The impact of Russia’s war against Ukraine on Sino-European relations

ABSTRACT

This paper analyses the development of Sino-European relations following Russia’s attack on Ukraine. I argue that the behaviour of European and Chinese leaders is driven by the availability and attractiveness of outside options. While both sides want to reduce their dependence on the other, neither actor seeks a radical decoupling. Measures to diversify supply chains, the negotiation of new trade agreements around the world, and the ‘technology war’ have made Beijing’s outside options less favourable. Europeans are emboldened to articulate their interests more forcefully, particularly in the areas of human rights, scrutiny of foreign funding, and economic coercion. China, in turn, provides diplomatic cover for Russia but resists undermining Western sanctions.

KEYWORDS:

• EU-China relations
• Ukraine
• European Union
• foreign policy
• technology war

Introduction

Russia’s aggression against Ukraine poses the largest threat to Europe’s peace and security since the end of the Cold War. It has also changed how the EU sees its future relationship with China. Sino-EU ties have always been shaped by two interrelated drivers: EU external trade, which represents a key tool of economic statecraft, and security policy, which has evolved in the context of rivalry between the United States and China (Kirchner, Christiansen, and Dorussen 2016; Men, Schunz, and Freeman 2020; Kirchner 2022). The war has amplified China’s significance in both areas, and China’s foreign policy is now just as important for stability in Europe as America’s. Beijing derives its influence from its close ties with Russia, large economy, and unrivalled control of rare earth supply chains, which are essential for Europe’s clean energy transition. There is now also increasing uncertainty about Beijing’s willingness to use military force against Taiwan.

EU-China relations have evolved around a dialogue structure that was developed within the 2003 ‘Comprehensive Strategic Partnership’, which has broadened and deepened ever since. While the EU has from the start acknowledged China as a competitor, it saw it as a potential collaborator in global politics (Men, Schunz, and Freeman 2020). European governments have seen China primarily as a business opportunity, with hard commercial interests often overriding values-based policies, including human rights. The EU and China are major trading partners: in 2021, China was the third largest partner for EU exports of goods (10.2%) and the largest partner for EU imports of goods (22.4%).¹

Whereas European capitals still prioritize commercial interests in their dealings with China, the European Commission has recently taken a more confrontational stance. It can be summarised as ‘cooperate when you can, push back when you must’ (Beeson and Biscop 2021). In 2019, the Commission issued a strategy paper stating that Brussels considers China a cooperation partner, a negotiating partner, an economic competitor, and a systemic rival all at once (European Commission 2019). EU-China ties have turned increasingly acrimonious in the past four years, but Beijing’s support of Russia’s war has caused a further deterioration of the relationship. In light of Russia’s aggression ‘there cannot be business as usual’, according to European Commission president Ursula von der Leyen. The invasion signifies ‘not only a war that Russia has unleashed against Ukraine. This is a war on our values.’²

This paper highlights and analyses three consequences of the war for Sino-EU relations. One, the war has not just highlighted Europe’s dependence on cheap Russian oil and gas, but also its dependence on China for rare earths and other raw materials. Fears that Europe might simply exchange one type of energy dependence for another, equally dangerous vulnerability has prompted efforts to diversify supply chains away from China. For the EU, energy security and the green energy transition are not just part of economic and environmental concerns, but a fundamental aspect of security. Two, the EU has been remarkably united in confronting Beijing on human rights, economic coercion, and scrutiny of foreign investments. This contrasts with previous practices of only paying lip service to fundamental values, and prioritizing purely economic motives. Three, European security policy discussions increasingly revolve around access to technology, the latest battlefield in the geopolitical rivalry between the US, China, and the EU. It is in this area that cracks are beginning to show in the West’s united front – not just between the United States and Europe, with the US favouring tougher restrictions, but also within the European Union.

Which side is more vulnerable in this moment of geopolitical tensions and realignments? Some claim that economic dependence cuts both ways: Beijing has just as much to lose from deteriorating relations as Europe. After all, European states are among the largest foreign investors and job creators in China, as well as an important market and source of know-how (Zenglein 2020). Others predict that Beijing will have the upper hand in the Sino-European relationship. For example, Colgan (2022) argues that the EU’s inability to replace cheap Russian fossil fuels quickly may condemn the continent to decades of low growth, leading to inevitable decline in the competition between the US and China.

Building on Stone (2011), my argument is that the behaviour of European and Chinese leaders is driven by the availability and attractiveness of outside options. Existing scholarship has shown that, rather than choosing an unpalatable status quo within the existing relationship, the dissatisfied actor can opt out and pursue a more appealing outside option (Lipscy 2017). If outside options are generally attractive, a high cost of challenge can produce estrangement, outright exit, or the gradual death of cooperative relationships (Gray 2018).

I argue that neither the EU nor China are seeking a radical decoupling, but are taking measures to create outside options. This includes EU efforts to diversify supply chains for rare earths and other raw materials, and a rush to negotiate free trade agreements around the world. Furthermore, the purpose of adopting the European Chips Act is to expand local semiconductor manufacturing. Brussels is reacting to the global chips shortage that hampered European car plants and held back sales of consumer electronics. Currently, China, Taiwan, South Korea, and the US dominate semiconductor manufacturing. While it takes time (and subsidies) for these efforts to bear fruit, Brussels is noticeably more assertive than in the past in defending its interests in the areas of human rights, scrutiny of foreign funding, and economic coercion.

