Watching China in Europe - October 2020

Welcome to Watching China in Europe, a new 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, Noah Barkin—a veteran journalist based in Berlin and a senior visiting fellow at GMF—will provide his personal observations and analysis on the most pressing China-related developments and activities throughout Europe. Click here to subscribe. 

Davos 2.0 

Nearly four years after wowing Europeans in Davos with a perfectly pitched speech on the virtues of multilateralism, openness, and free trade, Xi Jinping is at it again. His pledge, during a video address to the United Nations General Assembly last month, to make China carbon neutral by 2060 was another lesson in finely tuned—and timed—geopolitical messaging. Not only did Xi shine an unflattering light on Donald Trump and his climate change denial, but he also sent a signal to the Joe Biden camp that China stands ready to work with a new U.S. administration on one of the issues it cares about most. Still, the main audience for Xi’s climate message—as it was in Davos on the eve of Trump’s inauguration—was Europe. His pledge came just a week after German Chancellor Angela Merkel and EU leaders had warned the Chinese president at a virtual summit that time was running out for Beijing to address European concerns on a range of issues, including climate. Berlin was tipped off beforehand that Xi was preparing a big announcement. The 2060 target date for carbon neutrality was one of three climate demands that Merkel and the EU had made of China. The move was an acknowledgement by Xi that China had to give Europe something to keep relations from deteriorating further. But we are no longer in 2017. Europe’s position on China has hardened considerably since it swooned over Xi’s win-win speech in Davos. Promise fatigue has set in after years of unfulfilled Chinese reform pledges. In Europe, his commitment to stamp out carbon emissions 40 years from now was greeted with a healthy dose of skepticism, even among many environmentalists. “For the EU, the problems with China don’t go away because Xi has made a few more promises,” Reinhard Bütikofer, a former leader of the German Greens who now sits in the European Parliament, told me.

But don’t be surprised if Xi has more tricks up his sleeve as we get closer to the U.S. election and polls continue to point to a Biden victory. With Biden sitting in the White House, the chances of a transatlantic front against China increase significantly. China knows this and is pushing back. That is why Xi deployed China’s top two diplomats on a (botched) charm offensive to Europe last month. That is why he has nudged Premier Li Keqiang aside and engaged with EU leaders directly on two video conferences in recent months. And that is why his economy czar Liu He is now fully engaged with the EU in talks on a comprehensive investment treaty. Until recently, the assumption was that China would refuse to budge in those talks. But after Xi’s climate pledge and some tactical Chinese concessions on state-owned enterprises (SOEs), subsidies, and forced technology transfers in the latest round of negotiations, officials in Brussels are talking about a new “window of opportunity” and describing recent steps by the Chinese side as “very promising.” A German diplomat was more circumspect: “They have understood the message. But will they move? I’m not sure,” he said. There is a consensus in European capitals that it is now or never for a China deal. Xi has signaled that he is keen to clinch one with Merkel, who is entering her last year as chancellor and will relinquish the rotating EU presidency at the end of this year. I was told that Beijing was not pleased with her decision to push the in-person EU-China summit with Xi, initially planned for September in the German city of Leipzig, into 2021 and move it to Brussels.

Besides the U.S. election on November 3, there are a number of other key dates to watch as 2020 ticks down. At the end of October, China’s Communist Party leadership will meet to discuss the direction of policy for the coming years. Europe and the rest of the world will be watching to see if the CCP sends any signals about Xi’s climate promise. Until China lays out a roadmap for achieving this, his pledge is nothing more than rhetoric. On November 16, less than two weeks after the U.S. vote, Merkel will host a meeting of EU leaders in Berlin devoted entirely to China. German officials are describing this as a significant step. The plan is to have a “strategic discussion” that could lead to concrete changes in how Europe approaches its China policy. “China has become such a central issue for us that we need to devote more time to it. There is a recognition that the leaders need to deepen the discussion,” one told me. Then in early December, Merkel’s party will pick her likely successor (more on that below). For the future of EU-China relations and of transatlantic cooperation on China, the final months of the year are shaping up as decisive.

