lacks transparency and that non-transparent financing deals could threaten the competitiveness of European companies. It is becoming increasingly clear that Chinese companies are awarding contracts without complying with open procurement rules. This raises the question of reciprocity.
While Chinese companies find an open door environment in Europe, it is quite difficult, if not impossible, for a European company to win a contract to build infrastructure projects in China. Europe is also concerned that, through the BRI, China is encouraging debt in various countries in order to gain control of strategic assets when debtors do not pay debts, although Beijing denies this.
Both the US and the EU have reacted to what they see as a negative aspect of China's BRI. Washington has created an agency, the American International Development Finance Corporation, that could invest up to $60 billion to counter China's use of debt trap projects to gain influence abroad. The EU has adopted its own engagement strategy for the Eurasian region and an investment screening mechanism clearly aimed at Beijing.
3. Trade conflicts between China and the EU
The EU has filed a World Trade Organization (WTO) case against the People's Republic of China over its discriminatory trade practices against Lithuania, which also harm other exports from the EU single market. These actions, which appear to be discriminatory and illegal under WTO rules, are detrimental to exporters both in Lithuania and other EU countries as they also target products with Lithuanian content exported from other EU countries.
As attempts to resolve the issue bilaterally failed, the EU resorted to initiating dispute settlement proceedings against China. The consultations with the WTO, which began in 2022, are the first step in this process.
In the last weeks of 2021, the European Commission has collected evidence of various types of Chinese restrictions. These include refusing customs clearance of Lithuanian goods, rejecting applications for imports from Lithuania, and pressuring EU companies operating outside other EU member states to remove Lithuanian materials from their supply chains when exporting to China.
With regard to the trade conflict, since December 2021, without informing the EU or Lithuanian authorities, China began to severely restrict or de facto block imports and exports to Lithuania or is associated with Lithuania. The Commission has repeatedly raised this issue with the Chinese authorities. But Beijing's unofficial halt to its already limited trade with Lithuania is more aimed at warning the rest of Europe, analysts say.
Lithuania and Taiwan agreed to open mutual representations as a sign of deepening ties between the governments of the two countries. In response, Beijing recalled its ambassador from Vilnius and expelled the Lithuanian from Beijing. According to Taiwan's foreign ministry, it has since suspended rail travel to Lithuania and has reportedly suspended export permits for the country's producers, including those for agriculture, livestock and wood products.
The Chinese Communist Party has never ruled Taiwan, but Beijing considers it a province of China that needs to be returned and accuses the government of separatism. He is becoming increasingly oversensitive to any sign of support for Taiwan, which claims it is already an independent state. Lithuania does not have official diplomatic relations with Taiwan, but it maintains increasingly friendly relations, including by promising vaccines. He is openly critical of China and has withdrawn from key Chinese-led multilateral groups.
The EU is critical of China's human rights abuses but is taking a cautious line. The tit-for-tat sanctions caused the ratification of a
long-discussed trade deal to be effectively put on hold in May 2021.
There are other factors to consider as well. Lithuania has also deepened ties with the US, which has become increasingly hostile with China (and is also increasingly supportive of Taiwan). The United States promised support to Lithuania against "China's unilateral aggressive actions and political pressure." [5].
However, it is worth noting that Brussels is not going to risk a full-scale tariff war with China because of the restrictions on Lithuania. Instead, financial support measures are likely to be introduced in the near future to offset any losses from what Beijing takes from the Lithuanian economy.
4. Prospects for trade and economic relations between China and the EU
Tensions between the EU and China have increased significantly since the end of 2020. Chinese and EU officials have been sanctioned, the CAI ratification process has been frozen, and the EU has taken a more confrontational stance that China is trying to counter.
However, the EU still does not cut off China in any way or even demonstrate that it has a unified and coherent strategy towards Beijing.
It is important to note that the EU still does not cut off China in any way and does not have a unified and consistent strategy towards Beijing. This is partly because member states try to juggle their external relations, business interests, standards and values, and their stance towards the EU [6].
Moreover, the EU still sees China as a partner in combating climate change, a partner that it really cannot afford to lose due to the availability of raw materials needed to implement the planned green transition.
Regarding the increasingly difficult EU global balance of power, Brussels also keeps repeating that it wants to work with the US when it is in line with the EU's goals, but the goals of both sides - especially with regard to China - do not match, so they argue that there must be room for divergent actions. It is clear that this position has not met with much enthusiasm in the United States.
Going forward, the EU can be expected to continue trying to maintain trade ties with
China and the US, while striving to achieve strategic autonomy, respect its social standards and values, and not undermine its economic prospects. A continuation of the current "slow recession scenario" will mainly affect investment (policy), but may slightly reduce the income from foreign investment, while increasing entry and production costs for EU firms.
