Olan McEvoy
Research expert covering the European Union for society, economy, and politics.
Get in touch with us nowThese strong economic ties have come under pressure due to the emerging geopolitical and economic conflict between the PRC and the United States - a key ally of the EU - which is set to intensify over the coming decade, as the two superpowers vie for global influence and economic supremacy, as well as due to tensions over regional conflicts such as Taiwan or Ukraine. The EU's position in between the two superpowers is somewhat contested, as some European politicians wish to see a decoupling from China and alignment with the U.S., whereas others - notably French President Emmanuel Macron - wish to see the EU develop strategic autonomy, which would allow it to be independent of both camps, while a smaller number wish to see their countries to pursue closer ties with China. The EU's criticism of China's human rights record, as well as accusations of espionage and unfair trade practices against the PRC have significantly worsened relations over the past few years.
The EU-China political relationship: worsening relations in a multipolar world
With the end of the Cold War in the early 1990s, the world entered an unprecedented era of unipolarity - that is, the United States was the world's preeminent economic and geopolitical superpower, with no active challengers. The rise of China as a global power has upset this settlement, as scholars of international relations now talk of an emergent multipolar world order, whereby the United States and China compete for global supremacy, opening up space for other powers - such as Russia, India, or Saudi Arabia - to exert themselves on a regional or even global level. The EU occupies an unusual place in this multipolar order, as while it is a key power in some global policy areas (such as climate or tech regulation), the bloc is much less united in its outlook than most other international powers.This is particularly clear in the EU's ambivalent relationship with China; while EU leaders are generally critical of China's authoritarian political system, practices regarding dissidents and religious minorities, and at increasingly assertive foreign policy, most EU countries are keen to safeguard their economic relationship with China, which is especially vital for countries which export to China in greater quantities, notably Germany. Relations between the two sides have soured since Russia's invasion of Ukraine in 2022, with China being seen by the EU as enabling Russia's war. China is increasingly seen by EU policymakers as attempting to create an alternative international order which if focused on advancing its own interests through cooperation between the PRC and secondary powers, such as with BRICS, as well as through buying influence and structural power through its infrastructure investment, particularly through the Belt and Road Initiative.
The EU-China economic relationship: derisking or decoupling?
The economic relationship between the European Union and China is vitally important on both sides - being each other's main external trading partner - which is why the deteriorating political relationship between the two sides has become a major issue for business leaders and policymakers alike. A debate has emerged in Europe over the appropriate economic relationship which EU countries should have with China, revolving around the concepts of derisking - reducing Europe's dependence on China for critical inputs and infrastructure - and decoupling - cutting Europe's economic ties with China. While the United States has opted, at least in its rhetoric, for a strategy of decoupling, European policymakers have been keen to derisk their economic relationship with China, while preserving the economic benefits which it entails.For instance, European policymakers have tried to curtail the embeddedness of Huawei and other Chinese ICT firms in its telecommunications infrastructure. Other areas of the economy that have been highlighted as being sensitive for Europe's internal security include critical raw materials, semiconductors, and digital technologies. The EU has also become more concerned with the role of Chinese direct investments in Europe, with the EU Commission stepping up its screening efforts in this area. Indeed, Chinese FDI flows to Europe have declined from their high point of 18.46 billion U.S. dollars in 2017, to 10.34 billion in 2022. In spite of these calls for derisking the EU's economic relationship with China, economic links between the two remain as strong as ever, with EU exports to China having increased consistently for the past twenty years, while Chinese exports to the EU boomed in the post-COVID reopening, increasing by over 150 billion between 2021 and 2022.
