Diplomacy In An Age of Disruption: The EU-China Summit

This article was originally published on 9Dashline.

Beyond headlines dominated by the wars in the Middle East and Ukraine, preparations advanced discreetly for the EU-China summit, due to take place on 24 July. President Xi Jinping and Prime Minister Li Qiang will receive European Council President António Costa and European Commission President Ursula von der Leyen for a summit celebrating the 50th anniversary of the establishment of diplomatic relations. 

President von der Leyen set the tone for this summit in her speech at the 2025 World Economic Forum in Davos, expressing that “we must engage constructively with China […], and where possible, even expand our trade and investment ties”. This was a remarkable change of tone when compared to her first mandate, when she had emphasised the need to de-risk from dependencies on China. When confronted with the announcement of massive US “reciprocal tariffs”, she stressed in a call with Chinese PM Li Qiang on 8 April 2025 that Europe and China had the responsibility to “support a strong reformed trading system, free, fair, and founded on a level playing field”. In her pre-summit speech to the European Parliament, von der Leyen warned of the “strategic and systemic risks” China poses to “Europe’s security and competitiveness”, while expressing readiness to work together to build a “more balanced and more stable relationship” based on “predictability and reliability”.

China sees US President Trump’s stance on Russia/Ukraine, NATO, and tariffs as a golden opportunity to improve EU-China relations. This was reflected in President Xi Jinping’s congratulatory message on the 50th anniversary of diplomatic relations, calling for multilateralism in jointly tackling global challenges, and a fair, inclusive world order.

But is it realistic to assume that the upcoming EU-China summit will lead to improved bilateral relations?

The economic dimension of EU-China relations

Economically, China is undoubtedly important to the EU and its member states with trade having grown from EUR 2 billion per year in 1975 to about EUR 2 billion per day in 2024. China’s economic rise has benefited significantly from investments and technology transfers from European companies, and China has become the EU’s most important source of imports of goods. In 2024, the overall trade volume in goods reached EUR 731 billion, with a trade deficit for the EU of EUR 304 billion, the world’s largest bilateral trade deficit.

While major breakthroughs are unlikely, progress on economic issues is possible and could help restore a measure of stability and predictability for companies and citizens on both sides.

At the same time, Europe has become China’s second-largest export market, after ASEAN. The strategic importance of the EU market for China’s prosperity and stability cannot be underestimated, even though the US-China trade relationship tends to attract far more political attention.

The EU’s main objective for the summit is to remove existing or prevent potential Chinese retaliatory duties, imposed in response to the EU’s October 2024 anti-subsidy duties on Chinese Electric Vehicles (EV), which range from 17.4 per cent to 38 per cent, on top of the EU’s standard 10 per cent import duty. The Chinese measures include provisional Anti-Dumping (AD) duties on cognac varying by producer (38-39 per cent), an anti-subsidies investigation into EU dairy subsidies, and an AD investigation on EU pork meat exports.

Another top concern for the EU is the potential trade diversion of Chinese surplus production, which can no longer be exported to the US due to recent significant tariff increases, and may instead flood the EU market. Recent data show that Chinese exports to the EU rose by 10.3 per cent in March and 8.3 per cent in April, while exports to the US dropped by 21 per cent that same month. Meanwhile, Chinese imports from the EU fell by 16.5 per cent in April 2025.

A further pressing issue is China’s new global export licensing requirement for critical raw materials. Introduced on 4 April 2025, an export licence is now required for seven rare earth elements, and rare earth permanent magnets and their compounds — materials that are critical for digital and green technologies, as well as cutting-edge defence technology. China holds a quasi-monopolistic position over 17 essential metallic elements, commanding roughly 60 per cent of the world’s total supply and 90 per cent of global processing and refining capacity. While a provisional deal on this requirement was reached between China and the US in June, EU companies continue to face high volatility.

Moreover, several EU member states are actively seeking Chinese investments to enhance Europe's global competitiveness and industrial value-added. They aim to attract technologically advanced Chinese companies to help bolster new industrial sectors and innovation in existing ones (notably EV and battery production), including through greenfield investments. During Spanish PM Sánchez’s visit to China in April 2025, such technology-focused Chinese investments in Spain were very much the focus of discussions.

The overcapacity issue

Overall, the EU’s overriding concern for this summit is its persistent trade deficit with China. This is primarily linked to China’s industrial overcapacity, defined as a steadily growing excess export capacity in the manufacturing sector, fuelled by massive public subsidies. This overcapacity drives rising export volumes, which help sustain the Chinese economy amid sluggish domestic demand.