For China, the war in Ukraine had the effect of turning Russia from a great power peer into a Chinese client state (Dueben 2022). Beijing sees this as an advantage in the power struggle with the United States and tries to use its influence to prod more countries in the global south to embrace non-alignment. Ongoing tensions, as well as disputes over trade practices and technology access, might mean that China will continue to use economic coercion against EU members who challenge China on sensitive political issues. Beijing may conclude that pushing back against such challenges is necessary for its regime stability.

But Washington’s adoption of the Chips and Science Act, as well as the imposition of extraterritorial limits on the exports of semiconductors and chip-making equipment to China, constitutes a game changer that worsened China’s outside options. Now the EU is one of few remaining markets where China can obtain access to similar sophisticated technologies. In the absence of alternative options, Beijing may prefer a constructive relationship with European capitals and might therefore resist using economic coercion to escalate conflicts further. The EU disagrees with the scope of the US export restrictions. Whereas European governments generally share America’s concerns with China’s aggression towards its neighbours and accept the necessity for export restrictions, they object to the scale of the measures. The EU seeks to prevent China from using its wealth to threaten other countries but has no interest in seeing China slide into recession as a result of American economic containment.

For this reason, a radical economic or diplomatic decoupling between Europe and China is neither a desirable nor feasible strategy for either side, despite fundamental disagreements. China still depends on the European market for access to advanced technology, and Europe relies on cheap Chinese imports, particularly in a climate of soaring energy prices, inflation, and with millions of people seeking refuge from the war in Europe.

In what follows, I will explicate how the policy positions of European governments, the European Commission, and China have evolved in light of the war, particularly in regard to energy security, fundamental values, and technology access. The sections emphasize the current state of linkages but place them into their historic context while developing an understanding of possible future evolutions.

Global power shifts and the weaponization of energy

Early works were divided on the malleability of liberal internationalism in the face of rising powers. Some predicted that international organisations (IOs) could adapt flexibly to changing shifts in power and interests (e.g. Glennon 2003), while others maintained that, once IOs were established, they assumed a life of their own and therefore resisted change (Gilpin 1981; Keohane 1984). Following China’s accession to the WTO, many were optimistic that China could be peacefully integrated into the international system and discouraged from overturning the liberal international order (LIO) (Johnston 2008; Ikenberry 2011). China’s socialization within these institutions was supposed to have politically and economically liberalising effects. Chinese leaders were expected to solve disputes within the rules-based order, rather than through unilateralism and coercion (Goddard 2018).

But China’s integration in the international system did not bring about greater political or economic openness. During the Trump presidency, the United States adopted protectionist trade policies by placing tariffs on virtually all Chinese-manufactured goods, as well as on European-made steel, aluminium, and agricultural products. Xi Jinping, by contrast, positioned himself as a champion of free trade at the 2017 World Economic Forum in Davos. Highlighting the irony of the US president attacking the American-made liberal international order and the Chinese president defending it, Weiss and Wallace (2021) point out that scholarly portrayals of the LIO as being integrative have been too optimistic. While China has benefited from the LIO and has not spent much energy defeating it, it has resisted certain aspects of rules-based multilateralism when those principles threatened the regime’s domestic priorities (Weiss and Wallace 2021). Xi’s praise of free trade was not an embrace of the LIO, but a plea for the rest of the world to maintain openness to Chinese exports and investment, albeit without Beijing reciprocating in kind.

The Kremlin’s weaponization of energy has not just highlighted Europe’s dependence on cheap Russian oil and gas, but also its dependence on China for raw materials. China dominates the production and processing of rare earths, which are extremely difficult to extract and process, with an estimated 80% global market share (Dempsey 2022). The EU expects that the green energy transition and expansion of digital infrastructure will increase demand for raw materials five-fold by the end of this decade – lithium for batteries, silicon metal for chips, and rare earths to produce magnets, particularly for electric vehicles.³ European countries operate few mines, and even when mines are planned, local objections often gain political support and stop them from opening. For Brussels, gaining access to the minerals needed for the clean energy transition is now a crucial aspect of security.

Energy security has been on the European Commission’s radar since the mid 2000s. Much ink was spilled on proposals to address the EU’s vulnerability: a unified internal market, greater diversification of energy sources and transit routes, promotion of renewable energy, investment in energy efficient technologies, and well-regulated global markets (Yan, Katja, and Chen 2016, 105). Although it should have been clear after the annexation of Crimea in 2014 that Europe would have to protect itself from being held hostage to foreign energy suppliers, concrete action plans to implement the Commission’s proposals never materialized. Poland, the Baltic states, and other CEEs recognised the risk and invested in renewable energy, LNG terminals, and in interconnectors.

But Germany, under Angela Merkel’s leadership, exacerbated dependence on Russian fossil fuels by greenlighting the Nordstream 2 pipeline, phasing out nuclear power, and actively opposing alternatives, such as the building of LNG terminals. As early as 2014, the German Economics Ministry signed off on a deal between BASF, Europe’s largest chemical company, and Russia’s Gazprom, permitting the latter to control strategic infrastructure in Germany (Holz et al. 2014) – and then seemed surprised to discover in February 2022 that the gas storage facilities were empty.⁴ Furthermore, there was no EU-wide strategy to improve the flow of energy in any direction across Europe, to ensure that no supplier could gain a chokehold on any particular member country.

