China Power

What’s New About China’s Latest EU Policy Paper?

The last policy paper was issued just four years before. What changed?

By Julian Chan for
What’s New About China’s Latest EU Policy Paper?
Credit: Flickr/ Friends of Europe

In December 2018, China released its latest policy paper on the EU. It has only been four years since the previous one was published, amid a highly interesting time of global political dynamics and increasing policy divergence between the two global powers. This essay aims to provide an analytical comparison between the two papers, key events since 2014 that may help explain China’s position and actions toward the EU, and progress made on the China-EU 2020 Strategic Agenda.

The Timing

The first question to be answered: Why release a new policy paper in 2018, only four years since the release of the last policy paper, compared with an 11-year gap previously?

The timing of the publication for the new China Policy Paper on the EU has been particularly noticeable, as the lead-up to December 2018 was a rough period for China’s trade and economic performance. U.S.-China relations also seem to be playing an increasing role in shaping the economic front of EU-China relations. Arguably, the most conspicuous headlines affecting China’s trade were incidents relating to two of China’s champion telecommunications and electronics firms. First, ZTE plunged into an abyss from the short-lived U.S. sales embargo on American-made semiconductors vital for its products. That was followed by the arrest of Huawei’s chief financial officer Meng Wanzhou, in addition to numerous countries across Europe, North America, and Oceania scrutinizing the firm or even contemplating banning Huawei from building their local 5G infrastructure.

The two incidents, led by the United States, clearly aimed to curb China’s ambitions in the “Made in China 2025” program, while highlighting China’s urgency to look away from (or at least become less reliant on) the United States, and instead look toward the EU more than ever in terms of technological absorption and know-how. Therefore, China likely felt the need to warm up toward the EU and further recognize its importance by publishing this new policy paper.

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China’s Rationale

Since the previous policy paper in 2014, a few key factors may help explain why China felt the urgent need to renew its stance and relationship with the EU.

First, China’s attempt to lobby the EU to recognize China as a Market Economy Status in 2017 has stalled, and this necessitates a reorientation of China’s economic priorities toward the EU.

Also, despite China’s anticipation amid less-than-optimum trans-Atlantic relations, the EU did not conclude any trade deals with China after the 2018 EU-China Summit (even after China released Nobel Peace Prize Winner Liu Xiaobo’s wife Liu Xia, in an attempt to warm relations with Germany, a country China sees as the most important in the EU). Instead, the EU chose to sign an Economic Partnership Agreement with Japan right after the EU-China summit.

Next, there has been a relative lack of enthusiasm and even frustration in the EU for China’s Belt and Road Initiative, five years since its launch. There are a few exceptions where projects have been carried out in Europe and its neighborhood area – but these were not necessarily examples of success in the eyes of the EU. Rather, they served as confirmation of what the EU believes to be China’s genuine motives in the region. The concern over the BRI can be clearly seen by China’s call in this policy paper for “active participation of the EU and other European countries in a joint effort” in the BRI, signifying the BRI has yet to find a concrete direction in Europe. For China, there has not been sufficient response from European participants about how to drive the initiative forwards.

China’s policy paper was also a response to the EU’s publication of the EU-Asia Connectivity Strategy in September 2018 which heavily addressed China’s agenda without specifically referring to China.

China is more determined than ever before to show itself to the EU as a real, dedicated, and committed player in the game of globalization and multilateral trading order. Therefore China wants to be taken seriously by the EU at an eye-to-eye level, as President Xi Jinping attempts to address a noticeable domestic economic downturn and divert attention or find new solutions. As China begins to slowly lose its comparative advantage as a low-cost manufacturing country, it is attempting to shift toward a consumption and innovation-led economy, particularly through “Made in China 2025,” which not only aims to catch up to European levels, but has now specific targets and benchmarks to surpass advanced technological powers.

