China-EU relations are not a 'you lose, I win' knockout match

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On December 7, the 24th China-EU Summit was held in Beijing. This marks the first meeting between the leaders of both sides since 2019 and is another significant bilateral diplomatic event following the China-U.S. summit.

Some people intentionally frame China-EU relations as a knockout match in which "you lose and I win," but China reaffirmed that "partnership" is the key word in China-EU relations. During this meeting, Chinese President Xi Jinping proposed "three partners" between China and the EU: key partners for economic and trade cooperation, preferred partners for scientific and technological cooperation, and trustworthy partners for industrial and supply chain cooperation. This injects new meaning into the development of the comprehensive strategic partnership between China and the EU under new circumstances.

In the field of economics and trade, the China-EU "key partnership" has a solid foundation. Taking the period from 2020 to 2022 as an example, the total bilateral goods trade volume increased from $649.5 billion to $847.3 billion; the average trade volume exceeded $1.6 million per minute. Despite the global economic impact of the COVID-19 pandemic, China-EU trade continued to grow against the headwinds. According to data released by China's Ministry of Commerce, as of the end of 2022, the EU's direct investment in China was approximately $12.1 billion, a year-on-year increase of 70 percent. In the same year, China's direct investment in the EU was about $11.1 billion, a year-on-year increase of 21 percent.

In April 2023, French President Emmanuel Macron led a delegation including some 60 business leaders to visit China. In Germany, according to a survey by The Handelsblatt, over 56 percent of surveyed European companies are planning to expand their business in China, with the majority of which optimistic about the Chinese market.

Certainly, the trade imbalance with China is also one of the main topics being discussed in European media. This is the result of multiple factors, including global trade conditions, the macroeconomic environment in China and Europe, differences in industrial structure, and the mutual investment situation. In recent years, China has strongly promoted events such as the China International Import Expo and the China International Supply Chain Expo, facilitating European exports to China and effectively reducing the trade imbalance from the European perspective.

In the field of technological cooperation, China and the EU have developed a highly integrated symbiotic relationship. The EU has long been China's largest source of technology. However, factors such as China's rapid advancement in technology, increased global competition in areas like green and digital technologies, and ongoing tensions in China-U.S. relations have led to the EU becoming anxious about competitiveness and risks. In recent years, the EU has adopted measures reminiscent of the "small courtyard, high walls" approach taken by the United States in the high-tech sector. In October, the EU published a critical technology list covering 10 areas of technologies, including four highly sensitive ones. The EU proposed strengthening export controls on civil-military dual-use items in these areas, tightening foreign investment security reviews, and restricting EU companies from foreign investment in high-tech sectors.

This move will inevitably have an impact on China-EU scientific and technological cooperation, and will also cause huge losses to EU high-tech enterprises. For example, the new export control regulations of advanced semiconductors issued by the Dutch government in June this year have put huge financial pressure on ASML, a lithographic machine manufacturer with China as its main source of revenue, and will further affect the company's ability to continue research and development innovation and maintain a competitive edge in the global technology.

Similarly, the EU's anti-subsidy investigation into Chinese electric cars is a "boomerang." PricewaterhouseCoopers estimates that as many as 800,000 Chinese-made cars could be sold in Europe by 2025, most of which are pure electric. Of the 800,000 electric vehicles sold in Europe, about 333,000 are from Western automakers, and such investigations into China are bound to weigh heavily on Western companies' earnings. Philipp Lausberg, a policy analyst at the European Policy Center, said a confrontation would be "catastrophic," with both sides losing.

In terms of industrial chain and supply chain, there are many disputes within the EU. In March this year, President of European Commission Ursula von der Leyen first put forward the concept of "de-risking" on China-EU relations. Since then, the EU has issued an "economic security strategy," which clearly proposes to enhance local production capacity and decentralized supply chain, and gradually reduce its dependence on China in strategic areas.

On the other hand, the IFO economic Research Institute based in Munich, Germany pointed out in a report released in August 2022 that if it "decoupled" from China, Germany's economic loss is likely to be six times that of Britain's "Brexit" loss. According to a 2023 survey by the German Chamber of Commerce in China, nearly one-third of its members believe that if they "decouple" from China, finding new sourcing and sales markets will be a major challenge for their business. China and the EU are highly complementary economically and their interests are deeply intertwined. In reality, the EU's "decoupling" from China would face a dilemma, which is fraught with difficulties.

"Europe cannot become more protectionist," Iuliu Winkler, a member of the European Parliament, said bluntly in an interview with the Financial Times. The Dutch Minister for Economic Affairs and Climate Policy Micky Adriaansens insisted that the Netherlands and Europe "should have their own strategy." On the one hand, the pressure of the United States to restrict exports to China, on the other hand, the industrial upgrading of Europe based on strengthening industrial chain and supply chain cooperation, as well as the resilience and stability of the global industrial chain and supply chain, where Europe goes, determines its new development direction and opportunities in the future.

As Chinese Foreign Ministry Spokesperson Wang Wenbin said, China and the EU are partners, not rivals, and China-EU cooperation should be a positive cycle that enables mutual success, not a knockout match which results in only one winner. The EU's ability to leverage China for its own growth depends on the EU being a key partner, a priority partner and a trusted partner for China.

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