The Relations between China and the EU amid the COVID-19 Pandemic

ANTALL JÓZSEF RESEARCH CENTRE

THE RELATIONS BETWEEN CHINA AND THE EU AMID THE COVID-19 PANDEMIC

VIKTÓRIA PAPP

2 Czuczor Street, 1093 Budapest +36 20 310 8776 ajtk@ajtk.hu | www.ajtk.hu/en

ANTALL JÓZSEF RESEARCH CENTRE

AJRC-Analyses Series of the Antall József Knowledge Centre

Publisher-in-Chief: Péter Antall Managing editor: Péter Dobrowiecki Editorial office: Antall József Knowledge Centre H-1093 Budapest, Czuczor street 2

Contact: H-1093 Budapest, Czuczor street 2 Phone: +36 20 310-87-76 E-mail: ajtk@ajtk.hu Web: ajtk.hu/en

© Viktória Papp 2020 © Antall József Knowledge Centre, 2020 ISSN 2416-1705

2 Czuczor Street, 1093 Budapest +36 20 310 8776 ajtk@ajtk.hu | www.ajtk.hu/en

THE RELATIONS BETWEEN CHINA AND THE EU AMID THE COVID-19 PANDEMIC VIKTÓRIA ANNA PAPP

As the COVID-19 epidemic turned into a major global challenge it became not only a test for the European Union itself, but also for its relations with China. The subsequent economic crisis could easily become the worst economic downturn for EU member states since the end of World War II, while China could also be affected in a way unseen for decades.

Although more attention has been dedicated to the evolving ‘cold war’ dynamics between the United States and China in the international media, as the pandemic has been sweeping through the world, the EU has been definitely become more divided—struggling with the effects of the outbreak while its complicated relations with China became more apparent.

On the one hand the pandemic exacerbated some tendencies in Sino-European relations, but on the other it halted others. The present paper aims to examine the already visible impacts the current pandemic had on EU-China relations.

Even before the COVID-19 outbreak, relations between the People’s Republic of China (PRC) and the European Union had already become extremely complex. As China has been rising and claiming a larger role in global governance, it has grown to be more ambitious and competitive internationally as well. Along with that China’s interests in Europe have also grown and what used to be a largely commercially-driven relation has turned into a more multifaceted, contended and geopolitically driven one. Last year in a joint communication titled EU-China: A Strategic Outlook the EU described China as a partner, an economic competitor and a systemic rival.1 The two parties share a common interest in promoting multilaterism on the international stage and have no direct strategic or security conflict with one another, which is often cited as a great basis for closer cooperation. The EU and China are two of the most externally integrated economies and biggest traders of the world and their economies are highly interconnected. The EU is China’s largest trading partner while China ranks as the second-biggest trading partner for the EU after the US with the EU having amassed a considerable 164 billion trade deficit with China in 2019.2 The EU-China trade and investment relations are well developed, but not balanced—as often cited by EU officials—and other areas of economic activity, such as trade in services, foreign direct investment, financial market integration and cooperation on industrial and technological

EU-China—A strategic outlook. 12 March 2019. <https://ec.europa.eu/commission/sites/beta-political/files/ communication-eu-china-a-strategic-outlook.pdf > Accessed: 30 June 2020.

1

2 China-EU trade in goods: €164 billion deficit in 2019. Eurostat. 20 March 2020. <https://ec.europa.eu/eurostat/ web/products-eurostat-news/-/DDN-20200320-1#:~:text=During%20the%20period%202009%20to,stood%20 at%20%E2%82%AC164%20billion. > Accessed: 30 June 2020.

