Watching China in Europe - June 2021

Welcome to Watching China in Europe, a monthly update from GMF’s Asia Program. Now more than ever, the transatlantic partners need clarity and cohesion when it comes to China policy. In this monthly newsletter and the WCIE podcast series, Noah Barkin—a veteran journalist, managing editor at Rhodium Group and a senior visiting fellow at GMF—provides his personal observations and analysis on the most pressing China-related developments and activities throughout Europe. We hope you find it useful, but if you would like to opt out at any time please do so via the unsubscribe button below.

If you would like to subscribe to this newsletter please sign up here.

Dialogue Fatigue

At the heart of Europe’s approach to China is the conviction that continued dialogue with Beijing is essential—no matter how strained the relationship becomes. A recent example of this was the German government’s decision to go ahead with top-level government consultations with China in April, only weeks after Beijing unleashed a wave of sanctions against European lawmakers, academics, and think tankers. Lately, however, dialogue fatigue has begun to set in—including in Berlin. European officials complain that it has become more and more difficult to have a frank exchange with their Chinese counterparts. The room to discuss sensitive issues, even behind closed doors, is vanishing. When European officials do raise them, they are often dismissed by their Chinese interlocuters as pawns of the United States. Make no mistake—this hasn’t broken the commitment to dialogue with China. But after the unravelling of the Comprehensive Agreement on Investment (CAI), it is raising more doubts about whether dialogue can be counted on to deliver results. “Dialogue is now conditional on us not criticizing China,” a senior German official told me. “We can’t even have a rational conversation about the sanctions.”

Wolfgang Ischinger, who as chairman of the Munich Security Conference (MSC) has come to personify this dialogue-first approach, made an earnest attempt last week to demonstrate it still works. He invited China’s Foreign Minister Wang Yi and two European figures who are not known for being especially critical of China—Sigmar Gabriel and Federica Mogherini—to discuss all the thorny issues in the relationship in a public setting. Instead of a conversation, however, Wang delivered a half-hour lecture to his European hosts, explaining to them all that China was doing right and they were doing wrong. At the end of the monologue, an exasperated Mogherini said she feared the space for mutual understanding and cooperation between the EU and China was “slipping away.” Apart from the climate change issue—an area that may soon be more about competition than cooperation—it is starting to look that way.

Toxic Mix

Two days after the MSC event, an anodyne statement from an EU-Japan summit calling for a reduction of tensions in the South China Sea and Taiwan Strait elicited a furious reaction from the Chinese embassy in Brussels. As Gideon Rachman of the FT wrote this week: “The broader difficulty is that China’s reaction to any criticism in the outside world seems to be a toxic mix of threats, shrill rhetoric and secrecy.” Against this backdrop, European officials are asking themselves where the relationship goes from here. There are no easy answers. Brussels has quietly shelved plans to develop an “Agenda 2025” roadmap for cooperation with Beijing. Xi Jinping hasn’t taken Merkel up on her proposal for a joint visit with Macron before the end of her term—and some German officials now believe she may have to settle for a virtual farewell. Nor are there any concrete plans for an EU-China summit this year—European Council President Charles Michel extended an invitation to Xi Jinping last year for an in-person 27+1 gathering to replace the cancelled Leipzig meeting but there has been no response from Beijing. “There’s no date and I honestly don’t expect it to happen,” the senior German official told me. “What would we talk about?”

That hasn’t stopped Beijing from reaching out to other European capitals with a flurry of calls in recent weeks. Wang spoke with his British counterpart and hosted the Irish, Polish, Hungarian, and Serbian foreign ministers—all in the past week. Xi spoke with Spain’s Pedro Sanchez and Chinese Premier Li Keqiang with Italy’s Mario Draghi, while top diplomat Yang Jiechi visited Croatia and Slovenia. This looks like an effort by Beijing to shore up its bilateral relationships at a time when ties with the broader EU have become strained by sanctions and 17+1 (now 16+1) is in retreat following Lithuania’s withdrawal. It would be wrong to see these events as a prelude to a deeper rupture between Europe and China, but the strains are real. Merkel, the strongest European advocate of engagement with Beijing, will soon be gone. And officials in Paris say the political space for President Emmanuel Macron to engage with China in the run-up to the French election (and EU presidency) next year is shrinking fast. “There was a sigh of relief when the CAI was frozen,” one official told me. “Now it won’t land on our plate right before the vote.”

Cornwall Test

At the same time, the transatlantic—and broader multilateral discussion—about responding to China is shifting into high gear. Washington and Brussels held their first high-level strategic dialogue on China last week. And G7 sherpas are working behind the scenes to prepare the June 11-13 summit in Cornwall, which will be followed by U.S.-EU and NATO summits in Brussels—all attended by Joe Biden on his first foreign trip. On Tuesday of this week, Merkel’s top economic and foreign policy advisers, Lars-Hendrik Röller and Jan Hecker, traveled to Washington for their first face-to-face meetings with Biden administration officials. Washington is pushing for expansive language in the G7 communique that would create what some officials describe as a “unifying narrative” for democracies in the face of a growing challenge from authoritarian states like China. European countries have warmed to the idea of an “Open Societies Charter” but are pushing back against language that could be seen as explicitly aimed at China. “Nothing will improve in China if we turn the G7 into an anti-China coalition,” one official close to Merkel told me.

Beyond the rhetoric, the key China question for the summit is whether leaders can coalesce around joint action in two areas: responding to China’s Belt and Road Initiative (BRI) and addressing resilience in supply chains, particularly around sensitive technologies. On the first of these areas, the Biden administration wants leaders of the G7 and the four guest countries—Australia, India, South Africa, and South Korea—to endorse a new partnership dubbed “Build Back Better World” (or “B3W” for short—because Americans really love their acronyms), which would finance quality infrastructure projects in low- and middle-income countries. The U.S. proposal makes no mention of China or the BRI. This will make it more palatable to the Europeans, whose own connectivity strategy—a recent partnership with India notwithstanding—has stalled under Commission President Ursula von der Leyen. Frustrated member states are now pressuring her to knock heads in Brussels and inject new life into the strategy. Last week, Biden’s Asia czar Kurt Campbell announced plans to convene an in-person meeting of the Quad (Australia, India, Japan, and the U.S.) this autumn to discuss infrastructure, leaving the door open for others states to join. Europe risks being left behind if it doesn’t get its act together soon.

The Missing Tool

European and other G7 members also have an ask of the Biden administration. Missing from his China toolbox is anything resembling a trade strategy. If Washington wants to convince allies to pare back their economic relationships with China, it will need to offer them an alternative—an answer to the RCEP agreement that 15 Asian countries, including China, sealed last year. Trump pulled out of TPP and Biden, aware that big multilateral trade deals are political poison in today’s Washington, has no plans to re-enter. Nor is a transatlantic successor to TTIP in the offing—to the chagrin of both Merkel and the leading candidate for her party in the looming German election. “We’d like a common transatlantic economic zone,” the senior German official told me. “If our firms are to diversify away from China, then they need the United States. What is Biden offering?” The Asian dimension of this issue is pre-occupying Kurt Campbell as well. Coming up with a “positive economic vision” that convinces U.S. allies, he said last week, was the challenge he worried about the most. “We can do everything right in Asia but without an economic strategy it’s going to be hard to be successful,” he said.