Introduction

Both China and Europe had high expectations for 2020. China was keen to celebrate the forty-fifth anniversary of its bilateral relationship with the EU. Meanwhile, EU leaders were hoping to conclude a long-sought-after bilateral investment agreement with Beijing that would address structural trade and other economic issues. The culmination of these efforts was supposed to be a flagship meeting between Chinese President Xi Jinping and the twenty-seven EU leaders in Leipzig in September under the auspices of Germany’s presidency of the EU Council. Though these lofty ambitions were always uncertain, the negotiations are now stuck in the mud and the summit has been called off.

The unprecedented global coronavirus pandemic has pushed Sino-European relations further to the brink by accentuating the systemic rivalry between an increasingly assertive China and a divided West. The real question is: what comes next?

The Pandemic Has Chilled EU-China Relations

European views on China have hardened over the past several years. This sentiment is primarily driven by Europe’s increased disillusionment about Beijing’s willingness and ability to deliver on its repeated promises of market reform, as well as a general sense among Europeans that China under Xi is backsliding toward becoming more authoritarian at home and more assertive abroad.

Consequently, since 2016, the EU has taken several concerted steps to push back against perceived unfair Chinese trade and economic practices to promote greater reciprocity and a more level economic playing field for European companies in China. These steps include the completion of a landmark piece of investment screening legislation, the release of common guidelines for addressing the security risks that Chinese companies like Huawei pose to 5G networks, and a new connectivity strategy to help Europe better compete with China’s Belt and Road Initiative.

Philippe Le Corre
Philippe Le Corre is a nonresident senior fellow in the Europe and Asia Programs at the Carnegie Endowment for International Peace.
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Many experts considered 2019 a turning point in the EU’s bilateral relationship with Beijing. In March 2019, the previous European Commission under then president Jean-Claude Juncker codified a more skeptical view of China in a groundbreaking EU strategy document. It labeled China for the first time a “systemic rival” (in addition to a “competitor” and a “partner”) and outlined several concrete measures for the EU and China to take over the coming years to improve the situation.

To many Europeans, the pandemic has revealed a starkly different China, one that has been hailing its success in handling the pandemic to assert its openly stated geopolitical goals while avoiding an open debate on the origins of the virus. Denying that the Chinese city of Wuhan was the starting point of the pandemic back in December 2019, Beijing orchestrated a global propaganda campaign describing how it swiftly controlled the domestic spread of the coronavirus. In late June 2020, an unexpected outbreak in Beijing appeared to threaten China’s road to full recovery. China also portrayed itself as leading a massive international aid operation, assisting some seventy countries with advice and medical supplies in what some observers have described as “mask diplomacy.”

China may want others to think it is better at handling the pandemic, but the message has backfired, especially as some of its diplomatic missions started spreading offensive messages against European democracies, sometimes even directly criticizing their handling of the public health crisis. This approach has not helped Europe’s image of China, which was already becoming more negative even before the pandemic. According to a recent poll conducted by Körber-Stiftung, 36 percent of Germans now view China less favorably than before the outbreak of the virus. Another recent study by the European Council on Foreign Relations confirms that, across Europe, post-pandemic perceptions of China are increasingly negative.

During the coronavirus crisis, the EU has increasingly seen China’s propaganda efforts as hostile and aggressive. The EU’s High Representative for Foreign Affairs and Security Policy Josep Borrell has referred to the highly critical messages posted on Chinese embassy websites and social media accounts as a “battle of narratives.” A special report on disinformation issues during the pandemic produced by the European External Action Service clearly details some of China’s actions in Europe. Concerns about Chinese politicization of aid and faulty supplies have also surfaced in many EU member states and led to renewed calls for diversifying Europe’s supply chains for pharmaceuticals and critical medical supplies away from China.

In other words, China has not made any new friends in Europe since the outbreak of the coronavirus pandemic and, if anything, Beijing has seen its standing on the continent markedly decline.

The Limits of the EU’s Economy-First Approach

Notwithstanding the recent backlash against China’s activities during the coronavirus pandemic, European leaders had still hoped to make progress with Beijing on talks about a Comprehensive Agreement on Investment—a big-ticket item for the EU aimed at addressing long-standing structural economic difficulties. Yet, despite meaningful exchanges between the two sides over the past six months, EU officials remain disappointed with the lack of a Chinese response on the key issues of state subsidies, intellectual property protection, and market access; these officials have made clear they will continue to “put substance over speed.” The prospect of a breakthrough seems remote as China continues to drag its feet while EU officials stick to their guns.

Further, the lack of progress on the investment agreement talks combined with the recent fallout from China’s increased pressure on Hong Kong made it untenable to go forward with the China-EU leaders’ meeting in Leipzig. The meeting has now been indefinitely postponed until later this year. The best the two sides can hope for would be a brief political declaration that would fall short of addressing Europeans’ real worries.

