The EU’s trade chief told Beijing that strict security laws and a more “politicized” business environment have left European companies struggling to understand their obligations and questioning their future in China. Trade Commissioner Valdis Dombrovskis said the world’s second-largest economy faces significant political and economic headwinds that could lead the two sides to drift apart and called for a more balanced relationship between Europe and China. The strongest, yet not only, of those headwinds is Russia’s war in Ukraine and how China positions itself on the issue, Dombrovskis added in a speech at Beijing’s Tsinghua University.
The remarks were some of the most pointed from an EU official on China. They follow the launch by Brussels last week of an investigation into Chinese subsidies for electric carmakers, which the EU says is flooding the market with cheaper vehicles. China has condemned the probe as protectionist and a “naked form of protectionism.”
Germany’s carmakers are incredibly anxious that any duties that result from the probe might hit their Chinese factories. Any such duties would be a first for the EU, which has traditionally avoided hitting high-end sectors like EVs and medical technology. The trade chief is in Beijing to co-chair a high-level economic and trade dialogue with Chinese Vice Premier He Lifeng on Monday.
During his visit, Dombrovskis will convey Brussels’ list of trade irritants to the Chinese, including restrictions on cosmetics and medical technology and Beijing’s refusal to allow free data flows. He will also discuss trade imbalances and a European call for outbound investment screening to ensure that high-tech projects in China are not being used to transfer sensitive technologies to Beijing or create problematic dependencies.
He will stress that the EU wants to avoid a trade war with China but is fearless in fighting against unfair practices. He will also urge Beijing to rethink its support for Russia, saying the country’s actions in Ukraine are a “blatant breach of territorial integrity” and a risk to its global standing.
Analysts say that China is seeking to balance its economic support for Russia with its regional interests. Still, they won’t risk a rupture in relations with the West over Moscow’s aggression against Ukraine. It is also keen to keep its influence in the Middle East, where it is building a vast infrastructure project. “China is likely to continue supporting Russia financially and through trade as long as it can without jeopardizing its international relations,” Capital Economics’ chief Asia economist Mark Williams said. “However, this may be coming to an end.”
