BEIJING (AP) — Europe wants two things from China: First, a shift in its relatively pro-Russia position on the war in Ukraine. Second, a reduction in the trade imbalance — Chinese goods exports to the EU exceeded its imports from the 27-nation bloc by 291 billion euros ($310 billion) last year.
It’s not clear if it will get very far on either front.
German Chancellor Olaf Scholz became the latest European leader to leave China with promises to talk but little more. The Chinese statements on his meetings in Beijing this week didn’t appear to give ground on the issues that divide the EU and China.
There is some reason for hope in Europe. China badly wants foreign investment to boost its sluggish economy. And China has made efforts to mend its relationships from Europe to the United States and Australia, despite its differences with them.
But those considerations may not outweigh the larger strategic reasons China has for aligning itself with Russia as it seeks an alternative to the U.S.-led global order and for promoting its green energy companies as it tries to build the nation into a technology leader.
A EUROPEAN DIVIDE ON TARIFFS
Both the EU and the U.S. are complaining that Chinese policies to promote green energy have incentivized companies to build too much manufacturing capacity for electric cars, solar panels and other related products.
Low-priced exports have taken a toll on solar companies in Europe and America and pose a potential threat to other industries. The EU launched an investigation last fall into Chinese subsidies and could impose tariffs on electric vehicles exported from China.
China has agreed to talks on production capacity with the U.S. but remained steadfast in defending its exports of green energy products. They have “not only enriched global supply and eased global inflationary pressure, but also made an important contribution to the global response to climate change and the green and low-carbon transition,” Chinese leader Xi Jinping told Scholz.
Overcapacity is also a problem for China. Experts have called for better policy coordination. so that not every province promotes the same industries. While that may avoid future problems, it won’t reduce existing overcapacity.
Not everyone in Europe agrees that tariffs would be a good thing. China is a major market for many European companies, and some fear tariffs could trigger a trade war.
The German Chamber of Commerce said it would like the focus to be on further opening Chinese markets to German companies. In line with that thinking, Scholz called for a reliable legal system, the protection of intellectual property and equal market access for foreign firms in China.
These issues have taken on increased importance as Chinese companies emerge as innovation leaders in key technologies. A recent Chamber survey of German companies found that 5% viewed Chinese competitors as innovation leaders, with 11% doing so in the auto sector.
“This is really a new topic,” said Maximilian Butek, executive director of the German Chamber of Commerce in East China. “And if those highly competitive companies are still protected by the government, then we have actually global challenges resulting from that.”
A FUNDAMENTAL DIVIDE ON UKRAINE
If there is one issue most of Europe can agree on, it is the hope that China would lean on Russian President Vladimir Putin to end the invasion of Ukraine, now in its third year with no sign of letting up.
Dutch Prime Minister Mark Rutte said three weeks ago in Beijing that he had asked Chinese leaders “to put their considerable weight … on Russia to influence the course of events.” Five days later, French Foreign Minister Stéphane Séjourné said after meeting his Chinese counterpart that France expects China to pass on clear messages to Russia on Ukraine.
This week it was Scholz’s turn. “China’s word carries weight in Russia,” he said. “So I asked President Xi to bear upon Russia so that Putin finally breaks off his insane campaign, withdraws his troops and ends this terrible war.”
The problem is that Europe and China have fundamentally different starting points. Europe, together with the United States, says Russia is in the wrong and should pull its forces back and leave Ukraine. China doesn’t blame Russia, and says any peace settlement would need to address Russia’s concerns as well as those of Ukraine and the West.
China has undercut Western sanctions by continuing to trade with Russia, and Scholz and others have expressed concern about reports that Chinese companies are selling “dual-use” items that help Russia build military hardware. China has blamed the U.S. and others for prolonging the fighting by supplying armaments to Ukraine.
“China has not provided weapons to either side, and it is China’s right to maintain normal economic and trade relations with Russia,” said Ding Chun, the director of the Center for European Studies at Fudan University in Shanghai.
The Chinese government shares the desire of others to see an end to the fighting but seems unlikely to pressure Russia to pull out. The Chinese statement on the Xi-Scholz talks did not address the German leader’s request.
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Associated Press researcher Yu Bing contributed.
