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The EU’s reaction to the rise of China

Published onFeb 21, 2022
The EU’s reaction to the rise of China

1. From Tiananmen to Political Dialogue

Bilateral diplomatic relations between EU and China were first established in 1975. In 1985, they were extended by the conclusion of a Trade and Cooperation Agreement.1 After the Tiananmen Square Incident in 1989, EU introduced sanctions including arms embargo against China, as well as suspending bilateral contacts. This was decided by the Madrid Council on 26-7 June 1989. 2 The EC did not decide what exactly was to be included in this embargo, and it was up to the individual member countries to decide. 3 In the 1980s, European countries had followed American example and had exported increasing number of weapons, which had reached the value of 945 million dollars by then.

After the incident, EU started developing a Code of Conduct for Arms Control. They started in 1991 and was amended 1992 and 1998. Effort was made to legalize this Code of Conduct but failed in 2008, and Code of Conduct was replaced by Common Position on 8 December 2008. 4

But this situation did not last long. Interest in the expanding Chinese economy began to pick up in mid-1990s. EU and China formalized their political dialogue in 1994, by an exchange of letters. In 1995, The European Commission came up with a new orientation document called a ‘long-term policy for relations between China and Europe.’ 5This signaled the normalization of the relationships, acknowledging China’s emergence as an economic and political power. The first EU-China Summit was held in London in 1998 and has been held annually since then. The European Commission drafted in 1998 the communication ‘Building a Comprehensive Partnership with China.’6 This was in line with the surge in European interest in Asia in general, as can be seen in the launching of ASEM (Asia-Europe Meeting) launched in 1996. ASEM summit has been held every two years since then, with other Ministers’ meetings accompanying them.

2. Upgrading to Strategic Partnership

The early 2000s saw a surge in European interest towards Asia in general, but in Chinese economic growth in particular. This led to the upgrading of existing dialogue into a ‘Strategic Partnership’ in year 2003.7 This document marks one of the high points of EU-China relationship. Looking back from today, it is remarkable for its optimism. First of all, it is filled with the expectation towards the new Hu Jintao leadership which came to power in late 2002. Hu attended the EU-China Summit for the first time in October 2003. The document notes that the Chinese foreign policy has become ‘progressively more proactive and constructive.’
Firstly, the strategic partnership reflects the converging views of both sides about the global political environment, and their willingness to ‘work as strategic partners on the international scene.’ The document talks about “the EU and China have an ever-greater interest to work together as strategic partners to safeguard and promote sustainable development, peace and stability.” It emphasizes multilateral organizations and systems like UN and WTO and the importance of the ‘rules for global governance’. This reflected the concern globally held about the US ‘unilateralism’ in the Bush administration, and the convergence of major players including China and Russia in the era of global war against terrorism. In such a world, EU and China shared ‘responsibilities in promoting global governance.’

Secondly, the document is striking in its optimism about the possibility of Chinese society transitioning to ‘open society based upon the rule of law and the respect for human rights.’ The EU was just accepting growing number of former Communist countries from Eastern Europe as its members. There were high expectations that the experience of the new member countries could serve as a model for China as it opens its society to the globalized world. The document explicitly lists ‘Supporting China’s transition to an open society based upon the rule of law and the respect for human rights’ as its one of ‘essential element of EU policy’ towards China. Listed amongst concrete goals were ratification of the International Covenant on Civil and Political Rights, freedom of expression, religion, and association, as well as the rights of minorities, in particular in Tibet and Xinjiang. Following China’s entry into WTO in December 2001, there were expectations about wide ranging social and economic institutional reforms and EU was willing to assist in these processes.

Thirdly, it reflected EU’s geopolitical ambition to obtain a place in the world politics to balance the U.S. with China’s help. The proposal included an agreement on the joint development of GALILEO satellite navigation system, which was hoped to make Europe independent of the US Global Positioning System (GPS). As noted above, EU-US relations was increasingly strained at this moment, as US started the war on Iraq in March 2003, many European states chose to stay out of the campaign. EU developed its own ‘Security Strategy’ under EU’s High Representative for the Common Foreign and Security Policy (CFSP) Javier Solana for the first time in December 2003. 8 In this document, Europe proclaimed itself to be ‘inevitably a global player” and listed “an international order based on effective multilateralism” as one of its strategic goals. China was listed amongst Japan, Canada, and India as potential strategic partners.

