Europe and China in 2023: an agreement to disagree?

A belated new year for all readers of the European Express weekend edition. I’m at tony.barber@ft.com.

European news often starts slowly in January, but my eye was caught this week by the EU’s offer to China of a free Covid vaccine – a helping hand Beijing says is unnecessary, despite the rise in infections after the communist government. end the zero-Covid policy.

The rather chilly exchange is a reminder that difficulties in relations with China will be a dominant theme in European public affairs in 2023, including domestic issues such as health and education as well as diplomacy and trade.

Let’s take these areas one by one.

China and the war in Ukraine

China’s relations with Europe were cooling even before Russia invaded Ukraine last February. In 2019, the European Union defined China for the first time as a “systemic competitor promoting alternative governance models” as well as an “economic competitor to achieve technological leadership”.

But the EU is trying to avoid confrontation by insisting that in certain areas, such as climate change, both sides have “close objectives”. This three-pronged approach to China as a rival, competitor and partner is now in tension, and is even considered in Brussels as somewhat outdated, in light of Beijing’s support for Russia in the Ukraine war.

However, a complete breakdown of EU-China relations in 2023 is unlikely. A good and concise analysis appears in this Brookings Institution brief by Célia Belin, James Goldgeier, Tanvi Madan and Angela Stent.

The authors emphasize that the rapid decoupling of EU energy from Russia, which has already achieved high economic costs, will probably make European leaders wary of the risks of extensive trade and investment relations with China (the value of bilateral goods trade in 2021 will almost reach €700bn, according to EU data).

At the same time, Beijing is adopting a less intimidating posture towards Europe for fear of pushing it closer to the US, China’s main rival, the authors say. An interpretation of the Chinese attitude towards Europe in general is presented by Alicja Bachulska in her recent article for the Mercator Institute of China Studies (Merics).

EU-China economic relations

Some recent examples illustrate how, despite the trend towards stricter restrictions in some countries, Europe continues to attract large-scale Chinese investment.

Overcoming opposition from his own government, in October German Chancellor Olaf Scholz approved the acquisition of a 24.9 percent stake in the Hamburg container terminal by Cosco, the Chinese shipping giant.

The map below, produced by Merics, illustrates how Cosco’s holdings in European ports span the continent, from Rotterdam in the Netherlands and Valencia in Spain to Piraeus in Greece.

A second example is the Pelješac bridge in Croatia, which opened in July and is shown on the map below. Connecting the Croatian mainland to the southernmost coast, this strategically sensitive infrastructure project is paid for largely from EU regional aid funds (some €357 million out of a total cost of €536 million, according to Allison Carragher, who reports for the Carnegie Europe think-tank. most detailed on the subject ).

The project was undertaken by China Road and Bridge Corporation, a state-controlled giant, which won the tender with a 20 percent lower bid than Strabag, an Austrian company.

There are two questions. One is whether cheap loans and other forms of state aid give companies like CRBC an unfair advantage in tenders, as the EU Chamber of Commerce in China complained in a 2020 report.

Datanna, a Dutch information services company specializing in China, estimates that about 40 percent of all Chinese investment projects in Europe between 2010 and 2020 have a high or medium level of involvement by the Chinese state.

The second question is what China wants for large infrastructure investments in Europe. In his study of the Croatian project, Carragher commented:

“[Chinese] government officials have seen now at each major milestone of the bridge’s construction, and a sign posted on the bridge during construction reads ‘Building the Pelješac Bridge builds friendship between Croatia and China.’ . . . But some fear that this friendship could put pressure on Zagreb to get closer to Beijing on issues like Taiwan and human rights.

Chinese influence in central and eastern Europe

China has been particularly busy investing in central and eastern Europe. In August, China’s CATL, the world’s largest car battery maker, announced plans for a €7.3bn factory in the Hungarian city of Debrecen.

But China’s regional involvement extends beyond civilian industrial projects. Earlier last year, Serbia displayed a newly acquired Chinese surface-to-air missile defense system. Along with Belgrade’s refusal to align with the west in terms of its policy towards Russia, this acquisition underlines Serbia’s peculiar role in the Balkans – a region that is supposed to be a full EU member – and strives for an independent national security policy, which is balanced between. the west, Moscow and Beijing.

However, other countries have distanced themselves from China. In August, Estonia and Latvia left the central and eastern European economic cooperation forum with Beijing, formerly known as the “17 + 1” club. Since Lithuania has left in 2021, it’s better to call the club “14 + 1” now.

In another sign of China’s regional vigilance, the mayor of Prague canceled a sister city arrangement with Beijing in 2019 and signed it with Taipei, the capital of Taiwan. Depending on your point of view, this is a bold or provocative move, considering the growing military and political pressure China is exerting on Taiwan.

Universities and ‘police stations’

The actions of the mayor of Prague were then stirred up by the discovery that the Chinese Embassy in the Czech capital was secretly funding a Czech-Chinese institute at the city’s prestigious Charles University.

Since then, other European universities have come under pressure to reduce their ties with the Chinese, especially in research projects with potential military applications.

But Hungary is moving ahead with plans to open a campus in Budapest of Shanghai-based Fudan university – the first Chinese campus in Europe.

Bence Nemeth, who teaches in the department of defense studies at King’s College, London, wrote in 2021:

If the Fudan project in Hungary becomes a successful model, there is a great possibility that globally competitive Chinese universities can follow Fudan’s example and will establish campuses in the EU.

Well, anything goes, I guess.

But it seems to me that the expansion of China’s “soft power” in Europe may face difficulties due to the growing level of concern among EU governments about issues such as technological espionage, cyber security and, not least, Chinese officialdom. “Police” in Europe.

What do you think? What is the impact of China’s economy and soft power on Europe? Vote here.

More on this topic

Investors beware: Europe’s top companies are too much in China – says a report by Ties Dams and Xiaoxue Martin for Clingendael, the Netherlands Institute of International Relations

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