Tue, May 03, 2022 page9

• Alarmed by Russia’s invasion, Europe rethinks its China ties

  Unnerved by Beijing’s refusal to condemn Russia’s invasion, officials from Rome to Prague are re-evaluating the extent of their dependency on China

  • By Alan Crawford, Colum Murphy and Alberto Nardelli / Bloomberg
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  Russia’s war on Ukraine has triggered a profound reassessment in European capitals of their individual and collective relations with China.

  Confronted by the need to rapidly unwind a dependence on Russian energy built up over decades, government officials from Rome to Prague are re-evaluating the extent of their economic and political ties to China.

  Senior lawmakers in Berlin who now concede that such closeness to Russia was a historic liability are starting to see the danger of repeating the mistake with another authoritarian regime, raising alarm bells over Germany’s status as Beijing’s largest European trading partner.

  Nations in central and eastern Europe are casting fresh doubt on the wisdom of the so-called 16+1 forum with China. Italy has just strengthened its veto power against foreign takeovers, a measure directed at China.

  At the EU level, attitudes have soured over Beijing’s refusal to condemn Russia’s invasion and its attempts to undermine the transatlantic unity the war fostered. A virtual EU-China summit on April 1 took place in the context of what a person familiar with the discussions described as an increasingly challenging relationship.

  Against the backdrop of war in Europe, the EU went into the talks with the key priority of calling on China to use its influence with Russia to stop the bloodshed, the person said, adding that there was a serious concern that continued inaction by China would have a lasting negative impact on EU relations.

  After the summit, a readout from the Chinese Ministry of Foreign Affairs in Beijing said that Chinese President Xi Jinping (習近平) called on Europe to have an “autonomous” view of China, and that the solution to the conflict was to accommodate the “reasonable security concerns of all parties concerned.”

  “A dialogue of the deaf” was how EU High Representative for Foreign Affairs and Security Policy Josep Borrell described the exchange with China.

  ‘LIMITLESS PARTNERSHIP’

  After Xi met with Russian President Vladimir Putin in early February and declared a “limitless partnership,” Beijing has attempted to stay neutral in the conflict, expressing understanding for Putin’s stance even while defending Ukraine’s sovereignty.

  Beijing is unlikely to welcome the instability and economic turmoil Putin’s war has brought. Yet even if its ability to influence him is limited, the EU argues China has unique channels it can use to try.

  The view from a European diplomat in Beijing is that the war is pushing China and Europe further apart, strengthening their systemic rivalry. The COVID-19 pandemic and Europe’s realization that it relied on China for basic medical supplies was the wake-up call; Russia’s war on Ukraine bolsters the argument that Europe must reduce its dependence on Beijing, the diplomat added.

  “This is really the awakening of the West,” said Lithuanian Minister of Foreign Affairs Gabrielius Landsbergis, whose Baltic nation suffered a collapse in exports to China after it tussled with Beijing over Taiwan.

  The EU lodged a complaint with the WTO in March over China’s treatment of Lithuania.

  “The main lesson that we should learn from Russia’s war in Ukraine is that trade alone doesn’t change how authoritarian countries act,” Landsbergis said in an interview in Vilnius. “When we’re talking about China, we are clearly seeing that new dependencies are being developed.”

  China overtook the US as the EU’s largest trading partner in 2020, with about US$868 billion in trade last year.

  The war in Ukraine has snarled up already fragile supply chains on trade routes between China and Europe, while adding to soaring costs for energy and raw materials. However, geopolitical considerations are also influencing firms operating in China.

  A majority of German companies there said late in March — prior to the “zero COVID-19” lockdowns in Shanghai and elsewhere — that the crisis caused by the war in Europe was affecting their China strategy, a survey of 391 members of the trade chambers found.

  One-third of respondents said they expected to put planned business or investments on hold, while 46 percent saw a decrease in the attractiveness of the Chinese market. About 10 percent said existing business might be moved out of China, and 27 percent said they expected diversification to accelerate in Asia.

  Jens Hildebrandt, executive director of the German Chamber of Commerce in north China, said the trend is away from globalization and toward more of what he calls “localization,” where companies build localized supply chains to serve specific markets.

