EU chief urges caution in tech trade with China: ‘It is neither viable…’

Bloomberg | | Posted by Animesh Chaturvedi
Mar 30, 2023 05:15 PM IST

Ursula von der Leyen, head of the European Commission, warned of China's toughening strategy but urged for reducing risks and maintaining communication.

The European Union’s Ursula von der Leyen warned of a deliberate toughening in China’s strategy, with a new era of security and control, but urged the bloc to respond by working to reduce risks rather than decouple from the Asian nation.

Head of the European Commission argued in a speech in Brussels for ensuring “diplomatic stability and open communication lines with China.”(AP)
Head of the European Commission argued in a speech in Brussels for ensuring “diplomatic stability and open communication lines with China.”(AP)

Despite pressure from the US for a tougher EU position on China, the head of the European Commission, the bloc’s executive, argued in a speech in Brussels for ensuring “diplomatic stability and open communication lines with China.”

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“I believe it is neither viable - nor in Europe’s interest - to decouple from China,” von der Leyen said Thursday. “Our relations are not black or white – and our response cannot be either. This is why we need to focus on de-risking – not decoupling.”

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European leaders are trying to calibrate their relationship with China as it becomes an increasingly difficult interlocutor, partly given Xi’s close ties to Russian President Vladimir Putin. Von der Leyen noted that China’s stance on Russia’s invasion of Ukraine will be “a determining factor” in EU-China relations.

China is Europe’s second-largest trade and investment partner and the two economies exchanged €795 billion ($863 billion) in goods and services in 2021, according to EU trade data. Europe imports more goods from China than any other nation and China’s massive 1.4 billion consumer marketplace remains a critical destination for European exports of cars, pharmaceuticals and machinery.

Von der Leyen’s speech comes ahead of her visit to China next week with French President Emmanuel Macron, when both leaders will meet with Xi. Their trip follows the visit of Spanish Prime Minister, Pedro Sanchez, and after German Chancellor Olaf Scholz’s trip in November.

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Chinese President Xi Jinping “essentially wants China to become the world’s most powerful nation,” von der Leyen said. “We have seen a very deliberate hardening of China’s overall strategic posture for some time. And it has now been matched by a ratcheting up of increasingly assertive actions.”

Control Investments

Von der Leyen said that the bloc is preparing plans including a new instrument to control European investments abroad in critical sectors, as it seeks to strengthen its toolbox in dealing with China.

“We need to ensure that our companies’ capital, expertise, and knowledge are not used to enhance the military and intelligence capabilities of those who are also systemic rivals,” von der Leyen said.

Her commission, she added, is working on a targeted instrument on outbound investment that would focus on a small number of sensitive technologies where investment leakage could bring risks to national security. The plan will be part of a new Economic Security Strategy coming later this year.

The proposal comes amid growing concern in European capitals about China’s expansionary ambitions on issues including trade, technology and foreign relations.

Von der Leyen wants to reduce the risks in critical areas like the economy and trade, but wants to cooperate on climate, health and biodiversity.

But some countries including France, the Netherlands and Lithuania want not only to de-risk the relationship but also decouple from China, people familiar with the matter said. The Hague is one of the capitals in favor of the proposal for outbound investment screening, the people added, on condition of anonymity because the discussions are private.

Xi used two days of talks in Moscow earlier this month to firmly align with Russia against the US. The visit by Xi, his first to Russia since Putin invaded Ukraine just over a year ago, marked a political win for both leaders. Xi saw an opportunity to push back at the US and buttress his image as a global statesman, while Putin could show he has the support of one of the world’s most powerful leaders even as the US and its allies try to isolate him.

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