Bridges and divides: Reflections on the EU-China Summit
This article was originally published in Italian in Panorama on 22nd Dec 2023.
Please note that this is a courtesy translation of the Italian language article originally published in the Panorama Magazine Issue at: https://www.panorama.it/economia/vertice-ue-cina-dicembre
Shifting dynamics in EU-China relations
The EU-China summit held on 7 December 2023 marked a significant milestone as the first in-person summit since the outbreak of the COVID-19 pandemic. In comparison to 2022’s virtual summit characterised by the EU’s foreign policy chief as a “dialogue of the deaf”, [1] this year’s dialogue indicated the thawing of frosty relations that had nosedived during the pandemic. With the abandonment of stringent COVID- related travel restrictions, 2023 has seen a flurry of high-level diplomatic visits from the EU, as efforts to rebuild ties with China have intensified. For example, European Commission President von de Leyen’s visit to Beijing in April- the first in-person dialogue with President Xi in four years- occurred against the backdrop of mounting political tensions and economic disputes, aiming to clarify the future of the EU-China relationship.
While the 2023 summit covered a wide spectrum of issues, including climate change, human rights and the Ukraine war, trade and market access barriers were the key areas of concern. After all, both the EU and China find themselves grappling with various economic challenges. While Europe is facing an imminent recession, China is facing a sluggish economic recovery given the high youth unemployment levels and subdued investor confidence. The EU achieved it main goal of conveying the severity of the trade imbalances and China’s support for Russia, warning China that a failure to address these concerns would trigger a European policy response.
The focus was on managing differences and preventing a descent into confrontation, but the jury is still out on whether the two sides succeeded. The EU had kept its expectations low, and indeed, the summit was long on firm words but short on outcomes. During the summit, the EU highlighted the necessity of a more balanced economic relationship, expressing concerns over the current EU’s trade deficit of almost EUR 400 billion with China. [2] Without immediate intervention, the unsustainably large trade imbalance is likely to become a political thorn between the two sides.
This is particularly heightened by fears of China’s industrial overcapacity in solar panels, wind turbines and electric vehicles that may flood the EU market in coming years. [3] This comes on the heels of China’s export controls on graphite, a fundamental component of the defence and EV industries. While the EU favours negotiated solutions, the European Commission President emphasised that Europe possesses the necessary measures to safeguard its market.[4]
The EU’s message is clear: it’s time to get serious about de-risking and prevent its economy from being undermined by unfair competition. But how they will do so will depend on Beijing’s responsiveness to its concerns. Longstanding demands, such as encouraging reciprocity and transparency in the business environment and collaboration on mutual climate change ambitions, remain high on the EU’s agenda. Another aspect that defines the EU’s relationship with China is its ties with Russia, as the EU has still not persuaded China to leverage its influence on Russia to end the Ukraine war.
Italy’s “BRIexit”: Has the BRI lived up to its expectations?
But perhaps the most surprising aspect of this year’s EU-China Summit came through Italy’s withdrawal from China’s Belt and Road Initiative (BRI) just one day earlier. Earlier in November, Italy became one of the 5 EU countries to be given visa-free travel to China.
Once an enthusiastic participant of the BRI as only G7 nation, Italy had hoped for increased trade and investments in major infrastructure projects. However, Italy’s decision highlighted its disappointment over unmet economic gains, with its trade deficit with China ballooning from EUR 20 billion to EUR 48 billion since joining the BRI in 2019. [5] Foreign companies in China echo these concerns due to the lack of transparency in procurement processes and the dominance of state-owned enterprises in BRI contracts.
While Italy’s departure represents a major setback for Chinese leaders, China remains committed to advancing the BRI as a key pillar of its foreign policy. This move reflects increasing cohesion of the EU’s stance towards China, as Italy’s “BRIexit” aligns with the EU’s common de-risking strategy.
Looking Ahead
The EU’s approach to China is multifaceted, viewing China as a partner, competitor, and systemic rival. [6] However, the lack of cohesion and internal divergences among member states pose a challenge to this approach. For instance, this is exemplified by Hungary fostering closer ties through its participation in the Belt and Road Forum in October. Without internal cohesion, the EU will fail to effectively bolster its de-risking agenda, revealing the need for a more unified response.
Despite challenges, 2023 marked a turning point in EU-China relations, evidenced by intensified efforts to rebuild ties, even before the summit. The lack of meaningful progress on substantial issues during the summit left many questions unanswered, but the summit reflects the desire for continued engagement between the two economic giants. For instance, China has expressed during the summit its willingness to clarify restrictions on cross-border data flows, a long-standing challenge for companies operating in the country. [7]
Looking ahead, EU-China ties in 2024 will remain at a crossroads, marked by a fusion of global challenges, economic interdependence and conflicts stemming from contrasting security strategies. Nevertheless, as the world continues to navigate an increasingly politicised landscape, the EU and China must continue to find common ground for collaboration.
[1] EU-China Summit: Speech by High Representative/Vice-President Josep Borrell at the EP plenary, European External Action Service, 6th April 2022, <https://www.eeas.europa.eu/eeas/eu-china-summit-speech-high-representativevice-president-josep-borrell-ep-plenary_en>
[2] 24th EU-China Summit: engaging to promote our values and defend our interests, European Council, 7th December 2023, <https://www.consilium.europa.eu/en/press/press-releases/2023/12/07/24th-eu-china-summit-engaging-to-promote-our-values-and-defend-our-interests/>
[3] The 2023 EU-China Summit – A Lukewarm Affair But No Disaster, Wilson Center, 8th December 2023, <https://www.wilsoncenter.org/article/2023-eu-china-summit-lukewarm-affair-no-disaster>
[4] EU Chief Warns China On Trade Gap Ahead Of Summit, AFP News, 5th December 2023, <https://www.barrons.com/news/eu-won-t-tolerate-china-trade-gap-forever-von-der-leyen-3268fae2>
[5] Italy reportedly drops out of China Belt and Road initiative that failed to deliver, AP News, 6th December 2023, < https://apnews.com/article/italy-china-belt-road-infrastructure-c6b6e9f3f69d46544d7550622578e913>
[6] EU-China Strategic Outlook: Commission and HR/VP contribution to the European Council, European Commission, 12th March 2019, <https://commission.europa.eu/publications/eu-china-strategic-outlook-commission-and-hrvp-contribution-european-council-21-22-march-2019_en>
[7] China and EU leaders agree on need of ‘balanced’ trade ties, Reuters, 7th December 2023, <https://www.reuters.com/world/top-eu-officials-meet-with-xi-china-summit-with-low-expectations-2023-12-07/>