Under the strategic partnership, EU and China developed an extensive system of dialogue at different levels. It was already an impressive institution in 2003, but over years it developed into a genuine network. In 2003, there was a genuine conviction that such a strategic dialogue will create trust between the two partners and encourage China towards more open society.

<EU-China Dialogue structure in 2003>

ダイアグラム 自動的に生成された説明

3. Growing Disenchantment, 2003-2013

Hu Jintao’s Presidency lasted 10 years. During this decade, Chinese economic growth was something unforeseen in history. In 2007, Chinese nominal GDP surpassed that of Germany. By 2010, China overtook Japan as the second largest economy in the world. In contrast, the decade proved to be a difficult one for Europe. In two rounds, 2004 and 2007, EU welcomed altogether twelve new members from the former socialist bloc. EU-25 and China established a Strategic Dialogue in December 2005, and EU-27 and China launched the High-Level Economic and Trade Dialogue (HED) in 2008. But EU of 27 was not the same as the EU-15. It was far more heterogeneous. The ‘new Europe,’ as Secretary of Defense Donald Rumsfeld had called in the year 2003, were far more pro-US and anti-Russia and potentially anti-China than the older members.9 Initially, EU was thinking of lifting the 1989 arms embargo towards Beijing, but the Council Decision in the summer of 2005 shelved the proposal to lift the arms embargo. Both Japan and the US lobbied heavily against such a move, and some of the new members contributed to change the balance.

The dreamed-of strategic partnership was not coming into reality. Although economic relationship was deepening, Europe began to accuse Beijing of unfair trade practices, and human rights abuses. In July 2008, The European Commission decided to exclude Chinese contractors from the second phase of Galileo, citing unfair competition, a lack of intellectual property rights enforcement and of reciprocity in public procurement by China. By 2009, political commentators were writing that “the EU’s China strategy is based on an anachronistic belief that China, under the influence of European engagement, will liberalise its economy, improve the rule of law and democratise its politics.” This was a strategy of “unconditional engagement,” which was described as “a policy that gives China access to all the economic and other benefits of cooperation with Europe while asking for little in return.”10

Another commentator in 2013 described initial high expectation as a ‘fling start,’ and the Chinese motives as “traditional strategy of backing European integration in order to drive a wedge between the Western allies.”11 There was already by 2013, a growing sense of unfairness and disappointment, that all the concessions and goodwill had produced hardly any results. EU export to China had not grown at the pace of growth of EU imports from China, and hence the trade balance had turned very much negative. But compared to what happened in the next decade, what happened under Hu Jintao was remarkably low-key and modest. So many observers still professed optimism about the future of the bilateral relationships. After 2009, the onset of Euro crisis provided reason for Europe to value Chinese support by increasing its foreign reserve holdings in Euro.

Diagram from Fox and Godement (2009)

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4. Turning Downwards, 2013-2022

Already towards the end of the Hu Jintao era, China had started developing structures to shape its influence in a more institutionalized way. On 26 April 2012, “Cooperation between China and Central and Eastern European Countries “(China-CEEC Cooperation) or the so-called “17+1” formula was launched. It was claimed to be “a cross-regional cooperation platform with traditional friendship as the background and based on the common will of all the participants for win-win cooperation and development.” It was inaugurated by the first China- CEEC Summit in Warsaw, Poland.12 There has been an annual summit in one of the member countries except for 2020.13 The expectation was high at that time on the Central and Eastern European countries for direct investment from China in both infrastructure and business. Especially for the Balkan countries left out of the EU membership, China seemed to provide welcome investment. And even for Central European countries already inside the EU, China seemed to provide a viable and hopefully less demanding alternative to Brussels.