3

Antall József Knowledge Centre of Political and Social Sciences

innovation continue to be well behind.3 As a major global economic player with an increasingly assertive foreign policy China, in its endeavours to achieve global technological leadership and “promote alternative models of governance,” has been a source of concern in the eyes of EU leaders.4 Evidently, the EU has realised that it needed a common approach to address the challenges posed by Beijing and the aforementioned EU-China: A Strategic Outlook is a key document in this regard. It puts emphasis on achieving a more balanced relationship with China, which should be based on fair competition and market access, but is far from providing a coherent strategy. In a similar vein, the EU has adopted a framework for investment screening with the aim of protecting its strategic sectors and critical infrastructures and issued guidelines for the security of 5G networks in Europe.5 However, forming a common stance toward China proved to be quite difficult, as European countries’ bilateral ties with the PRC are quite varied and governments in some EU member states regard closer political ties with China as a tool to create more economic opportunities, while comfortably leaving the discussion of more problematic topics, such as human rights and trade concerns to the EU. Whereas at its initial phase it was seen as an opportunity for the European economic recovery after the Eurozone crisis, the PRC’s flagship foreign policy strategy, the Belt and Road Initiative (BRI) has proved to be one of the primary challenges in EU-China relations, due to its perceived lack of openness to Western companies and its unsatisfactory fiscal viability, transparency and sustainability.

While many European countries have signed a formal memorandum of understanding with China to endorse the initiative, some view the Chinese initiative as a means by which China intends to further strengthen its global influence, and consequently divide the EU, splitting member states into supporters and opponents.

The pandemic has definitely galvanised cooperation between China and the EU and crisis assistance has been mutual. When the novel coronavirus outbreak started in Wuhan in January, many EU countries organised support for China, but the communication about it was largely muted per the request of Chinese officials.6 As the situation started to stabilise in Wuhan, the epicentre of the infections moved outside of China in mid-March and more European countries have started to experience outbreaks, the PRC has mobilised huge amounts of resources to provide help. Chinese assistance has arrived from multiple sources, including the different levels of Chinese government, state-owned and private enterprises, foundations as well as local Chinese communities—the arrangements were different, however, in each country and there seemed to be a correlation with business

Alicia García-Herrero, K.C. Kwok, Liu Xiangdong, Tim Summers and Zhang Yansheng. EU–China Economic Relations to 2025 - Building a Common Future. <https://www.chathamhouse.org/sites/default/files/publications/ research/2017-09-13-eu-china-economic-relations-2025-garcia-herrero-kwok-liu-summers-zhang-final.pdf > Accessed: 29 June 2020.

3

EU-China – A strategic outlook.

4

Secure 5G networks: Commission endorses EU toolbox and sets out next steps. 29 January 2020. <https:// ec.europa.eu/commission/presscorner/detail/en/ip_20_123 > Accessed: 29 June 2020.

5

6 John Seaman (ed.): COVID-19 and Europe-China Relations – A Country-Level Analysis. European Think-tank Network on China Special Report. 29 April 2020. <https://www.ifri.org/sites/default/files/atoms/files/etnc_ special_report_covid-19_china_europe_2020.pdf > Accessed: 25 June 2020.

4

Antall József Knowledge Centre of Political and Social Sciences

interests of Chinese companies.7 For instance, Chinese billionaire and Alibaba co-founder Jack Ma and the Chinese telecom giant Huawei both donated two million masks and protective equipment to several EU countries such as Belgium, Italy, Spain, and France.8 Although, Chinese aid and the country’s “mask diplomacy” have become an important feature of the debate concerning China during the pandemic, it is important to note that the value of commercial deliveries of medical supplies have been significantly larger than that of medical aid from Chinese sources.9 At the time when the epicentre of the coronavirus moved to the European continent, the EU’s response was belated and even then it was slow in engaging cross-border cooperation as individual countries introduced travel bans and export restrictions, while for many European countries maintaining pragmatic cooperation with the PRC in order to secure medical supplies was crucial. China, however, has utilised the medical assistance and aid provided on a bilateral basis for European countries as part of its so-called “mask diplomacy” and in the absence of global leadership, it tried to redeem itself as the responsible country at the forefront of the fight against the spread of the coronavirus. Beijing has employed a highly proactive public diplomacy and soft power tools in the form of medical assistance accompanied with remarkably visible media coverage, in order to restore its “face” and shift the narrative about China from “being the origin of the virus” to the “leader of the handling of the epidemic.” As part of the Health Silk Road, China also initiated a number of conference calls with the countries of the “17+1 Cooperation” and with ten European countries including Spain, Italy and France to share best practices and lessons about combating the virus. Some EU countries were more receptive to this soft power push whereas other where less—while coupled with the accompanying disinformation campaigns of Chinese diplomats about the origin of the virus, for instance, it necessitated pushback from the EU administration even in the midst of the crisis, with High Representative Josep Borell Fontelles citing in a post: “China is aggressively pushing the message that, unlike the US, it is a responsible and reliable partner. In the battle of narratives we have also seen attempts to discredit the EU as such and some instances where Europeans have been stigmatised as if all were carriers of the virus.”10 Interestingly, Borell’s comments were followed by Huawei downscaling its medical donations to avoid embroiling in a wider geopolitical power play.