Because of growing fears that Europeans might simply exchange one type of energy dependence (Moscow) for another, similarly dangerous vulnerability (Beijing), the Commission president announced the European Critical Raw Materials Act in September 2022.⁵ This legislative proposal intends to reduce dependency for critical minerals on China, where 90% of rare earths and 60% of lithium are processed.⁶ Through this act, the EU intends to identify projects along the supply chain, including extraction, refining, processing, recycling, and building up reserves. It includes mining in Europe, which has long been a taboo, and the promotion of innovation in recycling solutions and alternatives to critical raw materials.

To diversify supply chains away from China, the EU is preparing to ratify trade agreements with Chile and Mexico, conclude negotiations for an FTA with New Zealand,⁷ and working to advance trade negotiations with India,⁸ Australia,⁹ and Indonesia (Hennessy and Winanti 2022). The purpose is to facilitate access to raw materials through reliable trade partners that are also democracies (‘friend-shoring’). The United States has also promised to supply 15 billion cubic metres of liquefied natural gas (LNG) to Europe to help it wean off Russian energy. US LNG terminals are producing at full capacity, and most of the gas sent to Europe come from exports that would have gone elsewhere.¹⁰

Likewise, East Asian countries have been important targets for free trade agreements (FTAs), ever since European Trade Commissioner Mandelson made market access to the emerging powerhouses of East Asia a priority.¹¹ The EU doubled down on this strategy after the US announced the negotiation of the TPP in 2009, seeking an equally ambitious trade deal in the region. More recently, FTAs reflect the prevalence of geo-economic objectives in bilateral negotiations between the EU and ASEAN members (Adriaensen and Postnikov 2022).

However, the negotiation and ratification of FTAs often takes decades. In Latin America, the EU competes with China and fears losing influence as trade negotiations are stuck. EU-Mercosur treaty negotiations took years to conclude, and Brazil now wants to reopen the agreement because it considers the deal unfavorable in some areas. According to Brasilia, the country ‘has other suitors.’ Josep Borrell, the EU’s foreign affairs chief, has lamented the lack of progress with Latin American countries, stating that the failure to complete trade deals has ‘undermined the EU’s credibility while China’s presence and influence in the region has risen exponentially’ (Bounds and Stott 2022).

A more assertive EU

Relations between Brussels and Beijing had been deteriorating before the Russian invasion. A key turning point in the relationship was Beijing’s reaction to the EU placing sanctions on some Chinese officials for human rights abuses against Uyghur Muslims in Xinjiang. China retaliated by sanctioning EU ambassadors, think tanks, and prominent members of the European Parliament who had criticized the human rights violations, accusing them of spreading lies. As one commentator noted, China’s defence on Xinjiang had effectively shifted from ‘we are not doing it’ to ‘you did it so you can’t criticize us for doing it, too.’ (Freymann and Ardissino 2021). The European Commission responded by publishing a proposal in September 2022 to ban goods made with forced labour from the EU market.¹² China operates mass internment and forced labour camps in Xinjiang, as detailed in a United Nations report, and Beijing is suspected of using forced labour to produce all kinds of products, from textiles to electronics.¹³

In addition, Commission president von der Leyen (VdL) announced in September 2022 a new Defence of Democracy package.¹⁴ Aware that disinformation can disrupt democratic political institutions, the measures are designed to scrutinize foreign funding of academic institutions. VdL criticized Chinese funding of research centres that dismissed evidence of forced labour camps for Uyghurs as ‘rumours’: ‘these lies are toxic for our democracies.’ The EU’s objective is to ‘bring covert foreign influence and shady funding to light’ so that European research institutions and democracies can shield themselves from malign interference.

The dispute over human rights abuses in Xinjiang spilled over into other policy areas. It effectively put the ratification of the Comprehensive Agreement on Investments (CAI) on hold. This was an agreement China and the EU had reached in December 2020 – against the concerns of the incoming Biden administration – after seven years of negotiations. The CAI would expand Chinese market access for European companies in several sectors and provided some protections against violations of business norms, such as forced technology transfers. Likewise, it would boost China’s investment in Europe.¹⁵ The deal was praised by the European Commission as a long overdue break-through, with China finally opening up its market and agreeing to a level playing field for foreign companies (Casarini and Otero-Iglesias 2022). It was promoted by the German presidency of the European Council since the Chinese market is particularly important to German manufacturers who have a large presence in the country. The chances of CAI being ratified now seem bleak.

Another reason for the souring of relations is China’s increased use of economic coercion, through restrictions on trade or investment, in response to choices of democratic governments. Lithuania is a case in point. The dispute arose after the Lithuanian government permitted Taiwan to open a trade office in Vilnius using the name ‘Taiwan’ rather than ‘Taipei’. From China’s perspective this was a diplomatic hostility. Beijing responded by downgrading diplomatic relations with Lithuania and refusing to clear Lithuanian goods through customs, rejecting import applications, and pressuring European countries to remove Lithuanian inputs from their supply chains. Initially, the coercive pressure did not seem to be working as the EU filed suit at the WTO. But the Lithuanian president acknowledged a few months later that the name choice had been ‘mistake’.¹⁶ Miller (2022) argues that China’s strategy of applying economic sanctions, but without explicitly linking them to a set of demands, is a deliberate choice. The reason is that this makes it easier for democratic leaders to concede while maintaining some plausible pretence that they have not done so. In this case, Lithuania can back down (by renaming the delegation) while denying anything has been conceded, because the office itself remains (Miller 2022).

