Watching China in Europe—May 2024
Fear Factor
If I were to sum up in a few simple words how European policy towards China has changed in recent years, I would be tempted to say that it is no longer driven by fear. The EU was not afraid to label China a “systemic rival” in 2019. It was not afraid to stand behind Lithuania when it was the target of economic coercion from Beijing in 2021. And over the past year, the European Commission has shown—with its economic security strategy, the launch of its anti-subsidy investigation into electric vehicle (EV) imports from China, and the expansive use of its level-playing-field toolbox—that it is willing to accept a level of tension with Beijing that in past years would have been unthinkable. In Brussels, officials have come to understand that economic leverage runs both ways. And at a time when China’s economy is struggling, the United States is closing down to Chinese firms, and Beijing’s need for foreign technologies, investments, and markets remains strong, Europe’s leverage is greater than it has been in a long time.
But having leverage and using it are two different things, as we witnessed during German Chancellor Olaf Scholz’s recent trip to China. The leader of the EU’s biggest economy demonstrated, with what he did and did not say, that his approach to China is still shaped by fear—a fear, nurtured by China’s leadership and parroted by captains of German industry, that Beijing will lash out against German businesses if Berlin or Brussels push them too far. This angst appears to have led Scholz, during his three days in China, to play down the threat that subsidized Chinese products pose to European industry, undermining the Commission and the French in the process. And it is what convinced him to dance gingerly around the grim reality that China is supplying dual-use goods to Russia that are fueling Vladimir Putin’s war machine in Ukraine. From what I could see, Scholz made no mention of Taiwan or human rights in his public remarks in China. Nor did he use the term “de-risking” at any time during the trip, choosing instead to repeat his stale strawman mantra: “No decoupling!”
Going Public
It is a worrying sign when your own intelligence agencies and the head of NATO feel the need to publicly (albeit indirectly) voice their concerns about your policies in the aftermath of a trip like this. But that is what happened in the week after Scholz returned. Germany’s domestic intelligence agency held a public event in Berlin at which it warned about the naivety of German companies in embracing closer ties with China. A day later, NATO Secretary General Jens Stoltenberg traveled to Berlin to deliver what felt like a public wake-up call to the German government on China’s support for Russia. “China says it wants good relations with the West,” Stoltenberg said. “At the same time, Beijing continues to fuel the largest armed conflict in Europe since World War II. They cannot have it both ways.” We do not have the full picture of what Scholz said to Xi behind closed doors. But based on his public remarks, the Chinese leader can be forgiven for coming away with the impression that he could indeed have it both ways.
The weeks leading up to the Scholz trip do not fill one with confidence either. The Chancellery, I learned, made an eleventh-hour request that the Commission delay until after his return the announcement of its case against China for discriminatory procurement practices in the medical devices sector. It appears that the arrests of three German citizens for passing on information about military technologies to China, and of a parliamentary assistant to a far-right German member of the European Parliament on suspicion of spying for China, were also slow-rolled in order to avoid embarrassing Chinese leaders while Scholz was in Beijing. That didn’t prevent Beijing, in a bizarre twist, from summoning Germany’s ambassador after the arrests. I understand that separately, one month before the Scholz trip, Berlin denied a request by Taiwan’s Vice President-Elect Hsiao Bi-khim to travel as a private citizen through southern Germany during a visit to Europe. Hsiao, who will not take up her official role until late May, was allowed into Belgium, Czechia, Lithuania, and Poland.
Where’s the Pork?
While in Beijing, I understand, Scholz promised his hosts that any measures to restrict Huawei from the German 5G network would be taken quietly, without a public announcement from the government. How this will work in practice in a country where government transparency is sacrosanct is unclear. But I was told that Berlin, after years of kicking the can, is days away from making a decision on Chinese 5G suppliers. Let’s hope, at least, that the final decision makes its way to the telecommunications operators who have to implement it. Several officials told me that China’s refusal to drop import restrictions on German pork during the Scholz trip was linked in part to the lack of clarity over Germany’s ultimate stance on Huawei. China’s ambassador to Germany repeated a years-old warning, in the weeks before the Scholz trip, that his host country would face consequences if Chinese suppliers were pushed out of the 5G network. The issue, I am told, was at the very top of Chinese leaders’ list of demands during Scholz’s meetings in Beijing.
