China and Europe: Profits versus Principles
by Mel Gurtov
With all the attention on US-China relations, Beijing’s on-again, off-again relations with the European Union (EU) don’t receive the attention they deserve. In the short space of a few decades, Europe in Chinese eyes has gone from being a “pole” in a multipolar world to being a major target of China’s attention.
China was the third-largest partner for EU exports of goods in 2021, and the largest partner for Chinese imports. Some of the same issues that plague the relationship remain from the early 2000s, such as China’s human rights policies and a European arms embargo. But now China’s economic diplomacy—trade and investments in Europe, mostly under the Belt and Road Initiative (BRI)—is at the center of Beijing’s approach to Europe.
Watching China Watching Europe
David Shambaugh, writing several years ago in one of the first major works on China-Europe relations, noted that:
“China’s Europe Watchers are almost uniformly upbeat and optimistic. They praise EU policy as being enlightened and farsighted . . . and they take great satisfaction in the China–EU ‘comprehensive strategic partnership’ (proclaimed in 2003). Nonetheless . . . Chinese analysts are constantly looking for fault lines across the Atlantic, which can possibly be exploited by China. . . . Some see the US and EU trying to collectively manipulate or pressure China – for example, on questions of human rights, trade policy, political liberalization, and civil society development.”
Shift to more recent years and we find that China’s often clumsy and abrasive diplomacy, carried out by “wolf warrior” diplomats; the Xinjiang genocide; and Beijing’s support of Putin’s war on Ukraine have to some extent poisoned the well.
EU governments have become wary of China’s economic power. They finally abandoned the strategy of “change through trade”—that is, viewing trade as an instrument for liberalizing China’s politics and mellowing its diplomacy. Following the US lead, the EU rejected Huawei 5G technology, sharply criticized China’s human rights policies, and decided not to ratify a Comprehensive Agreement on Investment that had been concluded in December 2020. Chinese efforts to punish European intellectuals and academic institutions that criticized Beijing’s repression backfired as the EU sanctioned Chinese officials in Xinjiang.
So-called “European values” seemed to have more salience than national interests, a shift that Chinese Europe-watchers decried. In one of their studies, they correctly observed that “Germans are increasingly expressing a cautious and restrained attitude [about economic ties]. This is because they are concerned that win-win outcomes for the two countries’ enterprises and economic policies could lead to confrontations over values outside the economic sphere.” The Chinese authors had in mind German technology, including technology acquired through Chinese takeovers of German firms, being used in weapons development.
But all that was in the Angela Merkel era. Things are different now. Money is talking loudly again.
Neither China’s human rights practices nor its backing of Russia—repeated just this month when Wang Yi, China’s top foreign policy official, visited Moscow—have been allowed to damage trade and investment ties—a development contrary to the view of some observers that the EU would significantly toughen its China policy.
China’s BRI remains a fixture in Italy and Greece, where China has bought port facilities; Chinese investors have bought up 35 German firms; and European companies are still investing heavily in China. European political leaders are again flocking to China in the post-Covid period in search of deals.
An EU-China “dialogue” on human rights is set to resume shortly, much to the displeasure of human rights groups. They want sanctions on China, not “meaningless” talks. Their pressure did lead to cancellation of a scheduled visit by the governor of Xinjiang province, a reputed internment camp defender whom some people demanded be jailed.
But when it comes to sanctions, the EU is not going to follow the US approach. To be sure, Chancellor Olaf Scholz says that Germany rejects “hegemonic Chinese dominance.” He has vowed to reduce “risky [trade] dependencies” with China, and “insist on reciprocity” when it comes to intellectual property rights and market access.
But he has made clear that Germany will not decouple its economy from China or embrace trade protectionism. Scholz’s stance drew applause from Wang Yi during the recent Munich Security Conference, when Scholz rejected decoupling and agreed on further development of Germany-China economic and trade relations. (As for the war in Ukraine, Wang made an empty pledge that China will work for peace.)
Germany’s position is the EU’s as well, an important contrast with the US, where decoupling from China is part of the bipartisan consensus in Congress.
As France’s finance minister clarified at the World Economic Forum in Davos, Switzerland. Bruno Le Maire said: “China cannot be out, China must be in. This is the difference of view we have between the U.S. and Europe…We don’t want to oppose China, we want to engage with China, we want China to obey by the same rules.”
The former US treasury secretary, Henry M. Paulsen, picks up on the EU’s China policy, warning that the US efforts to isolate China will backfire:
“Although many countries share Washington’s antipathy to China’s policies, practices, and conduct, no country is emulating Washington’s playbook for addressing these concerns. It is true that nearly every major U.S. partner is tightening up its export controls on sensitive technologies, scrutinizing and often blocking Chinese investments, and calling out Beijing’s coercive economic policies and military pressure. But even Washington’s closest strategic partners are not prepared to confront, attempt to contain, or economically deintegrate China as broadly as the United States is.”
What seems apparent is that the EU’s attempt to have it both ways with China—talk principles and walk profits—continues. Rhetoric often masks economic and political self-interest, which should surprise no one. Chinese leaders, caught up in confrontation with the US, have every reason to be pleased.