The European Union and China have an increasingly complex and conflicting relationship. Photo: Facebook

It is hard to judge how German Chancellor Angela Merkel’s recent visit to Beijing relates to Europe’s broadly cooling relations with China. Merkel, joined on the state visit by the Federation of German Industries, signed 11 cooperation agreements while in Beijing, at a time when Europe is tightening regulations on certain Chinese investments.

The German leader raised human rights during the visit, including in a meeting with Chinese premier Li Keqiang where she said that political freedoms in embattled Hong Kong “must be guaranteed.” But some analysts sensed that Merkel failed to take a tough enough line, not least because China is currently Germany’s largest trading partner.

Maximiliane Koschyk, writing for DW, wrote after Merkel’s visit that “Berlin still adheres to the outdated belief that trade can lead to political change” in China.

Other top European leaders, however, no longer appear to adhere to that theory. French President Emmanuel Macron has warned about European “naivety” over China, and is leading the way towards a more skeptical European stance.

In March, when Chinese president Xi Jinping visited Paris, Macron made a bold statement by also inviting Merkel and European Commission President Jean-Claude Juncker to join their meeting at the Elysee Palace.

Macron’s apparent message was that Europe, and European leaders in particular, need to start singing from the same song sheet on China. Months later, that European unity is far from apparent.

French President Emmanuel Macron welcomes Chinese President Xi Jinping at the Villa Kerylos in Beaulieu-sur-Mer, near Nice, France, March 24, 2019. Photo: AFP

Brussels clearly doesn’t want to rile China at a time of global trade tensions, as Russia looms ever larger over the bloc’s eastern borders and US President Donald Trump threatens to downgrade the historic transatlantic alliance.

But if the EU wants to play a more prominent role in global affairs and, as it says, uphold international norms in free trade, multilateralism, rule of law and democracy, then it needs to decide collectively to put its values ahead of trade.

Many commentators are asking whether the EU can sit by idly and watch as Beijing pressures weaker regional states like Vietnam, Taiwan and the Philippines in the South China Sea, and Hong Kong’s protests against Beijing’s creeping authoritarian influence extend into a fourth month.

“Do our companies not care about Hong Kong’s freedom?” read a headline from the German daily Bild earlier this month.

Europe’s relations with China are in flux. In July 1995, European Trade Commissioner Sir Leon Brittan unveiled the EU’s then-new initiative, “A Long-term Policy for China”, which stated that China is a “cornerstone in the EU’s external relations, both with Asia and globally.”

Trade has always been the cornerstone of the relationship. Worth US$5.3 billion in 1981, it grew to $31.5 billion in 1994 and $120 billion in 2003 – the same year China overtook Switzerland to become the EU’s second largest trading partner after the US.

Last year, bilateral trade in goods was worth about $670 billion. Germany is one of the few European states with a trade surplus with China. The entire EU bloc has a $167.8 billion trade deficit with China, or just under a third of overall trade, according to 2018 figures.

German Chancellor Angela Merkel and Chinese President Xi Jinping in a file photo. Photo: Pool

But Federica Mogherini, the EU’s foreign affairs chief since 2014 who will vacate the post later this year, has tried to take a far more pragmatic view on China. In March, the European Commission released a “Strategic Outlook” on EU-China relations that envisions a more robust stance.

“China,” it states, “is simultaneously a cooperation partner with whom the EU has closely aligned objectives, a negotiating partner, with whom the EU needs to find a balance of interests, an economic competitor in pursuit of technological leadership, and a systemic rival promoting alternative models of governance.”

It added: “This requires a flexible and pragmatic whole-of-EU approach enabling a principled defense of interests and values.”

In April, the EU also agreed to a new centralized system of screening foreign direct investment (FDI), which attempts to guard against outside investment that could undermine European security, and allows the European Commission to weigh in on member states’ acceptance of such deals.

The latest annual EU-China summit, also held in April, ended “with a stern position by the EU…the overall tone of EU leaders was one of frustration and skepticism,” wrote Philippe Le Corre, a non-resident senior fellow in the Europe and Asia Programs at the Carnegie Endowment for International Peace.

The EU currently has two somewhat conflicting China policies. With regards to what China does outside of Europe, Brussels has often taken a robust approach. In the South China Sea disputes, it has resolutely called on Beijing to abide by international laws and to refrain from bullying other claimants to maritime territory like Vietnam and the Philippines.

France and the UK have conducted freedom of navigation exercises in international waters near China. In April, for instance, Paris deployed a frigate to the Taiwan Strait, an act that led French officials being disinvited by Beijing to a naval parade celebrating the 70th anniversary of the founding of the Chinese navy.

