By: Prachi Kushwah, Research Analyst, GSDN

The European Union (EU) is today in a very critical crossroad with the People’s Republic of China. In the past forty years, China has been seen to evolve as isolated developing economy to a global superpower that has tremendous political, economic and technological influence across the world. The EU that has been keen on portraying itself as a champion of democratic ideals, multilateralism, and free trade has on the other hand increased its involvement to China and has become increasingly cautious about the possible dangers of depending heavily on Beijing. This has become a complicated political game that raises the questions of whether the EU is becoming a victim of a so-called Chinese grip. This paper tries to delve into this question by looking at how the EU-China relations have changed with time, the economic and trade relationship, the Chinese contribution to technology and infrastructure in Europe, the political and diplomatic impact, the security risk, and the last thought on how the EU can gain the independence further. Through these dimensions we will be able to see that the answer is not binary but rather it emphasizes the fine balancing act that Europe needs to ensure to strike between opportunity and vulnerability.

Historical Background of EU-China Relations

On May 6, 1975, the formal diplomatic relations between the European Economic Community, the forerunner of the modern-day European Union and the Peoples Republic of China were officially established. Back in 1990, China was still just coming out of the chaos of the Cultural Revolution and the EU was still in the midst of its institution-building and common market. Initial interaction was meagre with the early interaction largely being trade and cultural interactions. The changes that were implemented by Deng Xiaoping in December 1978 however exposed the Chinese economy to the world resulting in increased interconnection with Europe. The EU had developed into a major partner to China by 1990s when they realized the increasing influence that Beijing had on the world markets. In 2003, the EU and China also took their relationship to a new level of Comprehensive Strategic Partnership, which was meant to extend beyond trade to other fields of cooperation like science, education and the environment.

But together with cooperation tensions started to appear. The European parliament also questioned the human right practices, freedom of expression and the lack of democracy in China. These problems usually conflicted with the normative identity of EU. Economic interdependence increased at a high rate in spite of these political differences. EU-China trade in goods had up to 2020 reached US$ 709 billion with China emerging as the second largest trading partner of the EU after the United States. This two-sidedness: between values in conflict and between economies in interdependency has represented the movement of EU-China relations.

Economic Interdependence Trade

Trade and investment are the foundation of EU-China relations. The fact that the volume of trade between the two parties is so enormous shows how they are mutually dependent. This saw trade between the EU and China in goods and services to reach more than US$ 2 billion a day by 2024. EU imports huge volumes of consumer goods, electronics, textiles, and intermediate products with China and exports machinery, vehicles, pharmaceuticals, and luxury goods. Another significant market that has been gained by Europeans is their wine, dairy, and pork in China.

However, China has always had the balance of trade. The asymmetry of the relationship is witnessed in 2023 where the EU trade deficit with China is in excess of US$ 400 billion. European businesses tend to complain of unreasonable competition by the Chinese companies which enjoy state subsidies, inexpensive labour and less rigorous environmental regulations. The steel, solar and textile markets in Europe have all had a hard time competing with the Chinese imports.

The 2020-2021 COVID-19 pandemic demonstrated the dangers of overdependence on China-based supply chains even further. The inadequacy of medical machinery, drug raw materials and electronic parts made EU policymakers face the weaknesses of globalization. Although the European leaders accept that doing business with China leads to economic development, it is increasingly being realized that it is time to diversify and limit strategic reliance.

Digital Influence and Technology

Technology is one of the most disputable fields of EU-China relations. China has grown swiftly to become a leader in artificial intelligence (AI), semiconductors and telecommunications. The arrival of the Chinese companies like Huawei and ZTE into the European market created hope of quicker, inexpensive technological infrastructural support, in particular in executing the fifth-generation (5G) networks. This was however soon followed by security authorities in the various countries such as Germany, France and Netherlands to raise alarm about the possibility of espionage, threat to data security and overreliance on Chinese companies in building of essential infrastructure.

The discussion escalated in December 2020 when the European Commission released a toolbox of actions towards safe 5G implementation, stating that it is necessary to not be dependent on a single supplier. Other member states of the EU, such as Sweden and Denmark, have subsequently limited or prohibited Huawei equipment on their networks. In the meantime, European companies like Nokia and Ericsson are trying to offer alternatives, but they are hard pressed by the competition that is well subsidised by the Chinese competitors.

The technological industry is also an indication of a wider geopolitical conflict between China and the United States. EU has always been lying in the middle trying to safeguard their economic interests and at the same time maintain their strategic autonomy.