Interestingly, a separate agreement between the German and Chinese governments to cooperate on connected vehicles nearly failed to come together as the Greens and Free Democrats tussled over language in the days before it was sealed. In the end, I was told, the Greens were able to get wording on reciprocity and respect for EU data standards into the press release (more than two weeks later, the full agreement has not been published). But the Commission still views the pact as problematic. “We are all a bit at a loss. We know that our companies have an issue with taking data out of China. But we are working to resolve this,” one EU official told me. “For Germany to do something that is limited to the car sector, it baffles the mind. This is taking away our leverage.”
China Gulf
All of this points to a dangerous gulf between Berlin, on the one hand, and Brussels and Paris, on the other. This gulf could be on full display next week, when French President Emmanuel Macron and European Commission President Ursula von der Leyen sit down with China’s President Xi Jinping in Paris. During Xi’s last trip to Europe, Macron hosted him alongside Angela Merkel and Jean-Claude Juncker, Scholz and von der Leyen’s predecessors. Five years on, Europe’s “united front” on China no longer includes Germany. I understand that Macron may still try to convince Scholz to join the Xi party in Paris when the two leaders meet for a private dinner, together with their wives, on Thursday. But an official in Scholz’s entourage rebuffed the notion that he could travel to Paris to see Xi so soon after his China trip. If that is the final word, the picture that will emerge is of a divided Europe, with Berlin pursuing a “Germany First” approach. “Germany has to be careful that it is not seen to be acting against European interests on China. We are very close to that line,” a veteran EU diplomat told me. Another person involved in EU China policy accused Scholz of hanging the French out to dry during his trip to China. “The one thing they wanted from the Germans was a strong message on trade, and Scholz couldn’t even deliver that,” this person said.
The messages coming from Berlin have triggered concerns in some parts of the Commission that Germany could try to sabotage the EV case. “It is quite clear where the Chancellery is on this. They have the same position as the German car industry. They want this to go away,” one German official told me. But with his Greens coalition partners supportive of the Commission’s probe and the French firmly behind von der Leyen, Scholz’s options look limited. The Commission can impose provisional duties on EV imports from China before July without the approval of member states. And Berlin would be setting a ruinous precedent if it then tried to convince other member states to join it in blocking final duties later in the year. “In my opinion this procedure is unstoppable,” the German official added. “The Commission is determined. And the French won’t go against the Commission. The Chancellery will have to come to grips with this.”
Mountain Air
This puts Macron, whose warm and fuzzy trip to China one year ago drew fierce criticism, in the odd position of playing tough guy to Scholz’s softy when Xi passes through France next week. The French president’s decision, a week before the visit, to invite the president of the Tibetan government in exile, Penpa Tsering, to the Élysée Palace, sends a signal to the Chinese leadership that it is difficult to imagine Scholz ever daring to send. Trade and China’s position on Ukraine are at the top of the French priority list for the meeting with Xi, according to diplomats, who expect China’s leader to pile pressure on Macron to drop his support for the EV probe. It is unlikely that the mountain air of the Pyrenees, where Macron will take Xi, together with their wives, for a more personal exchange following the talks in Paris, will lead to any sort of breakthrough. By that time, Xi may already be looking forward to the next leg of his trip, in Serbia, where he will land on the 25th anniversary of the US bombing of the Chinese embassy in Belgrade, or to his final stop, in Hungary, where yet another Chinese car company is setting up shop. One thing’s for sure: He won’t hear complaints about Chinese EVs or his cozy ties to Putin from Aleksandar Vučić or Viktor Orbán.