China, however, denies the existence of an “overcapacity” problem. It has sought to reassure the EU that trade diversion will be strictly monitored and can thus be avoided, as conveyed by PM Li Qiang to President von der Leyen in their April phone call. China in turn considers that the EU has erected too many regulatory hurdles. Beijing accuses the EU of trying to stifle Chinese trade and investment, pointing in particular to the EU’s new Foreign Subsidies Regulation, International Procurement Instrument, Anti-Coercion Instrument, and FDI Screening Regulation.

The increasingly difficult trade relationship is evident in recent trade disputes between China and the EU. The EU has launched several measures: an AD investigation into Chinese tires production (10 May), it excluded Chinese medical device manufacturers from public procurement procedures (2 June), and imposed AD duties on Chinese hardwood plywood (11 June). In response, and beyond its earlier countermeasures to the EU’s EV tariffs, China imposed restrictions on government procurement of EU medical devices (6 July).

Beijing’s main economic interest at the summit is to reverse the EU anti-subsidy duties on EVs. Negotiations have continued to potentially replace these with voluntary undertakings by individual Chinese car exporters regarding volumes, minimum price levels, and related implementation application time periods. For China, securing an agreement on EV-related duties with price undertakings would be key to addressing the EU’s concerns on market access and critical raw materials, moves that could also facilitate further Chinese investment in EU member states. For the EU, any such potential deal is only conceivable if the price undertakings compensate for the harm caused by Chinese subsidies and include a robust monitoring mechanism.

China also hopes to revive the stalled ratification of the Comprehensive Agreement on Investment (CAI), which has remained frozen since 2020 after 7 years of negotiation. The freeze was prompted by Chinese sanctions on EU officials, including Members of the European Parliament (MEPs) over Xinjiang-related EU travel sanctions. Although Beijing has recently lifted some of its counter-sanctions, there is little appetite in Brussels to resuscitate the agreement. Many now view the CAI, which was concluded 6 years ago, as outdated.

EU-China relations in their global context

There is a growing risk that the EU could become the main battleground in the US-China strategic rivalry. The EU faces conflicting pressures from its two main economic partners. On one side, China is encouraging the EU to pursue greater “strategic autonomy”, offering increased high-tech industrial investments in EU member states. On the other, the US is pushing for closer “alignment”, particularly in dealing with Chinese export restrictions on critical raw materials and in strengthening economic security measures to reduce reliance on China in critical value chains.

At the recent G7 summit, President von der Leyen stated that “China is using this quasi monopoly [of critical raw materials] not only as a bargaining chip, but also weaponizing it to undermine competitors in key industries”. She proposed closer cooperation with the US on this challenge. Beijing swiftly rejected these remarks, calling her speech “baseless, [and] biased” and insisting that China would “speed up the review and approval of export licences”.

Jens Eskelund, President of the EU Chamber of Commerce in China, recently warned that EU companies were being caught in the crossfire of the US-China trade war. He noted that Chinese licensing requirements for rare earth elements remain in place globally and that many EU companies have not yet received their licenses. Eskelund decried this as “collateral damage” and concluded that volatility and unpredictability for EU companies in China are at their highest in the past 30 years.

At the upcoming summit, the EU and China may succeed in agreeing on concrete steps to strengthen their cooperation and remove market access barriers, without alienating the US. However, it is equally possible that mutually exclusive interests, and increased EU-US cooperation on economic security and critical raw materials could lead to a deterioration in EU-China economic relations.

On global challenges, the EU and China, share many interests, such as preserving the UN-led multilateral order, based on international law. Other common objectives include addressing climate change by achieving the Paris Agreement Green House Gas emission reduction targets and scaling up climate finance for developing countries, implementing the new Biodiversity Convention, reforming the WTO, and improving global public health, development finance, debt restructuring, and food security.

However, these shared ambitions rarely translate into common positions on specific issues given China’s continued insistence on its status as a developing country and its push to “democratise” the multilateral order. A vivid example was the 6th EU-China High-Level Dialogue on Environment and Climate held on 15 July in Beijing led by Chinese VPM Ding Xuexiang and European Commission VP Ribero and involving also three Commissioners with agreement on overarching aims, but very limited progress on substance.

Geopolitical challenges

The strategic theatres of Europe, the Middle East, and the Asia-Pacific have never been more interconnected, with Russia, the DPRK, Iran, and China aligned on multiple fronts.