Belt and Road Initiative (BRI) in Europe

The Belt and Road Initiative (BRI) a giant infrastructure investment endeavour by the Asian continent, Africa and Europe was launched in September 2013. One of the areas where BRI projects have been very active is Europe. In March 2019, Italy was the first G7 to sign a memorandum of understanding with China on the BRI. China has invested in railways, ports and energy in other European states e.g. Greece, Hungary and Serbia.

A good example is the Port of Piraeus, Greece. China Ocean Shipping Company (COSCO) later on in August 2016 took the majority stake in the port turning it into a key Chinese export hub to Europe. Although this investment improved the infrastructure of these regions and generated employment opportunities, critics believe that it made China strategic in terms of European trade routes.

The advocates of BRI initiatives stress that the Chinese capital will bridge infrastructural gaps caused by insufficient EU funds. Critics, though, are concerned with so-called debt traps and political considerations. The case of Hungary is one example when it is alleged that Brussels lacked transparency in pursuing Chinese-funded projects in the country. The BRI is therefore an opportunity of development as well as the potential geopolitical leverage weapon.

Diplomatic and Political Influence

In addition to economics China has also increased its political presence in Europe. In April 2012, a so-called 17+1 framework was introduced that united China with 17 Central and Eastern European countries, most of which are member states of the EU. This format also caused concern in Brussels, because this format appeared to circumvent EU institutions and separate member states. Other nations, including Lithuania, later pulled out claiming transparency and excessive reliance on Beijing.

Another form of influence by China is by exerting diplomatic pressure. As an illustration, the EU attempted to make some bold words criticizing human rights violations in Xinjiang or political oppression in Hong Kong, but some of the EU members watered down their words because of economic relationships with China. This has weakened the capacity of EU to provide a common voice in international issues touching on human rights.

Meanwhile, Chinese embassies in Europe are now more aggressive, resorting to social media and social diplomacy to push Beijing messages. This approach, often so-called wolf warrior diplomacy has occasionally caused estrangement among European citizens and decision makers.

Risks and Security Concerns

The increasing Chinese influence in Europe is not only a threat to the economy. The European intelligence services have also sounded alerts several times with regard to cyber-espionages, which have been associated with Chinese players. Claims of intellectual property theft and intimidation of transfer of technology also contribute to mistrust.

The context has also been changed by geopolitical developments. When Russia invaded Ukraine on February 24, 2022, it revealed the risks of using authoritarian regimes as sources of important resources. The uncertain attitude of China to the war, its cooperation with Russia, and a lack of readiness to denounce the aggression have increased the anxiety of the European secret positioning.

Another issue is energy dependency. With the introduction of renewable energy in Europe, the Chinese leadership in the production of solar panels and rare earths is a threat of future helplessness. The dilemma of the EU is that it should not repeat what it did with Russia in the energy sector, and this time with China in technology and green industries.

European Reactions and Strategic Independence

With all these challenges, the EU has started to re-adjust its position with regard to China. The European Commission in March 2019 termed China as a partner, competitor, and systemic rival. This triple framing is what is signifying that the EU is conscious of the intricacy of the relationship. Ever since, Brussels has endeavoured to reinforce trade defence tools, and review foreign investments, as well as protect critical technologies.

There is also the Global Gateway initiative by the EU which was launched in December 2021 with a view of mobilizing US$ 340 billion in infrastructure projects around the world as an opposition to the Belt and Road Initiative by China. The partnerships with the United States, Japan, and India are also being extended to encourage diversification of the supply chains.

The concept of strategic autonomy has taken over the leadership of the EU policy. Although this does not imply breaking ties with China, it ensures that there should be a balance. European leaders are more insistent on the fact that cooperation should not be at the expense of security, democracy, and sovereignty.

Conclusion

Is the European Union in Chinese grip or not is the question that does not lend itself to either yes or no answer. The EU is highly tied to China both on the economic front and this can never be cut off without colossal expenses. However, the EU does not ignore the dangers of relying on China too much in terms of trade, technology, and infrastructure. The argument brings out the peculiarity of opportunity versus resilience in Europe.

The EU still needs to invest in its own technological and industrial resources, establish better contacts with other similar democracies and solidify its internal cohesion in the next few years. Such steps are the only ones that can help the EU not to be too reliant on Beijing and enjoy the benefits of engagement, at the same time. Thus, the so-called Chinese grip is not unavoidable- it is a matter of European strategic decisions in terms of protecting its sovereignty and principles.