Watching China in Europe - May 2022

Welcome to Watching China in Europe, a 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 senior visiting fellow at GMF and managing editor at Rhodium Group—provides his personal observations and analysis on the most pressing China-related developments and activities throughout Europe. We hope you find it useful, but if you would like to opt out at any time, please do so via the unsubscribe button below.

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Misreading Europe

Over the past months, European officials have made clear to their Chinese counterparts that active support for Russia in its war of aggression in Ukraine would have serious consequences for the EU-China relationship. At their virtual summit in early April, this message was delivered straight to President Xi Jinping. Last week, all the mainstream parties in Germany signed on to a parliamentary motion threatening Beijing with sanctions if it provided Russia with military support or helped it circumvent Western sanctions. And yet, more than two months after the invasion began, European diplomats are still not convinced that China has fully understood the gravity of the conflict for Europe. “They are still treating Ukraine as a sideshow in the EU-China relationship,” one diplomat told me.
 
That does not mean that Beijing is not trying to reach out to Europe—in its own way and on its terms. The head of European affairs in China’s Foreign Ministry set up a Twitter account in late March and has been tweeting sweet nothings ever since: “During a time of uncertainties, China and the EU should work together for a peaceful and stable world to the benefit of both sides,” Wang Lutong posted in mid-April. Gone are the days of wolf warrior diplomacy with Europe, it seems. Still, China’s outreach to Europe remains clumsy and ineffective—a reflection of the cognitive divide that has opened up between Beijing and European capitals after years of tensions over Hong Kong, Xinjiang, Lithuania, and now Ukraine. Two recent examples of the dissonance: an attempt by China to jump-start stalled 16+1 talks with Eastern and Southern European countries, and Xi’s unveiling of an amorphous new “global security initiative.”

Cheshire Cat

I have touched on the slow death of 16+1 in recent months. Lithuania became the first country to leave the grouping last year. And only half of its EU members sent their head of state or government to participate in the last virtual summit in February 2021—a slap in the face for China, which for the first time was represented by Xi. This year is the tenth anniversary of 16+1. That would normally be a reason for Beijing to put on a big show (a commemorative envelope has already been issued, I am told). But getting all 16 European countries to show up is no longer a given. A handful of countries—including the Czech Republic, Estonia, Latvia, and Romania—have soured on the summits. And China’s coercion against Lithuania and its tacit support for Russia in the Ukraine war have only hardened views across Eastern Europe. One Eastern European diplomat likened his country’s approach to 16+1 to that of the Cheshire Cat in Alice’s Adventures in Wonderland. “We smile and then we disappear,” he said. “We are not going to be loud about it, but we are ignoring all 16+1 invitations.”
 
China seems determined to change that. In late April, it sent diplomats to many of the countries in question. Huo Yuzhen, its special envoy to Eastern and Central Europe, visited no less than eight over a span of two weeks. On several of her stops, diplomats told me, she suggested that 16+1 meetings be held at the level of foreign ministers going forward. That would be a face-saving solution for Beijing. Xi could extricate himself from future summits and European leaders who had stopped showing up would not be invited in the first place. But Huo’s proposal for a tactical downgrading of the forum has not attracted much interest. Instead, I was told, she received unvarnished messages in several capitals: 16+1 is a disappointment, future participation is up in the air, and countries in the region are watching Beijing’s stance on Ukraine closely. “I don’t know if 16+1 is dead. But it’s hard to see a face-saving way for China to revive it,” the Eastern European diplomat said. A tenth anniversary summit seems increasingly unlikely.

Indivisible Security

What about Xi’s new global security initiative? As in the early days of China’s Belt and Road Initiative and Global Development Initiative, details are sparse. Unveiling the idea at the Boao Forum in late April, Xi spoke of the need for “common, comprehensive, cooperative and sustainable” security that rejects Cold War thinking and upholds the principle of “indivisible security,” a concept also promoted by Russia’s President Vladimir Putin. Days later, China’s Foreign Minister Wang Yi elaborated on the initiative without shedding much more light. But EU diplomats say it would be wrong to dismiss it out of hand. Some have received signals from Chinese diplomats in recent months that one of the initiative’s aims is to create a Eurasian security order that binds Europe together with Russia and China. This is being seen as a wholesale misreading of the European mood by Chinese leaders. Last week, Germany was invited to join Xi’s grand new plan. Do not hold your breath.

