As a result of the online EU-China Summit, which ended on September 14, the EU finally got China to verbally promise to strive for completing bilateral investment talks by the end of this year. The commitment involves state-owned enterprises, technology transfer and transparency of subsidies, three issues that the EU is concerned about. Prior to the summit, China gave the EU a sweetener: it agreed on the use of labels on products to specify their origins. Judging from the results of the summit, China has made some breakthrough in its attempt to win over the EU, but it remains to be seen what actual concessions it will make. While the EU is easing its pressure on China’s human rights issues, it is not easy to make the EU switch to a pro-China position within a short period of time. The EU’s suspicion of China is deepening because of China’s attempt to divide Europe through its One Belt One Road initiative, its face mask propaganda, and human rights issues concerning Hong Kong and Xinjiang.

Back in 2014, the EU had little idea about the Belt and Road initiative. But as European countries wanted to get on the fast train of economic growth, the EU-China Connectivity Platform, aligned with the EU’s Juncker Plan, was established. Yet when China sought to win over Eastern Europe and Central Europe through the China-CEEC Cooperation Forum covering 16 countries, the EU realized China might be trying to divide Europe. Seeing that important ports in Europe and key high-technology enterprises in German were bought by Chinese companies, the EU, with the backing of Germany, France and Italy, created a framework for the screening of foreign direct investments in February 2017. The framework, which came into effect on April 1, 2019, is designed to rigorously scrutinize Chinese-funded mergers and acquisitions in the high-tech industry.

It has dawned on the EU that China’s state-owned enterprises do not comply with rules on government procurement, and that EU companies will not be able to benefit from Belt and Road. Worried about China leveraging its economic clout to expand its influence, the EU has come up with its own version of “EU-Asia connectivity”, using the “European way” to compete with China in Asia.

In October 2019, the EU signed with Japan an infrastructure agreement, with a view to improving connectivity with Asia. In March 2019, when Italy signed an agreement with China on Belt and Road, the EU discussed for the first time 10 countermeasures against China and unveiled a strategy towards China. It is stated in the strategy that China is the EU’s economic rival as well as an overall systematic rival. By then, EU vigilance became clear.

Recently, a report published by the European Council on Foreign Relations has pointed out that the outbreak of the coronavirus pandemic and human rights issues in Hong Kong and Xinjiang have been serving to align European countries' position on China. That has found expression in the speeches of EU officials. In May, the EU High Representative for Foreign Affairs and Security Policy said the EU had been rather naive when dealing with China in the past and that it should adopt a pragmatic approach. Towards the end of June after a EU-China videoconference, the EU pointed out the different values of China and the EU, saying it would strive to safeguard its interests and values. The EU also indicated its change of position during Chinese Foreign Minister Wang Yi’s recent trip to Europe. Wang failed to achieve the expected results from the trip and his mission was distracted by human rights issues. Germany has even unveiled its Indo-Pacific strategy as it tries to be less reliant on China economically.

More importantly, the latest report of the European Court of Auditors released the other day criticized 15 EU member states for signing with China Belt and Road agreements, pointing out that Chinese investments carry political and economic risks. The report raised concerns that these member states could become dependent on China due to excessive debts. The European Court of Auditors also denounced the EU for allocating to Croatia €357 million worth of so-called cohesion funds in 2017, which would cover 85 percent of the cost of constructing the Peljesac Bridge. Nevertheless, Croatia later handed over the contract to a consortium led by Chinese state-owned enterprises, so that the bridge has become a Belt and Road project that China can brag about.

Concerned that European companies would be taken over by Chinese firms during the pandemic, the EU released a white paper on foreign subsidies in June, proposing a legislation allowing EU countries to intervene in cases of foreign direct investment in strategic assets. Meanwhile, there are no shortage of other measures aimed at reducing the EU’s dependence on China, including new policies on 5G technology, the addition of lithium to the EU’s critical list of raw materials, and efforts to build up supply partnerships with Canada and African countries so as to diversify sources of materials. It should be noted that the EU gets 98 percent of its rare earth minerals from China, 98 percent of borate from Turkey, 78 percent of lithium from Chile, and 71 percent of platinum from South Africa.

The EU is going to go from being vigilant against China to being independent from it. It is gradually aware of the importance to put collective pressure on China. However, any tension between the EU and China will not escalate to an extent that both sides are in confrontation, given the sheer size and importance of the Chinese market. The EU still needs to cooperate with China. China, on the other hand, has to prevent the EU from siding with the U.S., and so it has to win over the EU. For EU-China relations to see any breakthrough, China must play by the rules and make sure the EU and itself are on a level playing field. In other words, it has to reach an investment agreement before the end of the year if it wants to win the EU over to its side.

(Chang Meng-jen, associate professor and director of the Department of Italian Language and Culture and Convenor of the Diplomacy and International Affairs Program, Fu Jen Catholic University)

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