The European Union and China

The European Union and China

Updated June 2, 2023
The European Union and China
Views within the 27-member European Union (EU)
investors amid PRC policies that limit foreign investment
regarding the People’s Republic of China (PRC, or China)
and subsidize domestic firms in strategic sectors. The EU
have hardened and now mirror more closely U.S. and
has worked with the United States and Japan to develop
congressional concerns about China’s global influence. In a
approaches to counter China’s subsidies, but the group has
2019 position paper, the European Commission (the EU’s
not moved to implement any specific proposals. Although a
executive body) described China as “a cooperation partner
proposed EU-China Comprehensive Agreement on
with whom the EU has closely aligned objectives, a
Investment (CAI) remains on hold (see below) and China’s
negotiating partner with whom the EU needs to find a
direct investment in Europe hit an estimated decade low of
balance of interests, an economic competitor in the pursuit
€7.9 billion in 2022, several major investment projects have
of technological leadership, and a systemic rival promoting
moved forward, which some experts contend could set the
alternative models of governance.” Some observers viewed
stage for further EU-China economic integration in the
the description of China as a competitor and rival as
medium-to-long term. For example, Airbus (a European
indicative of mounting frustration with China’s trade and
company) announced a new investment in April 2023 that
investment practices, aspirations to become a global
would double the production capacity of its China joint
technology leader and standard setter, and promotion of a
venture, and PRC electric vehicle battery manufacturers—
governance model at odds with EU values. In May 2023,
including national champion firm Contemporary Amperex
EU foreign policy chief Josep Borrell stated that “partner,
Technology Co., Limited (CATL)—have invested in
competitor, and systemic rival” remained the EU’s general
battery plants based in Germany, France, Hungary, and the
approach to relations with China, while underscoring it
United Kingdom (which is no longer an EU member state).
would be necessary to recalibrate the three elements’
“relative weights” based on China’s actions and increasing
Supply Chain Measures. In September 2021, the United
assertiveness.
States and the EU launched a new Trade and Technology
Council (TTC) to address a wide range of trade and
EU-China relations have been tested in recent years by
technology issues, including enhancing cooperation in
China’s so-called wolf warrior diplomacy in Europe, use of
sectors where China controls key supply chain inputs, such
economic coercion, alleged information manipulation and
as critical mineral processing and pharmaceuticals.
interference efforts, and continued “no-limits” friendship
Additionally, the European Commission in December 2020
with Russia (especially since Russia’s 2022 full-scale
published a regulatory “toolbox” for 5G network rollouts
invasion of Ukraine). Some EU officials also express
that some analysts contend could limit the ability of
concern about the PRC’s human rights practices and
Chinese firms to meet the standards for participation.
intentions toward Taiwan. In March 2023, European
Several EU member states have adopted measures that limit
Commission President Ursula von der Leyen called for a
and in some cases exclude Huawei’s participation in their
“sober assessment” of EU-China relations. The EU has
5G network buildout. In March 2023, the European
adopted or is weighing measures to bolster its economic
Commission proposed a Critical Raw Materials Act to
security and democratic resilience and is advancing
address the EU’s reliance on imports from “quasi-
partnerships in the Indo-Pacific. At the same time, some
monopolistic third country suppliers.”
European policymakers appear to be wary of U.S.-China
tensions and reluctant to antagonize a major economic
Response to PRC Economic Coercion. Some EU
partner. EU officials also point to a need to cooperate with
policymakers have expressed concerns about China’s use of
China on global challenges, such as climate change. EU-
economic coercion—frequently defined as the threat or
China relations are of interest to some Members of
imposition of economic costs by a state on a target with the
Congress given the EU’s role as a key U.S. diplomatic and
objective of extracting a policy concession—to advance
economic partner.
certain geopolitical objectives. In 2021, China imposed a de
facto trade embargo on Lithuania and European firms that
Economic Issues
source from Lithuania after Vilnius announced it would
Although some European policymakers seek to sustain or
open an office in Taiwan. The EU is finalizing an anti-
coercion instrument that could allow the EU to respond as a
deepen economic ties with China, they appear to share U.S.
concerns over China’s industrial policies, which have led to
bloc to economic coercion against a single member state,
among other tools.
asymmetric trade and investment advantages for China, as
well as China’s growing control of certain global supply
Human Rights and Other Issues
chains. EU officials also have expressed concern regarding
China’s use of economic coercion for political objectives.
European criticism of human rights violations in China, and
China’s reaction to such criticism, is a source of tension in
Trade and Investment Asymmetries. The EU has sought
EU-China relations. Some European policymakers have
to increase market access in China for European firms and
condemned human rights violations of the Uyghur Muslim
https://crsreports.congress.gov

