The EU's China Dilemma: A Missed Opportunity or a New Dawn?
The relationship between the European Union and China has long been a complex and contentious issue, with the latter's economic might and political influence casting a long shadow over the bloc's ambitions. Three years ago, Ursula von der Leyen, the President of the European Commission, delivered a speech that, in hindsight, could not have been more prescient. She warned of China's growing economic power and its potential to disrupt the EU's economic landscape, a warning that has since become all too real.
In her speech, von der Leyen highlighted a range of issues, from China's unfair trade practices and subsidies to its monopoly over critical raw materials and forced technology transfers. She advocated for a new approach, one that would "de-risk" the EU's economic relationship with China, a term that has since become a rallying cry for those concerned about the bloc's economic security.
The speech was a call to action, urging member states to come together and address the growing vulnerabilities in their economic relationship with China. However, the response was mixed, with some member states brushing off her plea to diversify trade and others failing to agree on a common understanding of what de-risking meant in practice. The COVID-19 pandemic only exacerbated the lopsided trade trajectory, with every member state posting a trade deficit with China in 2025.
The Commission's efforts to impose extra tariffs on Chinese electric vehicles and boost domestic production have met with mixed results. While they succeeded in imposing tariffs, the process was contentious and divided member states. The Commission's attempt to grant itself greater powers to control sensitive exports and screen outbound investment was also met with political backlash and ultimately abandoned.
The Anti-Coercion Instrument, partially designed with China in mind, has yet to be triggered, despite von der Leyen's accusations of blackmail. The fear of retaliation from China has been a significant obstacle, with member states avoiding direct mention of China in joint conclusions and instead tackling the topic as part of a wider point on geo-economics and competitiveness. The threat of painful reprisals has cast a shadow over von der Leyen's grand vision, with diplomats admitting that the prospect of tit-for-tat is the root cause of the intractable divisions among the 27 leaders.
Despite the challenges, there is a growing recognition among some EU leaders that the relationship with China is no longer just about economic opportunity but also about vulnerabilities, dependencies, and economic security risks. French President Emmanuel Macron and Belgian Prime Minister Bart De Wever have recently hardened their stance on China, echoing von der Leyen's assertive approach. The Commission is now assessing the adequacy of existing trade weapons and the possibility of devising new ones, with von der Leyen emphasizing the need for a balanced approach to dialogue and competition.
However, the road ahead is fraught with difficulties. China's economic might and political influence over EU countries are significant, with billions in goods, services, investments, and infrastructure projects at stake. The fear of retaliation and the complex dynamics of member states' relationships with China continue to cast a shadow over the EU's efforts to address the China dilemma. The question remains: will the EU now heed von der Leyen's warnings and take the necessary steps to protect its economic interests, or will it continue to grapple with the consequences of a missed opportunity?
