A missed opportunity for a China-EU grand bargain

Of all the questions one could ask of president Xi Jinping’s first visit to Europe since the pandemic, the overarching one is: are China-EU relations better at the end of it than a week ago? The answer is no, on any sensible definition of what improvement would consist of. But it makes sense, too, to ask what improvement it could in principle have brought, in order to understand what opportunity was missed. 

Understanding Xi’s primary purpose is easy enough. His visits to Serbia and Hungary after France illustrate a desire to drive wedges between Europeans to forestall any consensus in favour of a tougher stance against China. Straightforward, too, are Belgrade’s and Budapest’s reasons for hosting Xi. Chinese attention offers another diplomatic leg to stand on in the face of EU pressure against their warm links with Russia. Hungary, in particular, is benefiting from Chinese investments in battery and other green tech manufacturing for the EU market.

But what did Emmanuel Macron want to achieve? Xi’s meetings in France featured pleas for the protection of automakers against Chinese “overcapacity” in electric vehicles — evidently the EU anti-subsidy investigation launched at French behest is not seen as enough. Paris managed to stave off, for now, tariffs on cognac threatened by Beijing in response. But there was no perceptible change on the divisive issue of Beijing’s supportive stance towards Russia despite its war against Ukraine.

This is thin gruel. All the more so as France appeared as demandeur, asking a bit too insistently for “balance” in trade relations. It was all too close for comfort to chancellor Olaf Scholz’s recent trip to Beijing, where he ran a similarly mercantile errand for corporate Germany.

France, however, aspires to more than Germany. Just weeks ago, Macron called for a Europe of power, one that shapes the world around it — beyond, presumably, the tariff rates for cognac. Great strategic moves are those which set the world on a different path. The missed opportunity this week was the failure to seek a grand bargain to achieve this.

What, most profoundly, do Europe and China want from one another? Europe rightly deems Russia’s assault on Ukraine existential for its security and its liberal democratic way of life. China has taken the other side. Europeans also fear China is sabotaging Europe’s green tech self-sufficiency by flooding it with cheap products. 

Beijing wants a multipolar world order, which requires preventing Europe from aligning too closely with a US agenda of technological containment and “friendshoring” of supply chains. This is coupled with a domestic growth agenda premised on exporting large amounts of green tech — which requires keeping rich-country markets open.

Finally, both sides want to prevent the EU-China relationship from turning into a tail wagged by the US dog.

There is the making of a grand bargain in this combination. It would require both sides to move on from entrenched positions to reap greater advantages elsewhere. The key is to crystallise the nature of the choices: for China, having to choose between Russia and Europe; for the EU, to choose between China’s support for Russia’s war and its role in supplying Europe. If Macron is serious, he would seek to induce China to distance itself from Russia, in return for a secure commercial presence in Europe.

Xi would hardly disown Vladimir Putin publicly. But could Beijing effectively stop material support and sanctions circumvention, and tacitly cease opposing a confiscation of Russian state assets? Europe would not sign a death warrant for its green manufacturing sector, nor ignore hybrid security threats. But could it recalibrate its green transition to make ample room for both EU-made and Chinese products, accommodating China’s commercial plans?

France is ideally placed to pursue such a geopolitical pivot. Paris is currently the strongest proponent of locking Chinese imports out. It is, conversely, in the best position to offer the concession of letting China in further. As the European power most sensitive to threats to disinvest from euro government bonds should the EU confiscate Russian state assets, it has the most to gain if Beijing scales down its solidarity with Moscow.

Europe cannot welcome the wiping out of its industry. But it needs all the green tech it can get. For example, adding even the scariest estimates of Chinese EV exports to the EU’s own capacity falls far short of what is needed for Europe’s 10mn or so annual new car registrations to be emissions-free by 2030.

France has shown how public procurement initiatives can secure a pipeline of orders for local manufacturers. Paris has conditioned subsidies, including a leasing scheme allowing low-income commuters to rent an electric car for €100 per month, on the carbon emitted in the production and transport of the vehicle. The effect was to exclude most non-European EVs.

Many will dismiss a China-EU grand bargain as unrealistic. But it was not realistic to expect Richard Nixon to normalise ties with Mao’s China until he did; nor to expect Mikhail Gorbachev to dismantle communism in Europe until he did. That is the point of geopolitical strategy: to change the realities of the world so as not to be paralysed by them.

martin.sandbu@ft.com