China Watch: Courting Europe To Weaken EU-US Unity

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SUMMARY:  China is engaging European leaders to erode the transatlantic consensus on constraining China’s global ambitions.  This month, French President Emmanuel Macron visited China and suggested that Europe should not always follow Washington’s lead on China policy.  Other European leaders have also visited China recently to discuss economic cooperation and China’s peace proposal for Ukraine.  Continued success in splitting the EU-US alliance on China policy depends on Beijing’s future actions on Ukraine and greater market access for European businesses.

As we wrote in the last issue of China Watch, PRC President Xi Jinping views China’s peace proposal for Ukraine—published in late February 2023—as an opportunity to engage European leaders.  Europe has traditionally been less concerned about China’s rise compared with the US, but European attitudes hardened as China voiced support for Russia after it invaded Ukraine.  Over the last few weeks, Spanish Prime Minster Pedro Sanchez, French President Emmanuel Macron, European Commission President Ursula von der Leyen, and German Foreign Minister Annalena Baerbock have visited China to speak to Xi or senior Chinese officials about China’s Ukraine peace plan and EU-China economic cooperation.

  • China rolled out the red carpet for Macron, who took a conciliatory approach toward China and signaled a willingness to stake out policy positions that are not in line with Washington’s priorities.  In an interview in April, he said Europe should not be Washington’s “vassal” on China policy and should avoid being drawn into a potential conflict between the US and China over Taiwan.
  • Although some Western politicians have criticized Macron for sowing disunity, his comments likely resonated with other European political and business leaders who desire closer cooperation with China.  On 16 April, European Central Bank President Christine Lagarde said that pressuring countries to choose sides between the US and China will lead to less economic prosperity and more poverty across the globe.

Beijing also invited known European China “hawks” such as von der Leyen and Baerbock to visit China to boost the credibility of its diplomacy.  Von der Leyen travelled with Macron, and Baerbock visited on 13-15 April.  Both see China as a fierce competitor and have called for a “de-risking” of EU-China relations by putting restrictions in certain sensitive economic areas.

  • Von der Leyen’s presence in China provided “cover” for Macron to make more conciliatory statements and made it more difficult for other EU countries to distance themselves from Macron.
  • Although Baerbock’s comments in China were more critical than those made by Macron, she also said that France’s China policy reflects the EU’s policy.  Chinese media highlighted a 15 April report in Der Spiegel that the pro-business wing of German Chancellor Olaf Scholz’s Social Democratic Party had written a position paper criticizing Baerbock as “anti-China” and calling for a more pragmatic China policy.   
  • Baerbock criticized China’s support of Russia and military threats against Taiwan, but she also stressed German business interests in China.  Major German automotive and chemical companies are increasing their investments in China, despite US warnings regarding an overreliance on China.
  • Germany is by far the most important European investor in China.  Between 2018 and 2021, chemical giant BASF and the three big German automakers—Volkswagen, BMW, and Mercedes-Benz—accounted for more than one-third of all European direct investment into China, according to a September 2022 report by a US-based business consultancy.

Beijing views France and Germany as important sources of investment and advanced technology, given persistent tensions with the US.  The Biden Administration is considering new rules to restrict outbound US investments in China and other “countries of concern” in semiconductors, artificial intelligence, advanced computing, and related fields.

  • Beijing is hoping to prevent similar moves in Europe by using access to the China market as leverage.  In October 2022, German corporations successfully lobbied the German government to shelve a proposal to establish a review mechanism for outbound investment in China.  The EU has begun to consider regulations on outbound investment, but such discussions are at a nascent stage.   
  • Transatlantic disunity on technology transfer may undermine US efforts to restrict China’s access to advanced technology.  US companies would likely pressure Washington to refrain from imposing outbound investment restrictions if European companies are not bound by similar rules, arguing that it would disadvantage US businesses. 

China’s future success in persuading Europe to break ranks with the US depends on the progression of Beijing’s Ukraine peace plan and continued market access for European businesses.  During his meeting with Macron and von der Leyen, Xi stated his willingness to speak with Ukrainian President Volodymyr Zelensky “when the conditions and time are right.”   

  • Macron spoke with Zelensky about the China-sponsored peace proposal on 15 April.  Furthermore, Macron has instructed his foreign policy advisor Emmanuel Bonne to work with China’s top foreign policy official Wang Yi to establish a negotiation framework, with the goal of starting peace talks between Russia and Ukraine by this summer, according to a Bloomberg report on 18 April. 
  • If Xi fails to engage Zelensky soon, European attitudes toward the peace proposal would quickly turn negative.  The current visit by PRC Defense Minister Li Shangfu to Russia further cast doubt on whether China is too close to Russia to be a credible mediator, although Beijing has reiterated that it will not provide lethal support to Russia.
  • The EU-China Comprehensive Agreement on Investment, which aims to improve market access for EU- invested companies, has not been ratified in Europe due to tensions over human rights and criticism that the agreement did not go far enough in evening the economic playing field for Europe.