Brussels trade chief says China-EU ties ‘at a crossroads’

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Relations between China and the EU are “at a crossroads” and the two sides could “drift apart” because of Beijing’s support for Russia over Ukraine and “discriminatory” trade rules, one of Brussels’ most senior officials has warned.

Valdis Dombrovskis told an audience in Beijing that China must change its ways or lose investment and trade from the EU in his starkest assessment yet of the tensions between them.

The executive vice-president of the European Commission, responsible for trade and economics, made a pitch to future Chinese leaders at the elite Tsinghua university to prioritise openness, after new laws have made it harder for international businesses to operate there.

“We stand at a crossroads. We can choose a path towards mutually beneficial relations. One which is based on open, fair trade and investment, and working hand in hand on the great challenges of our time,” Dombrovskis said.  

“Or, we can choose a path that slowly moves us apart. Where the shared benefits we enjoyed in recent decades weaken and fade. And, as a result, where our people and economies face reduced opportunities.”

He noted that China’s economic success was built on globalisation, with EU consumers buying the goods that pulled hundreds of millions out of poverty. “A willingness to open up and reform supported growth, development, jobs and prosperity, built on global engagement.”

But the Latvian warned that “both the EU and China face significant political and economic headwinds. And some of these headwinds may cause us to drift apart.”

The strongest was China’s failure to condemn Russia for invading Ukraine. Beijing supports territorial integrity of states “so it’s very difficult for us to understand China’s stance on Russia’s war against Ukraine, as it breaches China’s own fundamental principles”, Dombrovskis said.

It was also affecting the country’s image, “not only with European consumers, but also businesses”, with a third of EU companies in China saying it made them less likely to invest further.  

Many were already “questioning their position in this country” because of a “more politicised business environment”, he said.

“This has resulted in less transparency, unequal access to procurement, discriminatory standards and security requirements, and data localisation and transfer requirements.”

He mentioned the new Foreign Relations Law and updated Anti-espionage Law as examples. “Their ambiguity allows too much room for interpretation. This means European companies struggle to understand their compliance obligations: a factor that significantly decreases business confidence and deters new investments in China.”  

He rejected Chinese accusations that the EU had become more protectionist, saying that it had to be “forced to become more assertive” because of unfair competition and security threats from China.

“The EU cannot allow itself to be unprotected when our openness is abused or when our national security is at stake.”

He said an anti-subsidy investigation on imports of battery-powered electric vehicles coming from China would be transparent and fair, but could be followed by others if China did not offer a “level playing field”.

His stance, and criticism of the record €396bn trade deficit the EU has with China, has moved Brussels closer to the tougher position of the US, which is seeking to restrain China’s economic and military growth.  

But Dombrovskis, who will have talks with vice-premier He Lifeng on Monday, emphasised that “co-operation between Europe and China remains essential”.

He said they could work together on debt relief for the poorest countries and on other global challenges. “We recognise that the world needs China. But China also needs the world.”