The key question is how long this "neutral" scenario will last: there is indeed a significant risk that, at some point, relations between the EU and China will deteriorate much more sharply.
If this happens, it will harm trade and investment (revenues), increase entry costs for EU firms and government tenders, and possibly jeopardize the EU-wide transition to a green economy.
The impact is likely to be greatest for Germany due to China's importance to its exports and foreign investment earnings, both undeniable reasons why Berlin is keen not to antagonize China. At the same time, several Central and Eastern European member states are relatively vulnerable to a decoupling of the EU and China due to their relatively heavy dependence on Chinese imports. This group of countries is also generally the most at risk of second-order consequences due to their economic ties with Germany.
Thus, several scenarios of relations between the EU and China may play out in the future:
1. Optimistic scenario.
Unlike the US, which has put forward a wide range of demands on China to change its trade and investment practices, the EU may well be content with a more limited set of actions on part of China. This would allow the European Parliament to re-evaluate the CAI and restore relations between the EU and China to some extent.
Presumably this may include:
- removal of sanctions from members of the European Parliament;
- commitment to concrete actions to improve the situation with human rights (with the strengthening of CAI in terms of social agreements);
- EU pledge to support its climate agenda and energy transition (i.e. through a commit-
ment to provide necessary resources such as rare earths and work with the EU to avoid European carbon taxes on its industries).
Under such a scenario, modest positive outcomes can be expected from continued cooperation, especially on topics where both sides - at least in theory - can be seen as having common interests, i.e. energy transition, combating climate change, and perhaps even taking action on the playing field for large corporations.
2. "Neutral" scenario.
In this second "neutral" scenario, the EU understands that there is no way back to partnership, but only a "slow move" towards a more confrontational position as a systemic rival. After severe economic shocks caused by the sovereign debt crisis and the pandemic, the EU remains economically weakened and, amid its desire to implement a growth stimulus and green investment program, the EU believes it cannot allow another serious downturn in international relations due to the trade war either with China, or because of worsening relations with the US.
In this scenario, the EU gradually becomes more hostile towards China, but without completely cutting ties, as the EU recognizes that it also needs China as a key market for its exports and imports of critical raw materials. In other words, the EU will take a multifacet-ed approach in an attempt to maintain trade ties with China and the US, as they do today. In this scenario, investment policy will be most affected.
Meanwhile, the evidence suggests that China is partly seceding itself, on its own terms and at its own pace: if so, the EU can either speed up the process or wait for China to act when it deems it strategically beneficial. In this scenario, China can be expected to gradually take the path of disengagement from the EU.
And China will enforce its foreign sanctions laws, but will stick to relative deviations to prevent escalation and hard division - in line with its response to EU sanctions.
3. Pessimistic scenario.
China will push its sanctions too far if China thinks it is ready for a larger economic decoupling or if it takes a major geopolitical move against Taiwan, for example. All of this
is likely to lead to the third, most painful "trade war" scenario.
Another potential risk event that could trigger such an acceleration of decoupling would be changes in European leadership. In addition to the issues raised in this scenario, the EU will impose stricter equity restrictions and explicit bans on Chinese takeovers and investments in the EU. Green transition and climate cooperation is also facing obstacles.
In this way, sharp divisions were revealed in relations between China and the EU, and the discussions showed how difficult it would be to overcome them, in particular in the approach to governance, values and security. China's alternative governance model, in addition to the basic structure of China's political and economic regime, also includes the areas of its domestic law and foreign policy.
5. Future conflict between China and Europe
Although there is still a lot of room for industrial cooperation between China and Europe, it may gradually move from complementarity to competition, especially the competition between China and European powers in the field of cutting-edge technology.
Competition from the US and China is an important factor in the context of the new European industrial strategy. In the new round of technological and industrial revolution led by digital technology, major European countries such as Germany and France have felt that they are lagging behind the United States and China, and are highly dependent on American and Chinese suppliers in the fields of electric vehicles, smart manufacturing, and new energy. The EU releases a new industrial strategy in 2020. The package of measures contained in the New Industrial Strategy supports all players in European industry, including large and small enterprises, innovative start-ups, research centres, service providers, suppliers and social partners. SME-specific measures in particular aim to reduce red tape and help Europe's large number of SMEs do business in the Single Market and beyond, access financing and lead digital and green transitions.
In addition, the EU plans to mobilize 300 billion euros of public and private infrastruc-
- Политология
ture investment in 2027 to provide developing countries with alternatives to China's Belt and Road Initiative. The plan will seek to "attract private capital" to boost investment. The programme primarily brings together existing initiatives and funding projects aimed at strengthening European interests and European competitiveness globally, and also seeks to strengthen sustainable environmental standards and values, such as democracy and human rights.