Even though the EU was less successful in challenging Beijing over the sanctions on Lithuania, the Commission has pushed back by publishing a proposal in December 2021 for the adoption of an anti-coercion instrument that would allow Brussels to better respond to such challenges. The framework is primarily designed to deter coercive action through dialogue and engagement, but as a last resort it also allows Brussels to retaliate with countermeasures, such as restricting trade, investment, and funding. While there is broad support for creating a legislative tool, disagreements remain about the severity of countermeasures and establishing when they should kick in (Szczepański 2022).

One year after the spat over the trade office in Vilnius, the EU had turned a corner on Taiwan, and demonstrated more resolve. The close partnership between Russia and China stoked fears around the world that China might take military action against the island. In the past, China had expressed its growing ambitions via economic influence, rather than military aggression. But Beijing has increasingly militarized the South China Sea and stepped up military activities around Taiwan. As a result, there is more uncertainty regarding China’s willingness to use military force. Oertel (2022) notes that Europe’s position on Taiwan had shifted during the pandemic. Taipei’s COVID policies had not only been effective, but also supportive of Europe in terms of delivering protective equipment. Taiwan’s central role in the production of semiconductors have also underscored the need for reliable partners. To show solidarity with the island nation, one of the European Parliament’s vice presidents, Nicola Beer, visited Taipei (a first by an MEP of her rank). Officials discussed a bilateral investment agreement, cooperation on supply chains, and the possibility of Taiwan participating in international organisations. Referring to China’s crackdown on Hong Kong’s pro-democracy movement, Beer mentioned: ‘Taiwan’s bloom is also Europe’s bloom. We won’t turn a blind eye to China’s threats (…). Europe was late for Hong Kong, we won’t be late for Taiwan’.

Russia’s war against Ukraine has also prompted recipients of BRI funding to distance themselves from Beijing. In the midst of the euro crisis, Chinese investments were welcomed in vulnerable member states, and Beijing was seen as a stabilizing force. However, European states are now much less likely to pursue bilateral infrastructure projects as they distrust China’s intentions. In addition, many Central and East European states (CEEs) have withdrawn from the 17 + 1 cooperation format, which was widely seen a tool for Beijing to buy allies and divide Europeans, rendering the forum defunct. Estonia and Latvia left the forum in the wake of military threats by China to Taiwan and Beijing’s support for Russia’s war.¹⁷ Lithuania left the group after it allowed the opening of the Taiwan office in Vilnius. Slovakia and the Czech Republic are forging closer ties with Taiwan while ignoring warnings from China. Despite Beijing calling the Czech Republic ‘despicable’ for inviting the Taiwanese foreign minister, Prague has encouraged fellow European countries to strengthen their engagement with Taiwan.¹⁸ Apart from Hungary, which maintains cordial relations with Russia, CEEs have made a clear choice: they belong in Europe. They have welcomed refugees and provide Ukraine with assistance. Poland stands out the most in this respect as it has morphed from a stubborn violator of European law to a front-line state in providing humanitarian aid and military equipment to Ukraine (De Gruyter 2022).

Importantly, the passing of Chips Acts in the United States and European Union have made Beijing’s outside options less favourable. These Acts incentivize businesses to bring semiconductor manufacturing, research, and innovation to local (US and European) markets and disincentivizes building factories in China. It forces companies to decouple from China and pushes them to work with democratic countries instead.¹⁹ A persistent global shortage of chips has stifled production in the car and electronics industries. China remains the dominant player in the semiconductor industry, with Chinese-owned firms buying chip companies around the world in recent years. That has raised concerns that Beijing could soon dominate certain sensitive technologies and use that as a strategic advantage.

Following America’s lead in providing $430 bn worth of subsidies and tax breaks for US companies, the EU announced its own Chips Act in February 2022, which enables EU member states to subsidize domestic semiconductor manufacturing and intervene in the supply chain in times of crisis.²⁰ Brokered by the Czech Presidency, the initiative will finance building advanced design capacities, new pilot lines for cutting-edge chips, and network of competence centres (at least one per member state). Financing will come from Horizon Europe (€1.65 bn) and the Digital Europe Programme for capacity-building (€1.25 bn).²¹ The Act is not uncontroversial, though. The European Commission will have to come up with an EU-wide mechanism that can prevent member states from undercutting each other.

The biggest game changer in the ‘technology war’ is the Biden administration’s decision to impose restrictions on the export to China of semiconductors, chip-making equipment, and supercomputer components, to prevent Beijing from using AI innovation for military and surveillance purposes. These measures go further than any previous low-grade economic restrictions placed on China. The American Bureau of Industry and Security justified the restrictions on national security grounds, referencing Chinese high-end computing as a military threat. But semiconductors are general-purpose tools and basic building blocks for an advanced, globally competitive economy – denying them to China is effectively a form of economic containment (Bateman 2022).

The controls won’t be effective without buy-in by other chip producing countries. European governments would prefer to proceed in a more cautious manner – banning only the most sensitive technology while allowing Chinese purchases of older chip making equipment. Opting for wholesale economic containment, as the Biden administration has unilaterally decided, is seen as disproportionate overreach that could invite Chinese retaliation. Technology firms in the Netherlands, Germany, and France could easily fill the void and want to continue doing business with China (Hmaidi and Arcesati 2022). If China were to slide into recession or experience a property market crash, it is likely that the consequences would be felt in America and Europe, too.

