Towards explicit criteria for de-risking? What the new European Commission has in store vis-à-vis China
Towards explicit criteria for de-risking? What the new European Commission has in store vis-à-vis China
WRITTEN BY DR UNA ALEKSANDRA BĒRZIŅA-ČERENKOVA
22 November 2024
True to Ursula von der Leyen's 2019 promise, the European Commission under her leadership has defined its "relations with a more self-assertive China" and has indeed woken up to geopolitics. During the past years, the EU's China policy has moved from the contradictory partner-competitor-rival trifecta into the practical realm of de-risking. The EU’s underlying economic interests have become more pronounced, and the approaches to minimising dependency on China have spread beyond the EU's borders.
The EU's newfound economic assertiveness also increasingly includes a conversation on critical raw materials access and supply chain protection globally. The EU symbolically completed the transition as its member states voted on 4 October to impose additional duties on EV imports from China, representing another step towards the conclusion of the Commission's anti-subsidy investigation. With 10 member states voting in favour, five against, and 12 abstentions, the decision became a close vote of confidence for von der Leyen, as well as "the meat on the bones" of the 2019 strategic outlook. With von der Leyen's second Commission taking office, how will Europe's approach to China evolve?
Staying the path
In her Political Guidelines for the next European Commission (EC), von der Leyen acknowledged that the trifecta dream of equal parts cooperation-competition-rivalry is over: "The more aggressive posture and unfair economic competition from China, its “no-limits” friendship with Russia — and the dynamics of its relationship with Europe — reflect a shift from cooperation to competition". The shift von der Leyen mentions will be reflected in the EC approach to China via a more mature, detailed, and comprehensive de-risking approach. Some of its characteristics could include ensuring future access to critical technology and critical raw materials as well as pushing for more cooperation with the business community to maintain European economic advantage.
Risks remain for Europe not just internally, but also externally, as China's support for Russia in its war against Ukraine and US pressure for a unified transatlantic approach limit the EU's room for maneuver.
The Commission will be tasked with advancing Europe’s economic security and economic statecraft, which will most likely include developing more far-reaching standards for economic security. The conversation will move on from European technology access denial for Chinese companies in strategic sectors, towards the exclusion of China-produced components from the value chains in those sectors. This would involve not just the Europeans, but the G7 at large coming to a joint understanding with the EU on safe, resilient, and green supply chains, and working together to de-risk them.
Europe has experienced PRC export controls on rare earths that are crucial in semiconductor production, as well as green and space technologies, and understands that more pressures are coming down the line. Therefore, von der Leyen is prioritising increasing European access to critical raw materials, including in the Mission Letter to the incoming commissioner for the European Green Deal, Interinstitutional Relations and Foresight Maroš Šefčovič. The new Commission is expected to develop approaches to ensure EU access to critical raw materials, such as the Minerals Security Partnership (MSP) Forum, "open to partners who are ready to commit to the key MSP principles, including diversification of global supply chains and high environmental standards, good governance and fair working conditions", jointly by the EU and the United States.
As it stands, European companies are still helping China to develop critical technologies, including facial recognition and AI applications in medicine, with a detrimental effect on European economic security. Unless policymakers find a way to persuade the business community that continuous cooperation with China brings tremendous business risks in the medium- and long-term, this approach will continue. European multinationals are bound to feel the impact of China’s uneven playing field not just in China itself, but also in the EU’s classic export markets, where Chinese companies are gaining the upper hand via dumping and elite capture. The new Commission will pay attention to this, by ensuring more access to sensitive information for companies, and by extending cooperation on economic security beyond the G7.
The scope and intensity of the China approach: Too early to call
With von der Leyen's second Commission on the way in, there is little doubt as to the general continuation of the course in securing tech access, ensuring critical raw material access, and boosting the involvement of the business community. The details, and the intensity, of EC's China policy, however, will hinge on several factors, including China's willingness to cut the EU some slack, Chinese military support to Russia's war in Ukraine, and the room for manoeuvre the US will be willing to grant Europe on China.