The postponed summit is first and foremost a big setback for German Chancellor Angela Merkel—a frequent visitor to China since taking office in 2005—who had hoped it would be a highlight of Germany’s turn holding the rotating presidency of the EU Council in the fall. Merkel’s original rationale for the summit (also branded as 27+1) was to project European unity to Xi. In this regard, the meeting would offer a stark contrast to China’s 17+1 dialogue with countries in Central and Eastern Europe, which Berlin, Brussels, and other Western European capitals see as challenging EU unity. Merkel was also hoping to use the occasion to send a message to the administration of U.S. President Donald Trump only a few months before the U.S. presidential election.

Erik Brattberg
Erik Brattberg is director of the Europe Program and a fellow at the Carnegie Endowment for International Peace in Washington. He is an expert on European politics and security and transatlantic relations.

While China and Europe officially remain committed to continuing the talks over a bilateral investment treaty with the stated goal of completing them before the end of 2020, these recent setbacks nevertheless call into question the underlying rationale of the EU’s prevailing strategy toward China. Up until now, the EU has opted for pragmatic engagement with Beijing—seeking to make progress on trade and investment issues and preserving cooperation on global multilateral issues like climate change and sustainable development, while treading lightly on more contentious areas like human rights or Chinese foreign policy activism. Although no EU leader is keen to follow the Trump administration’s combative approach or to enter into a blame game with Beijing, China’s growing post-pandemic assertiveness and its lack of willingness to concede on Europe’s core demands means a more forceful European rejoinder is necessary.

From Naiveté to Realism

A clear sign that EU leaders are adapting their approach came during the virtual EU-China summit on June 22. With the special leaders’ summit in Leipzig called off, this regular EU-China format ended up being an even more important stocktaking exercise of the bilateral relationship.

Beyond the usual diplomatic niceties about the benefits of mutual cooperation and a shared commitment to multilateralism, the hardening of the EU approach was evident in three major ways. First, European Commission President Ursula von der Leyen reaffirmed that the strategic outlook’s view of China as a “negotiation partner, an economic competitor, and a systemic rival” remains the dominant paradigm. European Council President Charles Michel further added that Europe and China “do not share the same values, political systems, or approach to multilateralism.” This is an important clarification because some recent remarks by other EU officials, such as Borrell, had seemed to question this perspective. Chinese officials had hoped the EU would abandon the “systemic rival” language, which has vexed Beijing ever since its inception.

Second, the two sides failed to agree on a joint communique. While this is not unprecedented—previous meetings in 2016 and 2017 also failed to produce such a document—it illustrates European officials’ reluctance to keep taking China at its word. EU officials consider the most recent communique from the March 2019 summit a major achievement and complain that China has since backtracked on its commitments. Instead of another joint statement with a list of lofty shared goals, the EU opted this time for a list of unilateral challenges for China to overcome and stressed the need to defend European interests. An apparently frustrated von der Leyen reiterated the need for “more ambition” from the Chinese side, particularly calling for “substantial commitments” on state-owned enterprises and subsidies.

Third, EU leaders did not shy away from raising controversial issues like human rights concerns and Chinese influence operations this time. Noting that “human rights and fundamental freedoms are non-negotiable,” EU officials said they expressed “grave concerns” over the situation in Hong Kong, mentioned human rights concerns in China’s autonomous regions of Tibet and Xinjiang, raised the issue of Chinese disinformation campaigns and cyber attacks on European healthcare systems (much to Beijing’s chagrin), and brought up the issue of the imprisonment of Canadian and Swedish citizens in China.

The sharp statement on Hong Kong is particularly important as the EU’s response has so far been rather lackluster. For example, Borrell recently suggested that the national security law Beijing imposed on Hong Kong would not put “investment deals” between Hong Kong and Europeans at risk. A large majority of EU member states share this view and do not want to be seen as interfering in Chinese internal affairs. This is a tricky proposition as the Chinese government signed a joint declaration with the United Kingdom in 1984, providing Hong Kong with a fifty-year period of special status as a Chinese special administrative region with a large degree of autonomy.

Although the EU did not participate in a joint statement with Australia, Canada, the UK, and the United States, Brussels did recently sign onto a joint G7 statement on Hong Kong. And the EU swiftly condemned China’s decision, on the twenty-third anniversary of the handover of the former British colony to China on June 30, 2020, to trigger the controversial new national security law governing Hong Kong. Michel said that it “risks seriously undermining the high degree of autonomy of Hong Kong and ha[s] a detrimental effect on the independence of the judiciary and the rule of law.” And von der Leyen said that the move would risk “very negative consequences” and added that the EU was “in touch” with international partners on the issue, especially in the run-up to Hong Kong’s Legislative Council elections in September.

Even so, Merkel also said on a separate occasion that the EU would continue to seek “dialogue and conversation” with Beijing and that this relationship was of “strategic importance.” These remarks caused her to come under fire from a leading political figure in her own Christian Democratic Union party in Germany for being too soft on China. On July 13, the EU’s foreign ministers discussed sanctions in response to China’s national security law on Hong Kong, including an export control ban on technologies that could be used by Hong Kong police and other authorities, a review of extradition links and travel advisory assessments, and a broadening of visa possibilities for Hong Kong citizens. In addition to such measures, closer cooperation between the EU and the UK is also expected.