Will EU solidarity hold?

So far, European states have been remarkably united in their efforts to confront China. But it is unclear if solidarity will hold and enable new central capacity building (Genschel et al., this issue). Germany’s stance towards Beijing is a key benchmark. Berlin has been a stalwart supporter of close ties with China and has tended to avoid tension with the CCP. Germany’s exposure to China for its sales market, source of raw materials, and cheap inputs for its domestic industry is much greater than that of any other EU member state. The country’s dependence on China might make it unlikely for Berlin to get tough on Beijing in case President Xi’s foreign policy becomes more abrasive. Whereas Germany’s concern over antagonizing Russia was losing access to low cost energy, a much bigger concern is the prospect of German industries losing access to the Chinese market. China – not any other European country – has been Germany’s most important trading partner for the past six years. Every third car produced by German car manufacturers is sold to China, and German automakers operate many factories directly in the PRC. Chinese consumption is responsible for roughly 2.7% of total economic output in Germany and 2.4% of total employment, whereas European consumption contributes only 0.6% to Chinese economic output and 0.5% of jobs (Matthes et al. 2022).

Because Berlin’s trade links with China are much more extensive compared to other European countries, member states have expressed consternation that German unilateralism in economic and defence measures may undermine solidarity in Europe. Olaf Scholz’ decision to visit Xi Jinping alone right after Xi was reappointed for an unprecedented third term as president at the Chinese Communist Party’s 20th Congress is a case in point. Refusing to visit Xi jointly with the French president was seen as a snub in Paris and a missed opportunity to send a strong signal of European unity. A joint visit would have sent a more effective warning that ties between the EU and China would suffer if Beijing continues its pro-Russian ‘neutrality’ (Hoff 2023). Scholz eventually dropped his opposition to an EU-wide gas price cap, even though the resulting agreement is less than what Macron had envisioned.²²

The French president has expressed misgivings about Scholz’ other decisions. Berlin’s scheme to protect households and businesses from high gas prices, which was not coordinated with EU partners, is viewed as distorting the single market. The planned purchase of F-35 fighter jets from the United States constitutes another irritant because it circumvents the French defence industry. Paris is also frustrated with the slow progress on the Future Combat Air System, Europe’s flagship defence project.²³ German officials, in turn, were annoyed with French opposition to the MidCat project, a gas pipeline that would have connected Europe to Spain’s network of LNG terminals. France and Spain agreed instead to build an undersea pipeline between the two countries. These incidents show how member states’ narrow interests can prevail.

The Chinese perspective

Chinese views on the war differ fundamentally from those of Western observers. They are more likely to blame the war on NATO enlargement than on the Kremlin, and therefore see it as just another war of US intervention, similar to those launched in Korea, Vietnam, Iraq and Afghanistan over the past 75 years. Whereas the West sees an attack on the rules-based international order, Chinese observers see the emergence of a more pluralistic world, with a declining American hegemon being forced to accept a revision of post-colonial borders (Leonard 2022). According to this perspective, the war is considered a proxy war in the larger Sino-American struggle for dominance.

Washington has effectively rallied the Europeans, Japanese, and Koreans into a new alignment under American leadership, isolating Russia and forcing China to clarify where it stands. At the same time, Beijing considers itself a responsible and ‘neutral’ international player by assuming a nuanced position, offering rhetorical and economic support to Russia but largely complying with the Western sanctions regime. Although it purchases energy from Russia, China has seemingly refrained from offering weapons or high-tech products to Moscow. The Kremlin has reportedly expressed its frustration at China’s limited support (Akita 2022).

China is an important player in Western efforts to isolate Russia, and European leaders closely watch Chinese reactions to Russia’s moves. Beijing’s actions can either strengthen or weaken the effectiveness of the sanctions regime (Meissner and Carranza, this issue), affecting the amount and quality of resources available for the Kremlin’s war effort. Brussels wants China to withdraw support for Russia, and China wants the EU to distance themselves from the United States, but neither seems willing to depart substantially from their respective positions.

It is no accident that the ‘unlimited partnership’ between Russia and China is not called a formal alliance. Despite their strong economic ties – Russia is dependent on Chinese electronics, vehicles and textiles, China imports cheap Russian wheat and oil – the partnership is based mainly on the personal relationship between the two leaders (Wong 2022). Even if China could offset European demand for Russia’s gas, it would still be impossible for Russia to pivot all its sales to China as the necessary infrastructure is not in place (Lu 2022). China has not provided Moscow with military support, and fundamental disagreements over spheres of influence in Central Asia, South Asia, and the Arctic persist. Even so, the objective is to support one another’s core interests (China on Ukraine, and Russia on Taiwan) as well as alignment of political, military, and economic issues.

China’s rhetoric on Russian actions in Ukraine has evolved from the proclaimed ‘limitless partnership’ (February 2022) to ‘concerns’ at the Shanghai Cooperation Organisation (SCO) summit in Samarkand (September 2022) and condemnation of threats to use nuclear weapons at the G20 summit in Bali (November 2022). Western news media have pointed out that, in his speech at the SCO meeting, President Xi neither commented on the war in Ukraine, nor mentioned the limitless partnership. According to Western media, Xi’s meeting with Putin did not go well since Putin acknowledged afterwards that the Chinese president had ‘questions and concerns’ about the situation in Ukraine. However, the ‘concerns’ he articulated were likely not meant to convey his disapproval of Putin’s aggression but his dismay about the lack of military success. Within days of the summit, the Kremlin held sham referenda in four Ukrainian provinces to create a pretext for annexation.