TTC Boost

What the war in Ukraine is doing is pushing Europe and the United States closer together. Take the EU-US Trade and Technology Council (TTC), which was seen as a temporary two-to-three-year vehicle for addressing points of tension between Brussels and Washington when it was launched in June of last year. Both sides now see it as a long-term initiative. “Ukraine has given the TTC a new sense of purpose. It has a bigger geopolitical dimension. The democracies versus authoritarians narrative is in there,” a senior EU diplomat told me. When EU and US officials converge on Paris in mid-May for their second TTC meeting, they are expecting big steps forward on supply-chain security, export controls, standards and the fight against disinformation. For example, I was told the two sides are discussing a joint mapping of dependencies and the creation of a common transatlantic space for critical inputs like rare earths. Cooperation in international standards setting bodies is being systematically ramped up to counter Chinese influence. And the two sides are discussing joint initiatives to counter Russian and Chinese propaganda narratives that blame the economic turmoil unleashed by the conflict on Western sanctions on Russia.

Taiwan Talks

The EU-US Dialogue on China, a separate transatlantic forum which was held in Brussels last month, included a detailed discussion about Taiwan—an issue the Europeans have shied away from in the past out of fear of provoking China. “It feels like the gloves are off a bit in Europe,” a US diplomat told me. Last year, the diplomat noted, the EU pushed back against Taiwan being put on the agenda (though it did get a mention in the joint statement). This year, it was the EU that proposed Taiwan as a main agenda item. That does not mean there is perfect alignment on how the two sides view the Taiwan question. There is a sense of urgency in the United States that does not exist in Europe. Over the past month, US officials have stressed the need for the EU to think through how it would respond to Chinese aggression in the Taiwan Strait. “There is a clear message coming from Washington that they expect us to act,” an EU diplomat told me. “They expect us to impose sanctions on China in the event of an invasion and work out what this would look like.” Both sides see 2024, when the United States and Taiwan hold presidential elections, as a potential danger point. “We both want to raise the costs for China,” the EU diplomat said, noting that the two sides have agreed to work with each other on lessons learned from Ukraine.

Pivot to the United States

What role Taiwan plays in a new German China strategy is unclear. But several people in Berlin told me that tackling economic dependence on China will be front and center. “Addressing dependencies is one of the most uncontroversial parts of the strategy,” a German diplomat said. In corporate Germany, we are already seeing signs of a pivot to the United States. Volkswagen CEO Herbert Diess recently announced plans to more than double his company’s market share in the United States by 2030. As one senior German industry official told me, Volkswagen has realized quite late in the game that it needs to rebalance its geographic footprint. Japan’s Toyota, which is worth more than twice as much as Volkswagen despite a similar level of revenues, is far less dependent on the Chinese market, in part due to its strong presence in the United States. “It is an unflattering comparison for the people at VW,” the official said. The German Federation of Industries, which has been warning about political risks in China for the past three years, launched a new transatlantic business initiative last year in response to demand from its members. Its president, Siegfried Russwurm, travelled to Washington last week and called for a reboot of economic ties with the United States.

Indo-Pacific

The United States is not the only country that Germany has in its sights. Olaf Scholz traveled to Japan last week on his first trip to Asia as chancellor and hosted India’s Prime Minister Narendra Modi and members of his government this week in Berlin. Last month, European Commission President Ursula von der Leyen surprised some officials in Brussels by launching a Trade and Technology Council with India—an idea that was floated by the EU and approved by Delhi within a day. There is no date yet for German government consultations with China nor plans for Scholz to meet with Chinese leaders in person, although Foreign Minister Annalena Baerbock is considering an Asia trip in early July, around the G20 foreign ministers meeting in Bali, that could include a stop in China. Still, some German diplomats are worried about the conflict in Ukraine sucking attention and resources away from the Indo-Pacific. I was told that Berlin may be forced to reconsider the scope of the German Air Force’s participation in Australia’s Pitch Black exercise in September because, as one official put it: “We need the planes elsewhere”. Other diplomats in Berlin said they expected the exercise to go ahead as planned.
 
France is thinking about how to re-engage with Australia following the elections there later this month. Paris is still smarting from Prime Minister Scott Morrison’s decision last year to ditch a $67 billion submarine deal with France in favor of the AUKUS nuclear submarine pact with the United States and Britain. President Emmanuel Macron, elected last month to a second term, accused Morrison of lying about his intentions and Paris pared back bilateral engagement. That may be about to change. “Even if Morrison is reelected, the sense is that we will need to reengage,” one French diplomat told me. “The question is whether we do just what we need to do with Australia or whether we do more.” If Morrison is defeated, expect more.