China Hardens Its Position on Sensitive Issues

One area worth highlighting in this new China Policy Paper on the EU is the notable hardening of China’s position toward the EU on the political front, regarding what China sees as sensitive or problematic issues, namely Taiwan, Hong Kong, and Tibet. Right from the beginning, the paper highlighted (in essence demanded) mutual respect, equality, and upholding the one-China principle from the EU. China’s Policy Papers on the EU in 2003 and 2014 largely chose words such as “asking” or “requesting” the EU to follow China’s lines on this issue. However, in 2018, this language has shifted to demanding the EU “should explicitly oppose” a list of demands and red-lines that is much longer than in previous papers, while also being prescriptive, even didactic, in sternly warning or teaching how the EU should behave and act toward China. The tone and language are direct, without subtlety and leave no room for doubt or negotiations. Such red-lines have become increasingly noticeable and clear in reference to Hong Kong and Taiwan, which China sees as a core matter of national security, particularly with political developments since 2014 (including the Umbrella Movement in Hong Kong, as well as the Democratic People’s Party taking power in Taiwan) where Beijing’s relations in both have grown significantly tense.

In the policy paper, China demanded the EU to behave in the following manners on Taiwan:

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The EU should explicitly oppose “Taiwan independence” in any form, support China’s peaceful reunification, and handle Taiwan-related issues with prudence. Exchanges between the EU and Taiwan should be strictly limited to nonofficial and people-to-people activities, and there should be no official contact or exchanges in any form. The EU should refrain from signing with Taiwan any agreement with sovereign implications or official in nature. No institutions of an official nature should be established. The EU should not endorse Taiwan’s membership in any international organization where statehood is required, not sell Taiwan any weapons or any equipment, materials or technologies that can be used for military purposes, and not carry out military exchanges or cooperation in any form.

On Hong Kong and Macao:

Given that Hong Kong and Macao are China’s special administrative regions, their affairs are part of China’s internal affairs and should not be interfered in by the EU side.

On Tibet and Xinjiang:

The EU should not allow leaders of the Dalai group to visit the EU or its member states in any capacity or under any name to carry out separatist activities, not arrange any form of contact with officials from the EU and its member states, and not support or facilitate any anti-China separatist activities for “Tibet independence.” It is also imperative that the EU side not support or facilitate the East Turkestan Islamic Movement and any other activity of anti-China separatism, violent terrorism and religious extremism.

Despite the iteration of a strong position, such firm language and tone would likely give justification to the belief in Europe that China is increasingly assertive not only domestically but also attempting to shape external actors’ behavior, as has been portrayed by some European media in recent years. In this policy paper, the content above seems to be reaffirming this theory, rather than dispelling it.

Such aggressive language also raises further questions about the heavy-handedness of China’s approach to human rights and treatment of ethnic minorities in regions Beijing regards as “troubled.” In this context, the EU-China Human Rights Dialogue, which was launched in 1994, was entirely omitted in this new policy paper for the first time. The lack of mention suggests that China no longer sees the Human Right Dialogue as a relevant or useful tool in engaging Europe, rendering it purely ceremonial and negligible in value. The policy paper further added that “The European side should view China’s human rights conditions in an objective and fair manner and refrain from interfering in China’s internal affairs and judicial sovereignty in the name of human rights.” This seems to suggest that the gap on this issue between China and the EU has widened than ever before.

Moreover, the paper says that “exchanges on an equal footing and mutual learning should be enhanced between our legislatures, political parties, localities and social groups.” However, little evidence has been shown in the policy paper regarding how China will take concrete steps to learn from the EU in order to reduce misunderstandings and difficulties in trade or investment. In reality China is essentially calling for the EU to understand its systems and structures, which many in the EU may find difficult to swallow, given how China is currently perceived in the EU.

Evaluating the China-EU 2020 Strategic Agenda

Despite a noticeable hardening of the political rhetoric, cooperation between China and the EU has made significant progress in several fields, as was highlighted by the policy paper. On the security and defense front, there has been in-depth progress on joint actions in practical cooperation at UN level, in policing and counterterrorism communication, and in policy dialogues on regional affairs, among others. This demonstrates China’s seriousness in wanting to be treated on equal footing as a major global power.

Yet a major divergence seems to remain, particularly in how China and the EU understand development: China still sees development in purely economic terms, and even calls for the EU to “avoid politicizing economic and trade issues, and ensure the sustained, steady and win-win progress of China-EU economic and trade relations.” However, since the last China policy paper on the EU in 2014, China has precisely run into a series of political problems with its economic projects under the Belt and Road Initiative, particularly in Central and Eastern Europe including the Balkans (such as the Hungary-Serbia Railway and Montenegro Highway Construction Projects). It has become increasingly clear that avoiding politics will not resolve problems that concern wider European community interests, nor would this facilitate China’s economic ambitions or resolve long-standing trade issues.