At the G20 summit in Bali, Xi offered his strongest criticism of the war to date. He agreed to wording in the joint statement that condemned threats to use nuclear weapons, and said that the G20 ‘must resolutely oppose the attempt to politicise food and energy issues or use them as tools and weapons.’²⁴ The joint statement further declared that ‘the peaceful resolution of conflicts, efforts to address crises, as well as diplomacy and dialogue, are vital. Today’s era must not be of war.’ Officials had warned that Moscow’s objection to condemnation of the war and Beijing’s support for Russia could result in the failure to agree on a joint statement, an unprecedented event in the history of G20 meetings. It was the Indian delegation that helped forge consensus over the wording. China’s own summary of the proceedings was more muted though; nuclear weapons were not mentioned. Instead, Xi was quoted as simply saying that the crisis in Ukraine had no ‘simple solution’ and that ‘confrontation between major powers must be avoided.’²⁵

The implication is that Russia is a growing burden for China. Beijing still sees the Kremlin as an asset in its efforts to erode American influence around the world but was likely surprised by Moscow’s military failings.²⁶ Backing the losing side in this war carries the risk of being seen as an incompetent leader. Public opinion matters in autocracies, even though few, if any, accountability mechanisms exist. Shared outrage at policy failures could activate street protests and elite fissures (Weiss and Dafoe 2019). Chinese elites are increasingly sceptical about Xi’s decision to forge closer ties with Putin, despite the risks of criticizing the leadership (Kirchberger 2022), and anti-Russian sentiment over Moscow’s efforts at territorial expansion has flared up on WeChat and other social media platforms (Xuetong 2022).²⁷ Together with pre-existing resentments about the faltering real estate sector, overzealous covid policy, and an abrupt abandonment of restrictions that overwhelmed the health care system, the continued support of a pariah may frustrate China’s growth ambitions and reinforce Xi’s image as incompetent leader. A humiliated Russia is not the partner China had hoped for.

It might be argued that the ratification of the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trading area, provides China with an attractive outside option. In 2020, leaders from 15 countries signed the agreement after a decade of negotiations. It came into force for 12 of the 15 signatories, including China, in January 2022. It takes most of the existing agreements signed by ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) and combines them into a single multilateral pact with Australia, China, Japan, New Zealand, and South Korea. The RCEP aims to remove tariffs on at least 90% of the goods traded among member countries over 20 years.²⁸ It is estimated that RCEP will add $186bn to the size of the global economy and 0.2% to the GDP of its members.²⁹ After the destructive trade war with the United States, ratification of RCEP was a major victory for Beijing.³⁰

While RCEP promises huge growth opportunities, it is not a substitute for access to the EU’s market, which Beijing needs to gain access to advanced technology. Germany, France, the Netherlands, and Italy have some of the most sophisticated technology in Europe, and their experiences in protecting their high-technology sectors motivated the setup of the EU-wide investment screening tool (Chan and Meunier 2022).

Despite the deterioration of the Sino-EU relationship, a radical de-coupling is not in the interest of either actor. Both sides still need to maintain ties in the areas of trade, climate protection, and pandemic relief. As the world’s largest buyer of LNG, China threw the EU an energy lifeline by reselling some of its surplus LNG cargoes due to weak domestic energy demand (Hama 2022). Consequently, European capitals were able to fill roughly 80% of their gas storage facilities before the winter. How long China will remain an energy seller rather than a buyer will depend on how quickly the economy can recover. A confluence of crises – zero covid policy, followed by the abrupt lifting of restrictions, which overwhelmed the medical system, and the housing market crisis – have put China’s economic growth behind the rest of the Asia-Pacific region for the first time in more than 30 years. China is projected to grow at only 2.7%.³¹ This represents a sharp slowdown from the 2021 growth rate of 8.1% – the fastest recorded in a decade.³²

Brussels and Beijing also reaffirmed their commitment to cooperation in financial regulatory matters, including in green finance, which both countries consider crucial for reaching their respective climate targets. At the meeting of the High-Level Economic and Trade Dialogue in July 2022, both sides welcomed a Memorandum of Understanding between the People’s Bank of China and the European Securities and Markets Authority which ensures access to the Shanghai Clearing House for European banks. Vice-President Valdis Dombrovskis praised the discussions on ‘concrete solutions to facilitate the operation of European financial institutions in China.’³³ Beijing and Brussels also agreed to work jointly on WTO reform.

As long as China and Russia continue to prioritize regime stability while managing their disagreements, the war is unlikely to alter the nature of their current partnership, wherein Russia is the junior partner. Because of China’s leverage over Moscow, Europeans want Beijing to act as peace broker, despite risks of Xi exploiting this as propaganda coup. At the margins of the UN session, EU foreign affairs chief Josep Borrell met with foreign minister Wang Yi, urging Beijing to use its influence over Moscow to help end the conflict. At the G20 summit in Bali, Emmanuel Macron hailed Xi as a ‘sincere’ figure who should ‘play the role of mediator’ (Lau 2022).