  The US-China trade conflict spurred that development, “and the Ukraine war gives another push to that,” he said by telephone.

  For Joerg Wuttke, who heads the EU Chamber of Commerce in China, “the kind of public image of China when it comes to Ukraine is really making a difference.”

  Taken along with its “zero COVID-19” policy and the associated disruptions to business, “what really matters now is the perception of China becoming unreliable,” he said, calling it a “new dimension.”

  EU-China relations have deteriorated sharply in the past year, marked by the imposition of reciprocal sanctions over the human rights situation in Xinjiang. China hit members of the European Parliament, putting passage of an ambitious EU-China investment deal on ice. Its treatment of Lithuania added to tensions.

  In March, two weeks after Russia’s invasion, China warned the US against trying to emulate NATO in the Pacific, and dismissed comparisons between the security disputes over Ukraine and Taiwan.

  “China-EU ties are already facing growing difficulties on various issues, and bringing more points of friction based on nothing is not in the interest of either side,” the Chinese Communist Party’s Global Times newspaper said in an op-ed, calling on the EU not to “fall into Lithuania’s trap.”

  SHATTERED HOPES

  Going into last month’s summit, Brussels and member states had hoped that Beijing would halt the “downward spiral” in EU-China ties by using its leverage on Russia to help end the war, said Janka Oertel, director of the Asia program at the European Council on Foreign Relations.

  “That hope has been shattered,” she said in an online commentary.

  China always views relations with the EU from a “strategic and long-term perspective,” and stands ready to work with Brussels, Chinese Ministry of Foreign Affairs spokesman Zhao Lijian (趙立堅) said at a regular press briefing on Friday. “We hope the European side will come to an independent perception of China and adopts an independent China policy.”

  At the same time, Zhao said that China’s ties to Russia were a “new model” for the world.

  In the EU, the sense of dismay at China is arguably most acute among countries in central and eastern Europe that have the most hawkish views on Russia. Paradoxically, they are also among the EU nations with which China had the best relations via its 16+1 forum that allowed smaller states an audience with Beijing’s leadership.

  Disaffection with the forum has long been evident, and Lithuania quit last year. A Chinese diplomat was dispatched to the region last week, fanning speculation that others might now be considering a way out. She was met by a warning from the Czech government that China’s endorsement of Russia would hurt its relations with the whole EU.

  Still, few advocate decoupling.

  The Dutch have woken up to the China threat in recent years, yet that does not mean they are going to stop trading with or talking to Beijing, people familiar with the government’s thinking said.

  Some European companies are increasing their focus on China. One of Volkswagen AG’s priorities for this year is to “boost our #China business,” chief executive officer Herbert Diess said in a post on Linkedin.

  Europe needs China to stabilize the economy as it suffers spillover from the war, said Henry Wang Huiyao (王輝耀), founder of the Center for China & Globalization, a policy research group in Beijing set up as a bridge explaining China’s position to the world.

  “The message is that if the EU militarily is more bonded to NATO now, economically they will have to be more bonded to China as time goes on,” he said.

  The political mood in Europe’s biggest economy appears to be shifting in the opposite direction. German Minister of Finance Christian Lindner, speaking at the Ludwig Erhard Summit last week, said that Berlin needed a whole new business model to reduce its economic reliance on China.

  Lars Klingbeil, who coleads German Chancellor Olaf Scholz’s Social Democratic Party, told the same conference of the need to learn the lessons of Germany’s Russian policy and “end the dependence on China.”

  In Italy, Prime Minister Mario Draghi has hardened his stance on China after Russia’s invasion. Italy strengthened its veto powers against foreign takeovers last month by setting up a special division to oversee any potential merger, enabling it to block a deal if it involves a strategic sector.

  “The war has already triggered intense debates on critical infrastructure and resilience in Europe,” Agatha Kratz, an associate director of the Rhodium Group, and Max Zenglein, chief economist at the Mercator Institute for China Studies, said in a joint report this week.

  The era of “massive Chinese investment” in Europe may be over, they said.
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