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EU-China Relations and the Future of Multipolarity. What Is Germany’s Choice?

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Julia Melnikova

European-Chinese relations have been on pause since the end of 2020. The politicisation of interaction, caused both by objective disproportions in the development of trade and investment partnerships, and by the desire of Brussels to control the relations of member states with China, became the main trend in the development of dialogue in the second half of the 2010s, which led to the transformation of Beijing from a “strategic partner” (this status was received in 2003) to a “strategic partner and systemic rival” of the EU (for the first time, such an assessment was made by Ursula von der Leyen and subsequently found its way in the China Strategy 2019, prepared by the European Commission jointly with the European External Action Service, reflecting the growing perception of China not only through economic, but already through geopolitical lenses.)

The confrontational tendencies reached their apogee in 2021. First, against the backdrop of accusations that China violated human rights in Xinjiang and the subsequent exchange of sanctions, as well as the failed ratification of the Comprehensive Investment Agreement, the text of which was incomplete as of the end of 2020. Then Lithuania defiantly left the 17+1 format, provoking significant trade restrictions on the Chinese side and a collective lawsuit by the EU against China in the WTO. Naturally, for the first time since 2008, the EU-PRC summit was not held at the highest level and a number of new anti-Chinese bills appeared. Incidentally, the summits were also not held in 2011 and 2014, but for technical, not political reasons. In 2008, the event was cancelled due to the Dalai Lama’s visit to Paris, which was then supposed to host the summit. Trade Compliance Regulation amendments came into force in 2021, increasing the EU’s ability to retaliate pending the completion of WTO dispute settlement procedures. In 2022-2023, amendments to the Trade Compliance Regulation in the field of intellectual property protection, the development of an Instrument against economic coercion by third countries and a stricter International Public Procurement Regulation Mechanism, are planned. In 2022, the summit took place in the context of developments around Ukraine, but did not lead to satisfactory results for the EU.

Given that the pan-European line is acquiring a distinct protective character, it could be amended by the member states that are the stakeholders of the dialogue, primarily Germany. The government of Olaf Scholz was destined to make unplanned strategic decisions regarding all the main partners outside the EU — the USA, Russia and China. This could have fundamental consequences for European-Chinese relations.

The role of Germany in the EU policy towards China

Germany has historically had a fundamental impact on the creation of a model for interaction between the EU and China. In the 1990s it was the interests of German exports that led to the prioritisation of economic gains, and to some extent the de-prioritisation of political concerns and human rights issues — the EU’s policy of “meaningful engagement”. Such a policy was proclaimed in 1995, but the document of the European Commission was based on the 1993 German Concept for Asia. Subsequently, the government of Gerhardt Schroeder, who earned a reputation as a promoter of Chinese interests in Europe, made great efforts to develop the dialogue, and, after the Eurozone crisis in 2010, the dialogue was supported by the government of Angela Merkel. During this period, the interests of business — primarily the automotive industry and engineering concerns — were a priority for Germany. Merkel also defended to the last the independence of the German and pan-European line in relation to China as an alternative to American influence and a way to avoid bipolarity. The 2020 summit, under the German presidency, was to be held in Leipzig in the presence of all heads of EU member states and would end with the signing of many agreements, first and foremost, the Comprehensive Investment Agreement.

However, the arrival of the new government led to a strategic pause in German-Chinese relations as well. In the coalition agreement between the SPD, the FDP and the Greens, the partners speak out strongly against human rights violations in the PRC and see cooperation as possible only if the situation changes. They also state the need to overcome “dependence” on China in critical sectors and the impossibility of ratifying the cooperation agreement amid the current conditions. In August, it became known that the German China strategy would be updated by early 2023.

Reasons for change

Changes in the position of Germany are largely due to external factors. The growth of the PRC’s role in international affairs in itself stimulates the involvement of geopolitical arguments in the statements on China and its departure from a pragmatic discourse. This manifested itself in the 2020 Indo-Pacific Guidelines, where Berlin comments on the need for activation in the Indo-Pacific, including the desire for stability and “rules-based” order in the region, regarding the strategic rivalry between the US and China. The document does not focus on the military, but indicates the need to establish and protect interests. Indirectly, the feeling of instability regarding China is exacerbated for Germany by the escalation of tension in Europe, which has already indicated a departure from establishing an individualised approach in relation to Beijing in favour of a pan-European one.

However, external factors alone are not enough for a transition to soft balancing, since Beijing does not pose an immediate security threat to Germany. Structural foundations for changes were accumulating within the country in parallel with the pan-European ones. Germany and China are indeed, in a certain sense, in a relationship of interdependence: since 2016, China has been Germany’s biggest trading partner, in 2021 it accounted for 8% of exports from and 11.4% of imports to Germany, and the share of Germany in pan-European trade turnover with China is more than 35%. This naturally made it an interested player in further opening up the Chinese market and improving conditions for investors through the IPO. With no prospect of resolving these issues, incentives to cooperate have diminished and fears have escalated.

The most sensitive area for Germany is interaction with China in the high-tech sector. If in the mid-2010s it developed by leaps and bounds, even documents were signed on pairing Industrie 4.0 and Made in China-2025. Then several acquisitions and attempts by Chinese capital to acquire the flagships of German robotics and electronics in 2016-2017 led to an increase in alarmism and a change in domestic investment legislation. The Union of German Industrialists in 2019 even released a report on rivalry with China. In some industries, however, dependence on the Chinese market in absolute terms can indeed be called critical. The German automotive industry supplies more than half of its production to the Chinese market. A similar situation, but in the opposite direction, is observed in the microelectronics market, which stimulates attempts to somehow equalise the disproportions.

The implications of change for Europe-China relations and beyond

Despite the fact that Germany’s defensive course towards China cannot yet be called either final or established, the strengthening of its geopolitical position makes Berlin’s position closer to Paris. There were no fundamental disagreements between the two largest EU states on the Chinese issue, but until recently they proceeded from different motivations. For Paris, the interest in cooperation has historically been driven by strategic and geopolitical considerations, and the economic interdependence of the two countries is not so high, and therefore the interest of Paris in maintaining cooperation trends has been lower in recent years. In addition, Macron’s course of strengthening the EU’s common position towards China was somewhat at odds with Berlin’s desire for pragmatism and individualisation in its approach. Today, when Germany also speaks in favour of a stronger common European position in relation to China, and economic motivation is drifting towards a decrease in interdependence, a platform is being created for uniting the efforts of the tandem, which means further degradation of the European-Chinese dialogue.

The potential activation of the Franco-German tandem regarding China and the subsequent aggravation of confrontational tendencies in the EU foreign policy towards the PRC, in turn, are important for Russia in the same sense that they are important for the world order as a whole. The European-Chinese diagonal in the geometry of world politics is no less important than U.S.-China, Russian-American or Russian-Chinese relations. Its very presence and possession of independent dynamics in the 2000s was evidence of the polycentrisation of world development, the complication of the structure of international relations. Its absence, accordingly, will once again testify to a return to a binary perception of reality.