If China is willing to put pressure on Moscow, it is unlikely to see any value in collaborating with Brussels in this endeavour. Wang noted at the UN meeting that China ‘will neither stand by nor add fuel to the fire, instead going its own way without taking advantage of the opportunity to gain self-interest.’³⁴ Furthermore, China does not consider the EU a serious security actor. China often lashes out when foreign delegations visit Taiwan, with government statements blaming foreign politicians for sending false signals to advocates of Taiwan independence. While US Speaker Nancy Pelosi’s visit to the island in August 2022 was condemned as a provocative and humiliating act,³⁵ European Parliament vice-president Nicola Beer’s visit one month earlier did not elicit the same anger and criticism.

However, China has signalled that it is willing to repair relations with select European capitals. Beijing is actively wooing specific European countries, something it has often done to sideline Brussels. At the G20 summit in Bali, Xi employed familiar divide-and-rule tactics, meeting with the heads of government of France, Spain, Italy, and the Netherlands, while avoiding the European Commission President and the European Council President. He dislikes the EU calling out Beijing on sensitive political issues and its designation of China as a ‘systemic rival’. Instead, he sought to leverage China’s influence with individual countries. The Netherlands, home to chipmaker ASML, should not join any US-EU trade coalition seeking to block Chinese access to technology (Lau 2022). France was promised more cooperation in manufacturing, energy, and aerospace. With Spain, Xi discussed preparations for the China-Spain Year of Culture, highlighting the importance of Chinese tourists for the country. The message was clear: don’t follow the US containment approach.

Another indicator are statements by Chinese officials who implore the benefits of Sino-EU cooperation, either to counter the influence of the United States, or because they worry about European companies leaving China for other markets. The Chairman of the China Chamber of Commerce to the EU (CCCEU) mentioned that decoupling from Beijing should never be the EU’s pursuit since ‘mutually beneficial cooperation prevails over confrontation or rivalry.’³⁶ His statement was a reaction to the annual position paper of the EU Chamber of Commerce in China, which had criticized policies that risk creating two separate systems.³⁷ This refers to the need for many companies to create distinct procedures when dealing with China compared to the rest of the world, such as developing separate supply chains to navigate the COVID policy. The report had painted a gloomy picture of doing business in China, saying that many companies are now looking to move future investments to other markets that provided greater reliability and predictability.

Conclusion

This paper has analysed the evolution of EU-China relations in an increasingly multipolar world, where Russia is waging a war of aggression to change Europe’s borders. I have argued that the availability and attractiveness of outside options explains actors’ decision to choose a confrontational or cooperative approach. China’s support of Russia’s war has united European governments in their willingness to incur costs to defend their core interests vis-à-vis Beijing. The Kremlin’s weaponization of energy has laid bare Europe’s dependence on a single country for cheap oil and gas.

Determined not to replace a one-sided dependence with an equally dangerous vulnerability, Europeans are taking measures to diversify supply chains away from China, which controls the entire value chain for rare earths and other raw materials. The negotiation of new trade agreements around the world, measures to boost domestic semiconductor manufacturing, and export controls of advanced technology create outside options that have emboldened the EU to articulate their interests more forcefully. Consequently, the EU has tried to squeeze concessions from China in the areas of human rights, scrutiny of foreign funding, and economic coercion.

While both sides want to reduce their dependence on the other, neither actor seeks a radical decoupling. China still depends on the European market for exports and access to advanced technology, and European companies rely heavily on the Chinese market as well as cheap imports, particularly in a climate of soaring energy prices, inflation, and with millions of people seeking refuge from the war in Europe. Severing supply lines from China would be impossible.

While the improvement of EU-US relations under the Biden administration can be seen as an advantage for Europe, tensions that arose during Donald Trump’s term remain. US foreign policy has always influenced the nature of EU-China relations, and the war has accentuated this tendency as it takes place in the context of growing competition between Beijing and Washington. China is increasingly expressing its ambitions not just with economic influence, but also military aggression. The United States is responding with technology export restrictions to hamstring China’s military, defence, and economic capabilities. Whereas European governments share many American concerns about China’s unfair trade and economic practices, they are exasperated with the scope of the US restrictions. Whereas the US is using a quasi-containment strategy on China, Europeans would have preferred to restrict only the export of the most sensitive technology. Forced to comply due to the long arm of US law, Europeans worry about Chinese retaliation.

Whether confrontational or cooperative tactics will prevail in the Sino-EU relationship depends on the speed with which European capitals are able to secure FTAs with countries such as Australia, Indonesia, India, and various African states (Carbone, this issue) to diversify gas supply chains and gain access to key rare earths. The EU’s ability to anticipate and manage chips supply crises effectively will also be crucial. Finally, it will depend on the EU’s ability to maintain unity when confronting China on issues such as economic coercion, and preserve its own foreign policy approach, distinct from the United States.

The relationship will also be shaped by the foreign policy choices of an increasingly unconstrained Chinese president. During Donald Trump’s presidency, China could have tried to expand Chinese soft power at the expense of the US, but instead it doubled down on using economic coercion against countries who challenged Beijing on sensitive political issues. While Beijing views the partnership with Russia as an advantage in the geopolitical struggle with the US, it is now stuck with a neighbour whose aggressive behaviour poses a risk to its global trade and growth ambitions. Given the fragile state of its own economy, China has carefully avoided actions that carry the risk of getting hit with Western sanctions, and sent signals that Beijing is willing to repair ties with select European countries. How EU-China relations will evolve when the pressing issues of our times – geopolitical shifts, global chips shortage, coronavirus variants, climate change – require large-scale cooperation, is an area of importance that will continue to engage scholars for years to come.