Building a More Robust European China Strategy

As 2020 continues to unfold, it is hard for Europe to envisage a neutral bilateral relationship with Beijing anymore. European governments are required to pay close attention to public opinion as they turn sour on China following the coronavirus outbreak and surrender any remaining hopes that Beijing will cave on the disputed trade and investment reform issues. In response, Europe is tailoring a much more defensive and assertive approach. The Europeans’ new approach leverages all possible trade defense mechanisms to protect their industry players and technology in what is becoming an increasingly contested period, and Europe no longer shies away from bringing up values-based issues.

Of course, there will still be avenues for continued dialogue and cooperation between Beijing and Brussels in areas such as connectivity, trade, and scientific cooperation. For example, the EU is hoping to soon finalize an agreement with China on geographical indications, a type of intellectual property rights for products based on their geographical origin. In addition, the EU desires to work with China on a broader set of global challenges such as Iran’s nuclear program, development in Africa, and climate change. That said, on climate cooperation, China seems much behind schedule in meeting the goals it signed up for in the 2016 Paris Agreement. The EU also wants to see China contribute more to the global response to the coronavirus, but there is great disappointment on the EU side over Beijing’s lack of transparency regarding the outbreak of the pandemic and its reluctance to support a comprehensive inquiry into the World Health Organization’s initial response.

While European governments are keeping communication lines with Beijing open, they are also quickly adopting more cautious discourse vis-à-vis China, jettisoning any remaining illusions that the overall trajectory of the EU-China relationship can be fundamentally reversed in any meaningful way. In this regard, the pandemic may not be a game changer in and of itself. But it is certainly an accelerator of existing trends, warranting the need for Europe to devise a new vision and strategy for dealing with China through the prism of viewing Beijing as a systemic rival. The March 2019 strategic outlook and its underlying philosophy have proven even more relevant in the post-pandemic landscape. Yet this document remains relatively short on practical steps, and European policymakers must ensure that it is fully implemented while also seeking to further expand upon it.

Updating Europe’s Strategic Outlook

In the wake of the pandemic and in response to China’s growing offensive stance, the European Commission is now doubling down on many of the recommendations outlined in its March 2019 strategy. For example, EU ministers are discussing ways to strengthen trade defense instruments, condition Chinese companies’ access to the EU’s procurement market, and make European guidelines on 5G security risks more robust, given that the UK appears to have reversed its earlier decision to allow a limited role for Huawei in its domestic 5G network. Other European countries may follow suit.

The commission took a major step recently, releasing a new white paper on curbing state subsidies that would make it harder for heavily subsidized foreign firms to access the European single market. Brussels is also considering ways of boosting the EU’s industrial policy to support more viable European alternatives to foreign industrial giants. These policies are increasingly seen as vital parts of strengthening the EU’s resilience and its strategic autonomy, a concept that traditionally has been used for security and defense affairs but which is now taking on a much wider meaning with respect to China.

Meanwhile, the EU is contemplating additional efforts to address emerging issues such as handling Chinese disinformation and political influence campaigns, further restricting China’s access to European innovation, pushing back against undue Chinese influence in international organizations, and strengthening the security of critical supply chains not only for medical supplies but also in other critical sectors.

Going forward, the EU should also consider beefing up its investment screening legislation, which will come into effect in October, strengthening rules regarding dual-use exports, limiting undue Chinese influence on European scientific projects, and doubling down on the setting of international standards for emerging technologies and the reform of multilateral organizations. On human rights, the EU must go beyond merely expressing concerns to spell out what consequences it is willing to impose on China should its behavior not change. (For instance, the European Parliament has called on the EU to impose sanctions on China for its actions in Hong Kong.) Such European efforts must ideally be closely coordinated with the EU’s closest like-minded partners—including Australia, Canada, Japan, the UK, and the United States—although doing so with Washington will continue to be difficult, given the fragile state of the transatlantic relationship under Trump.

However, a precondition for advancing these initiatives is overcoming lingering internal divisions among the twenty-seven EU member states and developing a more coherent strategy based on defending and protecting the union’s own collective interests. Certain member state capitals are still on the fence, and some even see a dichotomy between systemic rivalry and cooperation with China. Instead, they hope for more emphasis on cooperation with Beijing post-pandemic for economic reasons. Berlin and Paris have an especially important role to play providing leadership to ensure that the EU member states and institutions in Brussels all sing from the same hymnbook and put geopolitical interests ahead of more narrow economic ones. But this also requires an openness to Europeanize member states’ own bilateral dealings with China so as to avoid mistrust. Germany, which began holding the presidency of the EU Council on July 1, should also use its convening power to promote a stronger and more robust common European strategy toward China.

Beijing’s hopes for a “stable and mature relationship” with Europe, despite the ongoing global tensions around the coronavirus, ring increasingly hollow in the absence of any meaningful change on the Chinese side. Following the recent EU-China meeting, Xi even claimed there was “no conflict of fundamental interests between China and Europe.” Europeans appear to think otherwise, as the EU’s long-standing desire to keep relations with China on an even keel by focusing on trade is falling flat. Both sides now need to recalibrate what has become a more contentious relationship while also not shying away from areas of mutual engagement and even cooperation.