Europe will continue to matter to China both economically and symbolically. Some rhetoric aside, China's reactions following the EV tariff vote have been restrained so far. It is in Beijing's interest to prevent Europe from further aligning itself with US measures targeting China, which would be a prime task for the new cohort of PRC diplomats in Brussels and member states capitals. From an economic perspective, China’s "new quality productive forces" stimulate supply, that means a need for continuous access to global markets, European markets included.
Europe’s policy moves, including the newly introduced EV tariffs, even though the tariffs per se could be absorbed, have implications beyond China's access to the European market. It is problematic that a market that is pivotal for a new tech economy restart closes for China. With China's other high-value-added markets, such as Japan, watching the EU, Beijing is becoming more wary of an anti-Made-in-China tariff domino effect among developed economies. Furthermore, given the strict US bipartisan anti-China stance, the PRC would need to prioritise the part of the West it still sees as more open to dialogue. This could bring about another charm offensive and a Beijing-driven thaw if not in EU-China relations overall, then certainly in PRC's bilateral exchanges with several EU member states.
For Europe, however, it is not just the market protection awakening that is driving the momentum, but also the geopolitical implications of the China-Russia relationship. China has become a vital supporter of Russia's war in Ukraine, and the support is growing in scope and quality, effectively crossing the 'red lines' set by US President Joe Biden. According to senior US officials, China supplied 90 per cent of microchips imported by Russia in 2023, later used in tanks, missiles, and aircraft. The two are also cooperating in satellite and space-based capabilities, and China is providing satellite imagery to Russia. PRC-based factories in collaboration with Russian defense firms design, develop, and produce military drones, transferring them "to Russia for use against Ukraine".
The room for a European China approach — the middle space between China and the US the Europeans had long since comfortably inhabited — is sure to shrink. The US’ economic China policy is only bound to become stricter under President Donald Trump. As a result, the US will expect like-minded players and security partners to get on board with its China pressure program. In exchange for continued preferential treatment, the US will request more discipline among EU member states, which are currently still disrupting a joint European approach by competing for the China market among each other, including Hungary, Germany, and Slovakia.
But Europe will be left with less room for manoeuvre not just because of outside pressures. The challenges the EU is facing from China are too strong to be borne by Europe alone. Therefore, the new Commission will attempt to seek partnerships not just transatlantically or within the G7, but also among like-minded partners in other regions, as well as among the business community.
A narrowing path
Von der Leyen's second term promises an assertive EU stance towards China, as de-risking will become more streamlined. The Commission will prioritise securing critical raw materials, protecting European technology, and raising awareness among businesses about the long-term risks of unchecked engagement with China. For this, it will need all the friends it can get: in the G7 and beyond.
However, gaining more friends far away might not help the Commission with cohesion at home. A streamlined economic strategy risks putting more pressure on European unity, which is already unstable, as the capitals continue to push for bilateral, rather than bloc priorities in their China policies.
Risks remain for Europe not just internally, but also externally, as China's support for Russia in its war against Ukraine and US pressure for a unified transatlantic approach limit the EU's room for manoeuvre. Balancing its own economic interests and security with external pressures will require deft navigation by the EU.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.
Author biography
Dr Una Aleksandra Bērziņa-Čerenkova is a China scholar and a discourse analyst, Head of the China Studies Centre at Riga Stradins University, and Head of the Asia Programme at the Latvian Institute of International Affairs. She has held research fellowships at Fudan, Stanford, and Oxford Universities, and is affiliated with King's College London and MERICS. She is the author of "Perfect Imbalance: China and Russia" (World Scientific, 2022) and the editor of "Discourse, Rhetoric and Shifting Political Behaviour in China" (Routledge, 2023). Image credit: Wikimedia Commons/European Union.