At the summit, the Middle East will likely feature prominently. China is a close economic and political partner of Iran, especially due to energy trade, and has repeatedly criticised Israel’s and the United States’ attacks against Iran, as well as Israel’s war against Hamas in Gaza and Hezbollah in Lebanon. Unsurprisingly, China abhors any prospect of regime change in Iran. Nevertheless, the EU and China maintain that diplomacy is the only path toward a lasting solution to Iran’s nuclear ambitions and regional proxy dynamics, reflecting their long-standing cooperation in the Iran nuclear deal negotiations.

On Ukraine, the EU has repeatedly urged China to use its influence over Russia to help end the war, so far in vain. While China has engaged in some diplomatic efforts and has clearly stated its opposition to the use or threat of nuclear weapons, it has stopped short of condemning Russian aggression. Although China appears to have refrained from supplying lethal aid, it plays a central role in sustaining the Russian defence industry through massive exports of dual-use goods, advanced technologies, and critical components, with some 80 per cent of the dual-use goods reaching Russia originating from or through China.

At the summit, EU leaders are expected to emphasise NATO’s July 2024 assessment that China has become a “decisive enabler” of Russia’s war effort. The EU has reinforced export controls, targeting 58 entities from China and Hong Kong, and has sanctioned seven Chinese companies and two individuals for supplying drone components, microelectronics, and satellite images. Under the just adopted 18th sanctions package, the EU adds four more companies, and sanctions for the first time two Chinese regional banks financing such trade, effectively cutting them off from EU financial transactions. The Chinese Ministry of Commerce expressed China’s “strong dissatisfaction and resolute opposition” and threatened to retaliate, just days before the summit,

For the EU, a change in China’s position on Russia’s aggression against Ukraine, an issue of existential importance for European security, could trigger improved EU-China relations. However, the Chinese leadership continues to prioritise its “limitless friendship” with Moscow; this was on full display during President Xi Jinping’s attendance at Russia’s 80th anniversary parade on 8 May. China sees Russia as a strong partner in its quest for global leadership, including in hybrid warfare cooperation. As reportedly acknowledged by Chinese Foreign Minister Wang Yi during talks with EU High Representative Kaja Kallas, China may also fear that a Russian defeat would free the US to shift its full strategic focus toward Beijing.

Despite China’s stance, at the 2025 Munich Security Conference, Wang Yi called for all stakeholders of the Russia-Ukraine conflict to participate in peace talks and acknowledged Europe’s central role in shaping long-term regional stability. China has also expressed willingness to contribute to a future ceasefire, lasting peace negotiation, as well as Ukraine’s reconstruction, as partially also reflected in the recent China-Russia Joint Statement commemorating the 80th anniversary of the World War II victories.

However, the EU remains deeply sceptical. As long as China avoids distinguishing between aggressor and victim, refuses to acknowledge that the situation is a war (and not a “crisis”), declines to call for the withdrawal of Russian troops from Ukraine, there is little appetite in Brussels to attribute a meaningful role to Beijing in reaching a peace settlement, let alone accept Chinese involvement in shaping Europe’s security architecture.

Indo-Pacific tensions and Taiwan

The EU leaders will also raise concerns over Taiwan and growing instability in the South China and East China Seas. These include China’s increasing military manoeuvres, grey zone operations, and repeated assertions of its intention to reunify with Taiwan, by force if necessary. The EU is expected to reaffirm its One China policy, while strongly opposing any unilateral attempt to alter the status quo through force or coercion. At the same time, EU-Taiwan relations continue to deepen, particularly in trade and investment, and a significant portion of the EU’s foreign trade transits the Taiwan Strait.

Thus, cross-Strait stability is directly linked to the EU’s vital interests. The EU will underscore the need for full respect of freedom of navigation under UNCLOS, both in the Strait and in the contested waters of the South and East China Seas, where notably China’s territorial disputes with the Philippines and Japan are of increasing concern. Any further erosion of the status quo would carry major negative consequences for EU-China relations.

This is undeniably a high-stakes summit at a time of growing global instability and disruption. Both the EU and China have strong economic, technological, foreign, and security policy reasons to engage constructively with each other. While major breakthroughs are unlikely, progress on economic issues is possible and could help restore a measure of stability and predictability for companies and citizens on both sides. Even without a joint statement, both sides might reaffirm their common responsibility for preserving global stability, deepen economic ties, and coordinate on select regional issues. For its part, the EU must be careful to maintain internal unity and avoid being caught in the middle of the US-China strategic rivalry. The broader challenge for both sides will be achieving a sober, constructive and interest-based outcome while negotiating a tariff deal with the US.