France’s Landing Helicopter Deck (LHD) Mistral participated in the 2017 Jeanne d’Arc naval task group that sailed through the disputed Spratly Islands in the South China Sea. Photo: Embassy of France

Meanwhile, the EU has rapidly increased its military diplomacy with Vietnam, by far the most vocal and active opponent of Chinese expansionism in the South China Sea. Senior Vietnamese military officials have taken part in numerous EU conferences, while Brussels signed a new defense pact with Hanoi in early August, its first with a Southeast Asian nation.

The EU now has direct military-to-military engagements with 11 Asian nations, and has also recently signed defense agreements with South Korea, Australia, New Zealand, as well as with Vietnam.

The bloc has also taken a strong stance on the Hong Kong protests. Last month, Mogherini issued a joint démarche with the Canadian foreign minister on the Hong Kong situation.

“Fundamental freedoms, including the right of peaceful assembly,” she said, “and Hong Kong’s high degree of autonomy under the ‘one country, two systems’ principle, are enshrined in the Basic Law and international agreements and must continue to be upheld.”

Beijing responded, as it usually does to most international criticism, that Brussels should “immediately stop meddling in Hong Kong affairs and China’s internal affairs.”

But Europe’s opinion of China becomes far more opaque and convoluted when it comes to China’s activities and investments in Europe. Bilateral trade between the EU and China is worth about $1 billion each day, the European Commission estimates.

Having 28 members – soon to be 27 after Britain leaves – often frustrates EU efforts to forge unanimous positions, especially as power shifts from the European Commission, its executive branch, to fractious member states through the European Parliament and Council.

Some of the newer EU members, like those who take part in the 16+1 forum – 16 Central and Eastern European nations plus China – have been promised massive investment from China under its Belt and Road Initiative (BRI) scheme, although there are now certain signs that Beijing’s financial pledges aren’t being kept.

According to recent commentary by Judy Dempsey, a nonresident senior fellow at Carnegie Europe, the European Commission “has been unable to rein in the 16+1 group,” and “this has given China a strategic foothold in these parts of Europe thanks to Beijing’s deep pockets, its lack of conditionality and the speed at which it modernizes transportation networks.”

Jean Claude Junker, President of the European Commission, Donald Tusk, President of the European Council and Li Keqiang, Prime Minister of People’s Republic of China at the EU-China Summit in Brussels on April 9, 2019. Photo: AFP/Riccardo Pareggiani/NurPhoto

Hungary, a self-described “illiberal democracy”, has offered itself up as a gateway to Chinese investments, as has Poland and the Czech Republic. Yet, as of the end of 2018, China has invested just $5.1 billion in Hungary, more than half of its total investment in all of the 16+1 nations.

But other EU members are also turning towards China for financial support.

Portugal and Greece, both of which have suffered economic shocks in recent years, as well as stiff pressure from Brussels to reduce budgetary expenditures, have often backed Chinese interests at EU summits and worked to weaken a collective bloc stance on Beijing. In March, Italy became the first major European power, and the first G7 member, to sign up to the BRI.

Some analysts are concerned that smaller EU states could become economically dependent on China, including for loans, and that Chinese investment in non-EU European nations, like those in the Balkans, could affect stability on the bloc’s front door.

But the wealthy nations of Western Europe are still agnostic on whether to rebuff or embrace China’s advances in Europe, as they are currently the main benefactors of Chinese investment. Britain, Italy, Germany and France accounted for 75% of all Chinese investment into the EU in 2017, half of which went to the UK. Germany, the UK and France are by far China’s largest trading partners in the EU.

The UK is set to leave the EU at the end of next month, and this could reduce Chinese influence within the EU, perhaps allowing French President Macron more room to push his more skeptical policies on China.

The key will come down to whether the French or German position on China wins the day. Germany has long sought to influence China through trade and economic engagement. Berlin has thus been at the forefront of pushing for the Comprehensive Agreement on Investment between the EU and China, the latest round for which was held in June.

Former German Defense Minister and recently elected EC President Ursula von der Leyen has raised concerns about China. Photo: Twitter

Many commentators doubt whether the now-dated belief that China will liberalize politically through rapprochement and trade is valid. But a newer notion appears to be gaining traction among German politicians.

Ursula von der Leyen, the former German defense minister, is set to take up the presidency of the European Commission, the EU’s de facto most senior official, in the coming months. In January, she gave a speech in which she appeared to reveal a more hardline stance on China.

“Where Russia attacks militarily in the cyber area, China attacks with economic means,” she said. “China woos us with a friendly face. And that’s why we often overlook how single-mindedly it pursues its goals. And how cleverly.”

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