Of the countries involved in China-CEEC Cooperation, several including Serbia and Hungary came to be seen closely associated with China. About 80% of Chinese western Balkan investment (includes Albania, Bosnia and Herzegovina, Kosovo, Montenegro, and North Macedonia) goes to Serbia according to one estimate.14 China and Hungary often appear at various international occasions to show their solidarity in relation to China (and often Russia). The ‘hallmark’ project of China-CEE cooperation in Europe is the Budapest-Belgrade-Skopje-Athens railway. It starts in Belgrade and ends in China-run part of Piraeus (Greece). The construction began in 2014 for the first section, Budapest-Belgrade railway. It was supposed to be constructed in two years, but has been lagging behind, ostensibly due to an EU investigation into possible violations of its public tendering requirements. By connecting the China-run Piraeus port in Greece with the "heart" of Europe, this railway is meant to be the pillar of Chinese Belt and Road Initiative in European continent. But it has so far failed to live up to the local expectations.
EU already had its own railway plan for the region as “Priority Project 22: Railway axis Athens–Sofia–Budapest–Vienna–Prague–Nuremberg/Dresden (PP22),” in its 2012/13 EC report. But the offer from China seemed to be with less conditions and easier to get. However, in many countries, skepsis against China grew as time went on. This is particularly pronounced in some countries, probably from historical experience as well as the stance of main ruling parties. Foremost amongst them is Lithuania, but Czech Republic has also grown quite critical about Chinese ways of doing business and has issued many warnings towards its citizens. Here again, 2013-2017 was regarded as the ‘golden age’ in Czech-China relations. Signing of Czech–Chinese strategic partnership during President Xi Jinping’s visit to Prague in 2016 was the highpoint of the relationship. But the golden promises have not materialized, leaving Czech side deeply disappointed.15

Planned Budapest-Athens Railway route

Germany under Angela Merkel was decidedly the most important partner for Xi Jinping throughout these years. In the early years, Merkel raised Tibet problems and expressed concerns about Chinese human rights situations. But as German cars export to Chinese market increased, she repeated her visits to Beijing and silenced her criticisms. 16 But as relationships deepened, frustration from German business outside auto industry increased. First to react was the steel industry and in October 2016, responding to German steelmakers claims, European Commission imposed anti-dumping duties on Chinese steel products.

Another incident in August 2016 gave a foretaste of troubles coming. Unknown Chinese appliance company Midea had secured a stake of more than 90 percent in the German industrial robotics supplier Kuka, with a multi-billion euro offer that stoked controversy in Europe. The Kuka deal raised concerns in Europe about the transfer of high-end technology to a Chinese company for national security reasons. Two years afterwards, the CEO of Kuka was replaced by Chinese and its shares were losing value. 17

When in January 2019, BDI (Association of German Industry) produced a report named “Partner and Systemic Competitor – How Do We Deal with China's State-Controlled Economy?” the winds had really started to change.18

In March 2019, European Commission published “EU-China – A Strategic Outlook.” EU now recognized that China was now a global player with its own agenda and henceforth required a more nuanced approach:

“China is, simultaneously, in different policy areas, a cooperation partner with whom the EU has closely aligned objectives, a negotiating partner with whom the EU needs to find a balance of interests, an economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance. This requires a flexible and pragmatic whole-of-EU approach enabling a principled defence of interests and values. The tools and modalities of EU engagement with China should also be differentiated depending on the issues and policies at stake. The EU should use linkages across different policy areas and sectors to exert more leverage in pursuit of its objectives.” 19

The year 2019 was probably the turning point in Europe’s view towards China. The first human cases of COVID-19 were described in Wuhan, China in late-December 2019, but it probably did not require the pandemic to change Chinese image in Europe. Xinjiang and Hong Kong crossed the border of politically acceptable in Europe and suddenly sympathies were rushing towards Taiwan. The EU-China Comprehensive Agreement on Investment (CAI) signed in December 2020, was soon mothballed in the European Parliament.

On 19 April 2021, the European Council adopted conclusions on an EU Strategy for cooperation in the Indo-Pacific, and as a follow-up, the Commission and the High Representative presented a Joint Communication on the EU's Indo-Pacific Strategy on 16 September 2021. 20 The EU had come a long way since the “strategic partnership.” The report explicitly mentioned South and East China Sea and Taiwan Strait as hotspots which “may have a direct impact on European security and prosperity,” called Indo- Pacific Europe’s ‘natural partner’ and listed as its goal to “solidify and defend the rules-based international order, by promoting inclusive and effective multilateral cooperation based on shared values and principles, including a commitment to respecting democracy, human rights and the rule of law.” This echoed the views of Asian democracies like Japan and Australia on the issue, showing how the views had converged after three decades of turbulent relationships.

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