Europe is currently at a critical crossroad, grappling with the future of its security architecture, its ability to provide a sustainable future to its citizens, and its capacity to push for digital transformation. The post-WWII world is disappearing, leaving room for a transactional and interests-based reality where norms and principles are increasingly questioned.
China’s rise has led to increased geopolitical competition, reshaping political dynamics on the world stage. As President Xi Jinping stated in March 2023, “there are changes, the likes of which we haven’t seen in 100 years, and we are the ones driving these changes together.” However, China’s efforts to reshape the international order, along with the existing set of rules, norms, values, and principles, come at the expense of the existing rules-based international order and an efficient multilateralism.
Europe’s capacity to deal with China will impact its own future and its capacity to be a geopolitical player. There is a sense of urgency in responding to the China challenge for Europe, both for the future of European prosperity and security and for maintaining a functioning international rules-based order for Europe to thrive.
In March 2019, the European Commission presented a strategy that became a turning point in the European approach to China. The strategy acknowledges the need for a comprehensive approach with China, addressing both challenges and opportunities, and addressing issues like lack of reciprocity and level playing field.
The war in Ukraine and China’s No-Limits Partnership with Russia has sparked a sense of urgency in European dealings with China. The war has challenged the illusion that China would offer an offer to Europe, and China’s support to Russia’s aggression against Ukraine has accelerated this sense of urgency. This has led to the idea that Europe can both recalibrate its engagement with China and maintain open channels of communication while de-risking at home from identified risks or vulnerabilities.
Europe is in a delicate balancing act between recalibrating engagement with China while derisking. With 2.3 billion Euros exchanged daily between China and Europe, decoupling is not an option. European companies that have not left China still believe in the economic opportunities that the Chinese market can represent. There will be no fight against climate change or debt relief without China, so Europe has no alternative but to engage with a difficult partner with a growing value gap and fundamental divergences.
Recalibrating European engagement vis-à-vis China is a difficult task, as it can take several forms, such as having channels of communication open or cooperating in sectors where interests converge. However, over the past years, there has been a deterioration in the quality of engagement due to a toughened European approach, China’s economic coercion of Lithuania, tit-for-tat attitudes over trade barriers, the closure of China during the pandemic, the question of Taiwan, the oversecuritization of almost all issues, and China’s support to Russia.
Europe is “derisking but not decoupling,” which means carefully considering its relations with China, especially in the economic and trade domain, and reducing its vulnerabilities when a risk or over-dependency is identified. This effort to secure future prosperity and security should not be confused with protectionism but with the realization that if China places security as a comprehensive approach to all its policies, Europe has the legitimacy to do the same.
Derisking has been a key aspect of European trade strategy, involving raising awareness of risks and developing a defensive toolbox. This has been combined with efforts to diversify European supply chains and scale up offensive measures. However, the challenge lies in articulating the relationship between derisking and economic security. The European Commission has been proactive in articulating an economic security strategy, but national actors and stakeholders are lagging behind. The real challenge for Europe is to remain united and spread risks across the Union while working with partners on the best way forward.
Europe’s approach to China has been successful, but there are key parameters to assess the future of this trajectory. The European Union will go through elections, creating a new Commission, which will be a time for rethinking and questioning previous leadership. China, facing domestic uncertainties and economic difficulties, is looking inward and prioritizing domestic issues.
This presents a limited space for dealing with Europe and looking forward, especially during US elections. Zhongnanhai is constantly recalibrating its approach to Europe, providing an opportunity for Europe to continue derisking and developing its economic security agenda while maintaining a limited European offer to China.