Acknowledgments

For helpful comments on previous versions I am grateful to Mitchell Orenstein, Shenghao Zhang, the other contributors to the special issue edition, the anonymous reviewers, and the editor.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. Eurostat 2022.

2. Keynote address, ‘Europe’s Moment’ event, Princeton University, 22 September 2022.

3. Rare earths such as dysprosium, erbium, europium, gadolinium, neodymium, yttrium, and praseodymium are used in the defence industry – in ammunitions, aerospace, military surveillance systems, lasers, etc. (Robinson 2011).

4. https://www.tagesschau.de/investigativ/monitor/wintershall-dea-gazprom-101.html.

5. https://single-market-economy.ec.europa.eu/sectors/raw-materials/areas-specific-interest/critical-raw-materials_en.

6. European Commission announces new critical minerals legislation. Mining technology, 15 September 2022.

7. https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/negotiations-and-agreements_en.

8. https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/india_en.

9. https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/australia/eu-australia-agreement_en.

10. https://www.reuters.com/business/energy/us-eu-strike-lng-deal-europe-seeks-cut-russian-gas-2022-03-25.

11. Peter Mandelson, speech 06/574, 9 October 2006, London.

12. https://ec.europa.eu/commission/presscorner/detail/en/IP_22_5415.

13. https://www.ohchr.org/en/documents/country-reports/ohchr-assessment-human-rights-concerns-xinjiang-uyghur-autonomous-region.

14. https://ec.europa.eu/commission/presscorner/detail/ov/speech_22_5493.

15. Barely existent in the late 2000s, Chinese investment grew exponentially in the early 2010s and reached a record high flow of nearly €36 billion in 2016. Despite an overall decline in subsequent years, the drop had been less pronounced than in the U.S, where Chinese FDI plummeted. Chinese investments spanned all sectors but were concentrated in automotive, financial services, and information technology (Chan and Meunier 2022).

16. https://www.bbc.co.uk/news/world-europe-59879762.

17. https://www.orfonline.org/expert-speak/europe-distances-itself-from-china.

18. https://www.business-standard.com/article/international/taiwan-gains-global-support-amid-chinese-aggression-post-pelosi-s-visit-122091000211_1.html.

19. https://mindmatters.ai/2022/09/what-difference-has-the-chips-act-made-to-the-u-s-and-taiwan.

20. https://www.dw.com/en/russia-looms-large-at-eu-us-trade-and-tech-talks-in-paris/a-61812879.

21. https://www.euractiv.com/section/industrial-strategy/news/eu-countries-reach-common-position-on-the-chips-act/.

22. https://www.thenationalnews.com/business/energy/2022/10/21/gas-price-cap-makes-progress-in-europe-as-hungary-obtains-exemption/.

23. https://www.ft.com/content/b589c6ba-aded-42da-8adb-5a6d50b7aec1.

24. https://www.ft.com/content/4a3197fd-cd9d-4517-9ac2-bce69dce5e0b.

25. https://www.washingtonpost.com/world/2022/11/15/biden-xi-cold-war-tensions-g20-meeting/.

26. https://www.nytimes.com/2023/01/02/world/europe/ukraine-russia-himars-makiivka.html.

27. Some Chinese netizens began rehashing the unfairness of the 1858 Treaty of Aigun, which ceded roughly 230,000 square miles of Chinese territory to Russia (Xuetong 2022).

28. https://www.china-briefing.com/news/how-has-the-rcep-benefitted-china-findings-from-the-initial-months-of-operation-2022.

29. Harding, Robin (2020), Asia-Pacific countries sign one of the largest free trade deals in history. Financial Times, 15 November 2020.

30. RCEP may enable China to become a standard setter in the region and could provide opportunities to increase its soft power. But many countries in the Asia-Pacific, especially South Korea and Australia, have experience with Beijing using threats or economic coercion to force them to adopt or abandon certain policies (Hackenbroich, Medunich, and Zerka 2022).

31. https://www.worldbank.org/en/news/press-release/2022/12/20/china-domestic-and-external-conditions-are-leading-to-a-weakened-economic-outlook#:~:text=Real%20GDP%20growth%20is%20projected,today%20by%20the%20World%20Bank.

32. https://www.icis.com/explore/resources/news/2022/09/29/10810253/lockdowns-property-crisis-to-slow-china-2022-gdp-growth-to-2–8-world-bank/.

33. https://ec.europa.eu/commission/presscorner/detail/en/IP_22_4547.

34. Kawala Xie (2022), China goes ‘its own way’ on Ukraine as EU pushes for pressure on Russia. In: South China Morning Post, 23 September 2022.

35. ‘Instead of noting and welcoming China’s relative neutrality, Washington has responded with threats, accusations and deliberate provocations at a politically sensitive time. (…) It is peculiar how Washington expects help from China on Ukraine while maintaining a campaign of hectoring and humiliation, including on Taiwan.’ Dong Lei, South China Morning Post, 23 September 2022.

36. https://www.euractiv.com/section/eu-china/opinion/decoupling-from-china-should-never-be-eus-pursuit.

37. https://www.europeanchamber.com.cn/en/publications-position-paper.