At an EU/China summit by videoconference on Monday 22 June, European leaders noted that Chinese commitments to rebalance trade relations with the European Union had gone unheeded, warning Beijing that this could hamper further progress in bilateral cooperation.
The President of the European Council, Charles Michel, the President of the European Commission, Ursula von der Leyen, and the High Representative of the Union for Foreign Affairs and Security Policy, Josep Borrell, had a first meeting with the Chinese Prime Minister, Li Keqiang, followed by an exchange with the Chinese President, Xi Jinping.
From the outset, the EU had shown limited ambition in terms of European expectations at the summit, which did not include a joint declaration or press conference. In an exchange “without taboos”, in the words of Mr Michel, the EU “stressed the need to implement the commitments made at the 2019 EU/China Summit”.
In April 2019, China promised to improve access for European companies to the Chinese market and to work hard to seal a comprehensive bilateral investment treaty (BIT) in 2020, talks on which were launched 7 years ago (see EUROPE 12232/7). This agreement is above all called for by the EU to rebalance this economic relationship, which is increasingly unfavourable to it (see EUROPE 12220/1).
While European companies have so far accumulated more foreign direct investments (FDIs) in China than the other way round, Chinese investment in Europe is growing and highly technology-focused. Taking full advantage of the opening of the European market, these FDIs threaten the technological advantage of European industry, which, moreover, has to tackle Chinese competitors heavily subsidised by public funding.
Despite the economic importance of the EU as China’s largest trading partner, despite the weight of their economic relationship – more than €1 billion worth of goods are traded daily – the EU has obtained little from China.
The Union’s strategy towards China, published at the beginning of 2019, takes a less peaceable stance in these bilateral relations (see EUROPE 12212/20, 12437/11), however. It is based on the idea of promoting European values, respect for the EU’s market economy and Beijing’s commitment to multilateral issues of common interest. On trade and investment, the EU calls for a ‘level playing field’ from China, in particular the reduction of subsidies to domestic Chinese companies and reciprocity in access to markets, including public procurement (see EUROPE 12504/6).
EU raises its voice
But the commitments made in 2019 have remained a dead letter (see EUROPE 12437/11), and the Covid-19 pandemic has heightened the feeling of dependence on China. Europeans are worried about their businesses, as confirmed by a debate in Parliament’ s plenary a few days earlier (see EUROPE 12509/9).
For Mr Michel, the time has come to “highlight in a concrete way the issue of strategic autonomy” (see EUROPE 12502/13, 12495/16, 12490/27, 12494/7).
Little by little, Europe is equipping itself with tools to control and limit Chinese access to the European single market. In addition to strengthening its trade defence instruments, the publication of its White Paper to counter non-Member State subsidies within the Single Market, 1 week before the bilateral summit, is not neutral, a European source has pointed out (see EUROPE 12507/1). Other instruments are also being developed or will soon be implemented. The investment screening mechanism will be implemented from October 2020. The proposal for an international instrument on public procurement is still being negotiated between the EU institutions.
The bilateral trade negotiations have made progress at the technical level, but in order for the talks to be concluded before the end of the year, Beijing must show signs of political goodwill, said Ms von der Leyen after the summit.
The European requests relate to market access in the automotive, biotechnology, telecommunications and IT services sectors. The EU also wants to address issues related to the role of Chinese state-owned enterprises, the transparency of state subsidies and the forced transfer of technology. Finally, the Commission intends to convince Beijing to accept robust provisions on sustainable development, climate and labour, as well as good dispute settlement.
As for China’s commitment to the WTO, European officials are disappointed by China’s weak commitment to update the organisation’s rules, notably on industrial subsidies or the fight against forced technology transfers.
The EU also wanted the summit to reach agreement on the 2025 cooperation agenda. This may be the case in the autumn, if China demonstrates that it is committed to concluding the BIT by the end of 2020, the Commission President warned. “We need action”, she said.
Ms von der Leyen also confirmed that a treaty on geographical indications was due to be concluded shortly.
EU reiterates its concerns about Hong Kong
European leaders also expressed to their Chinese partners their “serious concerns” about the National Security Law in Hong Kong, stressing once again that it was not in conformity with Hong Kong’s Basic Law nor with China’s international obligations (see EUROPE 12492/19).
This law “puts pressure on the fundamental rights and freedoms of the population protected by the law and the independent judiciary”, stressed Mr Michel and Ms von der Leyen in their joint statement.
In front of the press, Mr Michel recalled the economic importance of Hong Kong for the EU, home to some 350,000 European citizens. According to him, 50% of European investment in China transits through Hong Kong and 1,600 European companies are active in the city-state. “We must accept the political neutrality of these companies; we do not accept the pressure that would be put on them”, he warned.
For Ms von der Leyen, “Hong Kong’s autonomy has allowed it to prosper and be so successful”. This law could therefore have a negative impact on China, she added, indicating that the EU was consulting with its G7 partners on Hong Kong (see EUROPE 12509/6).
Another bone of contention is the issue of human rights. At the summit, this issue, including the treatment of minorities in Xinjiang and Tibet and the treatment of Chinese human rights defenders, was addressed, according to the Europeans. “Human rights and fundamental freedoms are non-negotiable”, said Ms von der Leyen, who hoped that the EU-China human rights dialogue would be held soon.
In addition, both partners discussed the global health situation related to Covid-19, its economic consequences and the race for the vaccine.
“Vaccines must be a public good, accessible and affordable for everyone”, said Mr Michel.
Ms von der Leyen recalled that the EU had provided “56 tonnes” of medical equipment to the Chinese authorities when Covid-19 first exploded in the country and acknowledged that China had also helped Europeans when they needed it.
Finally, on the climate issue, Europeans and Chinese are showing their common cause at the international level. However, Europeans would like Beijing to make a concrete commitment to climate neutrality while China’s greenhouse gas emissions, which account for 25% of global emissions, continue to rise.
The EU recognises that China needs more time to make a successful transition from its polluting industry and is aware that Chinese investment in renewable energy is already massive. However, it criticises the fact that investment in coal-fired power stations is continuing at a sustained pace. (Original version in French by Hermine Donceel with Camille-Cerise Gessant and Mathieu Bion)