The Slow Death of 17+1

A few years ago, discussions about Europe’s relationship with China were dominated by concerns about Beijing’s unholy alliance with eastern and southern European countries under the 17+1 format. That is no longer the case. Following years of drift, swelling trade deficits with China, and unfulfilled investment promises, the grouping is no longer seen as the divisive threat it once was. There was no 17+1 meeting this year because of the coronavirus pandemic, and no date has been set for a new gathering. Skepticism towards China has swelled in members like Poland, the Czech Republic, Lithuania, and Estonia. And now there are whispers that some of these countries are seeking a way out of a format that is not compatible with Europe’s push for a common, tougher China policy. “The dilemma for a lot of countries now is how to get out of 17+1 without incurring too much damage,” a senior European diplomat told me. In late August, Estonia’s foreign minister hinted at a possible withdrawal, citing human rights violations in China and the need for a whole-of-EU approach to Beijing. There are exceptions of course. Hungary, Serbia, and Greece are true believers. They were the only three members to participate in a virtual Belt and Road conference held in June. But other eastern European countries have grown more bold in challenging China, signing anti-Huawei agreements with Washington and criticizing China’s national security law in Hong Kong. When the president of the Czech Senate visited Taiwan last month, China’s foreign minister Wang Yi warned the country would pay a “heavy price.” But besides a canceled piano order, no concrete measures have followed. Czech carmaker Skoda is the most obvious target for China, but it is owned by Volkswagen, the German company whose commitment to China knows no bounds. "There is not so much that they can throw at us,” Martin Hala of Charles University told me. “The big concern is hostage diplomacy—that Beijing could possibly detain Czech citizens to send a message, like they’ve done with other countries.” The threat of retaliation is likely to dissuade countries from pulling out of 17+1 unilaterally for now. Any withdrawal, officials in several member states told me, would have to be a coordinated move by several states. It may be easier, they say, to let 17+1 die a slow death.

Röttgen Rises

Could Angela Merkel, known for her accommodating stance towards China, be replaced next year by the most outspoken China hawk in German politics? The idea is not as far-fetched as it seemed a few months ago when Norbert Röttgen was languishing in last place in the three-way contest to lead the Christian Democratic Union (CDU) into the next federal election. Recent polls have put Röttgen, a former environment minister who has led a parliamentary revolt against Merkel’s Huawei-friendly 5G policy, ahead of Armin Laschet, the premier of North Rhine-Westphalia and pre-pandemic frontrunner. Röttgen still trails Friedrich Merz, a favorite of social conservatives, by a good margin. But that gap is shrinking and if Röttgen were to make it into a two-way run-off with Merz in early December, CDU centrists could swing behind him. What has changed? With the U.S. election looming and concerns growing about a more assertive China and Russia, media attention has shifted, after months of intense focus on the coronavirus, to geopolitics—the issue on which Röttgen has staked his candidacy. At the same time, the appeal of both Merz and Laschet has dwindled after a series of gaffes and unflattering profiles. Röttgen is still a long shot to become chancellor, mainly because he lacks a strong base of support within the party. But he has positioned himself to play a role in the next government: He is the only CDU candidate who has expressed a willingness to make way for Markus Söder, head of the CDU’s smaller Bavarian sister party. Surveys suggest Söder, who has not committed to run, is more popular than any of the CDU candidates. The prospect of a Söder-Röttgen team, with the latter taking a key cabinet post like the foreign ministry, may in the end be a more attractive solution to the CDU grassroots than a Merz or Laschet solo act. Last week, Röttgen and his China-sceptic allies in parliament scored what looks like a massive victory against Merkel on 5G. A new IT Security law that will be debated in the Bundestag later this year foresees a de facto exclusion of Huawei from Germany’s next-generation mobile network. Should Röttgen get a top spot in the next government—which seems likely to include the human rights-focused Greens—one would expect a major shift in tone on China. I asked Röttgen about what that change would look like. His most interesting response was on the subject of Taiwan: “We are at a point, at which China has become very blunt about its intentions with Taiwan,” he said. “We need to strengthen Taiwan’s position by intensifying relations in every respect below the official recognition of statehood. Should China intervene militarily this would severely and lastingly harm relations with the entire EU.”

EU Breaks Export Control Impasse

It hasn’t garnered much attention, but the EU is on the verge of breaking a years-long impasse on the reform of its dual-use export control regulation. This is not a big bang reform that would give the European Commission vast new powers on a par with the U.S. Commerce Department. But the proposal from the German presidency of the EU, which won support at a meeting with the European Commission and European Parliament on September 22, would allow the EU to take autonomous decisions on export controls, independent of multilateral regimes like the Wassenaar Arrangement. It would pave the way for human-rights specific controls for cyber surveillance technologies, ensure greater transparency on licensing decisions, and open the door to controls of emerging technologies. A report by Amnesty International, released on the eve of that meeting, pointed to worrying gaps in the EU’s existing legislation, which have allowed European companies to export digital surveillance technologies, including facial recognition, to China. The new legislation aims to close these gaps. It also puts the EU in a better position to engage with the United States and allies like Japan on emerging technology exports to China—a focus of the Trump administration since 2018. The German proposal provides a legal basis for technology controls implemented in one EU member state to be spread across the bloc. This back-door solution was a nod to member state concerns about ceding too much power over export controls to Brussels. Ultimately, implementation will continue to rely heavily on individual EU nations. But in the future, countries that fail to curb sensitive dual-use exports could be named and shamed. The breakthrough comes two months after the EU agreed to curb exports of sensitive equipment to Hong Kong following the introduction of China’s national security law. I was told that there is still no formally agreed list of items, nor a common approach to implementing these controls. Here too, it will be up to individual states to interpret the order as they see fit. So while the EU is taking steps in the right direction, this remains an issue that will need to be closely monitored.