The European Union and China
and other Muslim populations in China’s Xinjiang region.
response to Russia’s war against Ukraine. The Baltic states
In March 2021, the EU sanctioned four officials and one
left the 17+1 in 2021 and 2022.
entity in Xinjiang under its Global Human Rights Sanctions
Regime, in tandem with sanctions imposed by the United
China’s Perspective
States and other allies. China countered with sanctions
While China generally portrays its relationship with the EU
against EU-based entities and individuals. The exchange of
as friendly and cooperative, China’s top diplomat Wang Yi
sanctions brought bilateral relations to a low point and put
has described the EU’s acknowledgement of China as
ratification of the CAI on hold.
simultaneously a partner and a rival as the product of
“cognitive dissonance” that is undermining China-Europe
EU and member states’ engagement with self-ruled Taiwan
relations. China’s EU policy includes rhetorical support for
is another point of contention in relations with China, which
European integration and autonomy, which some Chinese
claims sovereignty over the island democracy and has
officials have described as a way to promote a multipolar,
sought to limit other countries’ interactions with it. The EU
less U.S.-centric world order.
maintains a “One China” policy, while warning that
unilateral changes to the status quo and the use of force
China’s support for the concept of EU “strategic autonomy”
would be detrimental to the EU-China relationship.
seems partially attributable to China’s desire to weaken
transatlantic ties, at a time when the United States is
Differing Views Within Europe
seeking to strengthen ties with Europe to counter China in
Despite seemingly growing agreement within the EU on
certain areas. In his April 2023 meeting with Macron and
certain aspects of relations with China, forging a consistent,
von der Leyen, China’s top leader, Xi Jinping, expressed
consensus-based policy has often been difficult. Major EU
his hope that “the EU will develop a more independent and
decisions on external economic relations and foreign policy
objective perception of China and adopt a pragmatic and
often require unanimous agreement from the EU’s 27
positive China policy.” He also warned against adopting a
members, which have varying national security concerns
narrative of “democracy vs. authoritarianism” and “stoking
and economic interests, as well as differing bilateral
a new Cold War.”
relations with China. Some member states have deeper
trade and investment ties to China, making economic
The PRC has sought to use Russia’s invasion of Ukraine to
coercion a potentially more worrisome prospect for them
advocate for changes to Europe’s security architecture. In
than for others. Some observers suggest that Germany, for
March 2023, State Councilor and Foreign Minister Qin
example, remains relatively cautious about upsetting
Gang called the conflict “[essentially] the eruption of the
relations with China, in part because of its extensive trade
problems built up in the security governance of Europe”
and investment relations. Further complicating efforts to
and argued “the legitimate security concerns of all parties,”
reach consensus on China, views may differ among key
including Russia, “should be respected” to achieve “durable
stakeholders within EU member states, such as political
security” in Europe. According to some Western officials
parties, business groups, and civil society organizations.
cited in international media, Special Representative on
Eurasian Affairs Li Hui’s May 2023 tour of Europe was
Some observers asserted that an April 2023 joint visit to
aimed at “testing the unity of the West and trying to show
China by European Commission President von der Leyen
initiative.”
and French President Emmanuel Macron demonstrated
Europe’s differing approaches to China. Prior to the visit,
U.S.-EU Cooperation and Congressional
von der Leyen delivered a speech in Brussels outlining a
Interests
tougher approach to China and a need to “de-risk” (but not
The Biden Administration and the EU have sought to
“de-couple”) Europe’s economic relations with China to
deepen cooperation on shared concerns about China. In
avoid dependence. President Macron, on the other hand,
2021, the two parties relaunched the U.S.-EU Dialogue on
emphasized economic and commercial ties by bringing
China. The United States and the EU also coordinate on
along a large delegation of French business representatives.
shared concerns about China through the TTC and the
Macron further stirred controversy in an interview
Group of Seven (G7). At the same time, varying economic
following the trip in which he urged Europe to build
and political interests among EU member states, as well as
strategic autonomy and avoid “getting dragged” into a
areas of friction in the broader transatlantic partnership,
confrontation between China and the United States over
could impact cooperation and coordination on China.
Taiwan. At the same time, the two leaders attempted to
Among other areas of potential oversight, Congress might
project unity during the visit by pushing China to play a
assess transatlantic cooperation under the U.S.-EU
larger role in ending Russia’s war against Ukraine.
Dialogue on China and other platforms. Congress also
might evaluate transatlantic cooperation on countering PRC
Some observers have viewed the PRC-led China-Central
influence in other global regions and alignment on policies
and Eastern European Countries engagement mechanism,
whose effectiveness may partly depend on coordinated
formerly known in Europe as “17+1,” as potentially driving
action, such as export controls on sensitive and emerging
a wedge between western and central and eastern Europe.
technologies. Additionally, Congress might evaluate the
The platform’s prospects have grown increasingly
scope of China’s economic and other ties to individual EU
uncertain, however, as some participants express
members and assess their policies on China-related issues.
disappointment that China’s pledges of investment and
trade have not materialized and frustration with China’s
Ricardo Barrios, Analyst in Asian Affairs
Sarah E. Garding, Analyst in European Affairs
https://crsreports.congress.gov

The European Union and China

Michael D. Sutherland, Analyst in International Trade and
Derek E. Mix, Specialist in European Affairs
Finance
IF10252

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