China’s relations with the EU face another rocky five years after German politician Ursula von der Leyen secured another term at the helm of the European Commission (EC), vowing to persevere with her tough policies towards Beijing. A wider-than-expected majority of lawmakers backed von der Leyen in a vote at the European Parliament on July 18, granting her another five years at the head of the EC. While many policies are set in national capitals, the Commission has decision-making powers for trade and competition – two of the most contentious components of the EU-China relationship. During her first term, von der Leyen pursued a strategy of de-risking from Beijing and cracked down on what she called “market-distorting” subsidies in China’s hi-tech and clean-tech industries.
A manifesto released shortly before the vote suggested that the she was not for change: von der Leyen 2.0 looks a lot like von der Leyen 1.0 in relation to China. “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 manifesto read. It promoted the ideas of geo-economics and economic security, pledging to continue “de-risking rather than decoupling” with China. “We must be more assertive in protecting our economy from key technology leakage and security concerns,” it continued. “This issue is particularly acute when dealing with those who are also strategic competitors and systemic rivals.” The document pledged to bolster ties with Indo-Pacific allies, including Australia and India. “This includes our collective efforts to deploy the full range of our combined statecraft to deter China from unilaterally changing the status quo by military means, particularly over Taiwan,” it said. Von der Leyen will oversee a different Europe to the one she inherited in 2019. Her policy platform five years ago made no mention of China, nor even of Russia. This time, her pledges were dominated by references to security, defense and self-sufficiency.
Business figures noted that during a speech that ran to over 45 minutes, she did not once mention the word “trade”. It was a reflection of how drastically ties with China have changed too. In 2020, barely a year into her first term, a smiling von der Leyen signed an EU-China investment deal with Chinese President Xi Jinping and other leaders in an online ceremony that now seems like a snapshot of a parallel universe. The coronavirus pandemic helped sour the mood in Europe towards Beijing, while a tit-for-tat barrage of sanctions in March 2021 effectively killed the investment pact. China’s coercive response to Lithuania’s hosting of a controversially named Taiwanese government office further poisoned relations. But it was Russia’s invasion of Ukraine in 2022, halfway through von der Leyen’s term, that led to a tectonic shift. While China has professed neutrality in the armed conflict, most in Europe view Beijing as having backed Moscow rhetorically, diplomatically, and through the increasing supply of dual-use goods that EU officials say are helping to “kill Ukrainians”. Friendly China-Russia relations emboldened von der Leyen to push for a sterner trade policy, arguing that Europe must not remain dependent on authoritarian states and that Beijing’s state subsidies were bankrupting European competitors. The debate over overcapacity in China’s manufacturing industry reached fever pitch this year, with Brussels unleashing a deluge of probes against Chinese firms in sectors ranging from electric vehicles to wind turbines. The trend is set to continue, as the Third Plenum of the Chinese Communist Party’s Central Committee signaled continued support for the country’s hi-tech sectors and opted not to take short-term consumption-boosting measures that could absorb so-called overcapacity.
Both sides are getting closer to a trade war each passing month. Indeed, von der Leyen vowed to “use all of our trade defense instruments where and when needed”. “Von der Leyen wants a new kind of economic foreign policy,” said Tobias Gehrke of the European Council on Foreign Relations, who described it as an “extension of what already took place in her current mandate”. “Rather than banking everything on free-trade agreements, she wants the union to build economic security, trade and investment,” Gehrke added. While the German’s intentions are obvious, various obstacles could stop her pursuing her China strategy to the extent she desires. The American presidential election in November is the biggest unknown. A return of Donald Trump to the White House could jeopardize the close transatlantic ties that have seen the U.S. and EU collaborate on some areas of China policy.
While U.S. President Joe Biden has gently cajoled Brussels to follow a tougher line on Beijing, Trump is widely expected to wield stick over carrot. That could mean a more transactional alliance marked by tactical cooperation and strategic dissonance. Furthermore, many EU member states remain unconvinced by von der Leyen’s proposed economic security strategy, the cornerstone of de-risking. The strategy includes the screening of outbound investments in some hi-tech sectors in China as well as a European-wide export controls regime. The Commission was supposed to publish guidelines this summer on how the outbound policy would work, but unease in many capitals caused it to be postponed till November. The South China Morning Post understands that only one of the EU’s 27 member states – Lithuania – has backed the Commission’s proposal. Some members, von der Leyen’s Germany included, do not even have the legal right to monitor transactions by private businesses. Still others are loathe to hand the Commission more powers. “While there is much repetition of the EU’s economic security agenda, there are few suggestions on how to overcome the institutional deadlocks that have prevented greater advancement in areas where member states hold exclusive competences,” said Arthur Leichthammer of the Jacques Delors Center in Berlin. The appointment of former Portuguese Prime Minister Antonio Costa to head the European Council may be viewed in Beijing on a positive note. During his nine years as government leader in Lisbon, he invited billions of euros in Chinese investment into the Portuguese economy. “Von der Leyen will continue to drive the China agenda,” said Noah Barkin, an EU-China expert at Rhodium Group. “Member states can push back on certain areas, but this fundamental shift in the relationship, triggered by the worsening trade relationship and by China’s support for Russia, I don’t see that changing,” the South China Morning Post reports.