In terms of trade, China has for the first time clearly indicated its wish in this new policy paper to launch a joint feasibility study on China-EU Free Trade Area. Yet from the perspective of the EU, the conditions for this are still far from ripe: The ongoing EU-China Bilateral Investment Treaty continues to face multiple problems. A history of trade issues ranging from garments to solar panels to steel suggests that there are still significant and fundamental differences to be resolved, particularly in relation to major issues such as reciprocity, market access, and ensuring level playing fields.

In more recent months, high-tech exports have been a source of major unease for the EU, particularly with China’s technological firms receiving strong state backing or state aid. While China has called for the EU to “ease its high-tech export control on China,” the “Made in China 2025” program has concretely targeted leapfrogging, surpassing, and threatening some EU member states (particularly those with advanced technological capacities), so the EU would most likely remain extremely cautious on exporting its technology to China. Similarly, China’s call for closer cooperation with the EU in scientific research, innovation, and emerging industries would lead the EU to be wary of China’s motives and agenda.

One positive element however, was highlighted by the plan for Chinese companies in Europe to set up the China Chamber of Commerce to the EU. This, if operational according to mutual interests, would provide a step in enhancing mutual trust and understanding for both sides, starting from trade and business dialogues, and reducing tensions and differences.

Conclusion and Policy Recommendations

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This latest China Policy Paper on the EU shows that despite the strengthening of cooperation between China and the EU, there are increasing policy and normative differences. The priorities and the focus of the policy paper, particularly on the economic front, are somewhat short-sighted insofar as being mostly relevant only under contemporary U.S.-China relations with Trump’s administration (i.e. moving away from globalization and multilateralism). Yet it is obvious that China’s position would radically shift if it finds itself at the disadvantaged end of the WTO game; in such a context Beijing would be less keen to call for cooperation with the EU. As China urges the EU to uphold such a trading system (which is essential for China’s economic survival), China is also worried about the EU potentially stepping up mechanisms in investment screening and protection, and increasing restrictions to entry to the EU’s markets, such as for Huawei’s 5G technologies. The last thing China would like to see is for the EU to start imposing U.S.-China style trade tariffs and causing unforeseeable disruptions, and so China still needs the EU as a predictable and stable economic partner. Despite the stern political warnings that China outlined toward the EU, in the end such rhetoric may not be much more than paper tigers, as China’s engagement in the EU is still strategically important for China’s continued growth and reach in influence.

With the release of the policy paper, two policy recommendations can be derived on how to move forwards for China-EU cooperation.

First, on security, China has the potential to play a part in the new EU Permanent Structured Cooperation in Defense, in areas where the EU and China share common ground, and in tackling global security challenges. This particularly includes Africa, where China has significant interests and engagement (through the Belt and Road Initiative), while the EU and China can strengthen cooperation and coordination effort on cross-border issues such as counterterrorism and counterpiracy, in addition to supporting the UN.

Second, in addition to the China-EU Strategic Agenda 2020, which was written in 2013, a more effective response for China toward the EU should look much further beyond, particularly into the EU’s Multiannual Financial Framework for 2021-2027 focusing on the EU’s external action and fields of priorities. As the global geopolitical environment has evolved significantly since 2013, closer China-EU cooperation should see China developing an in-depth understanding of, recognizing, or even aligning to the EU’s work programs in order for China’s efforts in Europe to have more reasonable chances of success.

In the end, there still appears to be a significant divergence between China and the EU on multiple fronts, but a willingness of China to understand the EU, with more respect for the EU’s values and agenda, would be strongly in China’s strategic interest, and would give more strength to a bilateral policy cooperation framework that is gradually in place.

Julian Chan is a founding member of the Institute of China-Europe Affairs, a former member of the Political and Economic department at the Asia-Europe Foundation and the Europe Asia Policy Centre for Comparative Research, with a Master’s in EU International Relations and Diplomacy Studies from the College of Europe.