Conclusion.
Europe reacted to the Chinese Revolution in 1949 more flexibly than the United States, with Britain recognizing the PRC shortly after its creation and France following in 1964. With the establishment of the European Commission in 1975, relations began to take on a new multilateral dimension. Since then, the number of multilateral organizations such as ASEM linking Europe and China has increased, and trade and financial ties have steadily deepened. However, it was the fateful structural changes in Europe after the end of the Cold War, caused by the recent economic growth of China, that brought Sino-European ties to a qualitatively new level. It is to these events and their wider global implications that we now turn. At the present stage, new transit routes through Eurasia and around it, between China and Europe are becoming more numerous and convenient to use. These developments are rapidly bringing Europe and China closer together and complement each other in the financial and industrial sectors described earlier.
References
1. EU's New Strategy on China: Implications for Businesses [Electronic resource] - Access mode: https://www.china-briefing.com/news/eus-new-strategy-on-china-implications-for-businesses/.
2. Nicola Casarini. A European strategic "third way?" The European Union between the traditional transatlantic alliance and the pull of the Chinese market // China International Strategy Review. - 2022. - P. 1-17.
2. Nicola Casarini. Defend, Engage, Maximise: A progressive agenda for EU-China relations // FEPS Policy Paper. - 2019. - P. 1-28.
3. China's trade halt with Lithuania over Taiwan ties sends warning to Europe [Electronic resource] - Access mode: https://www.theguardian.com/world/2021/aug/26/chinas-trade-halt-with-lithuania-over -taiwan-ties-sends-warning-to-europe.
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At the same time, these historical changes create a natural space for a steady deepening of Sino-European relations, offset by the need for global financial stability, which even the United States cannot realistically oppose. These deepening ties across Eurasia, in turn, give the continent great mass and integrity in global geo-economic conditions. It seems that the intra-European divisions created by Brexit will not have a significant impact on this trend, relations with both the UK and continental Europe.
The long-standing relationship between China and the European Union (EU) is turning into a broader geopolitical competition between major centers of power. Along with cooperation, elements of competition and rivalry have intensified as a result of the reassessment of bilateral relations by the EU entities. Areas of cooperation include China's participation in internal EU projects to provide connectivity, especially in transport and digital networks.
Expanding ties within and around the EU to facilitate trade and commercial relations has been relatively undeniable, even if the initiatives have never been fully agreed upon. But the space for joint projects has narrowed due to political differences and a new sensitivity in the EU to the security implications of Chinese investment. China understands that the EU's scrutiny of its investments and restrictions on its participation in connectivity projects depend on the relationship between the EU and the US.
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5. EU refers China to WTO following its trade restrictions on Lithuania [Electronic resource]
- Access mode: https://trade.ec.europa.eu/doclib/press/index.cfm?id=2355.
6. Three scenarios for EU-China Relations: But one direction of travel? [Electronic resource]
- Access mode: https://economics.rabobank.com/publications/2021/august/three-scenarios-for-eu-china-relations/.
РАЗВИТИЕ ОТНОШЕНИЙ МЕЖДУ КИТАЕМ И ЕВРОПЕЙСКИМ СОЮЗОМ
Чжан Тайчан1, студент Линь Сичжэнь2, студент Се Сяочэнь1, студент
1Московский государственный университет имени М.В. Ломоносова 2Ноттингемский университета 1(Россия, г. Москва) 2(Китай, г. Нинбо)
Аннотация. Отношения между Китаем и ЕС развивались в условиях значительных геополитических потрясений. Это привело к тому, что прежние области сотрудничества, такие как торговля, инвестиции и инфраструктурные связи, стали политизированными и стали играть важную роль в рамках двусторонних отношений и за их пределами. Китай продолжал реализовывать свою инициативу «Один пояс, один путь» в Европе, но отсутствие конкретики и ясности не позволяло партнерам из ЕС слаженно реагировать на нее. Давление со стороны США и растущее мнение о том, что Китай представляет серьезную угрозу многостороннему порядку, основанному на правилах, также способствовали более напористой позиции ЕС в отношении Китая. Китай продолжает подчеркивать, что его отношения с ЕС основаны на всеобъемлющем партнерстве и что он поддерживает многостороннюю систему, в то время как в ЕС растет мнение о том, что сама природа политической и экономической системы Китая может представлять собой альтернативу и даже конкурентоспособность. Форма глобального управления. Таким образом, необходимо обновить различные ожидания относительно того, чего каждая сторона пытается достичь, различные подходы и различные стандарты, связанные с сотрудничеством.
Ключевые слова: Китай, ЕС, «Один пояс, один путь», экономическое сотрудничество и конфликт.