Italy was the first country to deal with China’s “mask diplomacy”, as it was the first country to register a major outbreak outside of China in Europe. The Italian government welcomed vital medical supplies from China presenting it as a sign of Italy’s special relationship with China as well as participation in the BRI and the Health Silk Road, but at the same time emphasizing the EU’s slow and uncoordinated response to the pandemic,

John Seaman (ed.): COVID-19 and Europe-China Relations.

7

Jack Ma donates two million masks for coronavirus crisis in Europe. Reuters. 14 March 2020. <https://www. reuters.com/article/us-health-coronavirus-jack-ma/jack-ma-donates-two-million-masks-for-coronavirus-crisisin-europe-idUSKBN2110KA > Accessed: 30 June 2020.

8

John Seaman (ed.): COVID-19 and Europe-China Relations.

9

Huawei to ‘scale down’ supply of COVID-19 masks, after Borrell comments. Euractiv. 26 March 2020. <https://www. euractiv.com/section/digital/news/no-more-coronavirus-masks-from-us-huawei-says/ > Accessed: 29 June 2020.

10

5

Antall József Knowledge Centre of Political and Social Sciences

which created resentment towards the country’s traditional partners. In turn, the medical assistance sent to Italy was highly overstated in Chinese public diplomacy and on social media—for example by the Chinese ambassador to Italy—as a display of China’s goodwill and solidarity.11 Although China presented its assistance to Italy as an amicable aid, in reality, it was a subject of a commercial deal agreed by their respective foreign ministers.

The increasing Chinese public engagement has in fact started before the pandemic, with Italy signing a Memorandum of Understanding on the Belt and Road Initiative last year to officially become a member of the BRI as the only G7 and founding EU member.12 Even though Italy received medical aid from through the European Commission’s Emergency Support Instrument as well as Germany and the US, these were downplayed by the Chinese narrative.13 Similarly to the Italian example, other Eurosceptic governments have also played up China’s medical assistance in the face of lacking solidarity from the EU, and portraying it as the success of their foreign policy toward their East Asian partner. China’s “mask diplomacy” has been not only pro-China but has also marked biases against the EU and the US. The epidemic has also accentuated internal political discord and the division among member states, as some governments have utilised China’s assistance for their domestic political aims. At the same time, China’s “mask diplomacy” and the supposed inadequacy of European countries to handle the epidemic without Chinese help aimed to show the supremacy of the Chinese model of crisis management to their respective domestic audience.

The pandemic was a shock for the global supply chains creating a serious economic downturn and also took a toll on the highly interconnected European and Chinese economies, while also exposing how reliant European supply chains have become on production in China. Consequently, many voices in Europe are calling for a form of rebalancing away from China, which has already begun due to rising costs and tariff pressures anyway, but as the global economy is in slowdown this may also be a long way to go. Although a voluntary foreign direct investment screening has been agreed in the EU, in this time of economic downturn, to stop Chinese companies buying up—likely strategically important— assets at a currently low price, the EU trade commissioner and the NATO secretary-general both warned European leaders to act cautiously.14 The dependency on China for medical supplies during the first months of the outbreak in Europe and the fact that many deliveries included faulty equipment have definitely showed the strategic importance of this sector, which created debate about the future of such sectors and the relationship with China. Even

China’s Disinformation Campaign in Italy. The Diplomat. 9 June 2020 <https://thediplomat.com/2020/06/ chinas-disinformation-campaign-in-italy/?fbclid=IwAR349jbJ08mApnTHQqmOj_8eFor_3PDyn1hO487GsvMIrp GuRGtrCvu-LHw > Accessed: 1 July 2020.

11

Valbona Zeneli, “Italy Signs on to Belt and Road Initiative: EU-China Relations at Crossroads?,” The Diplomat.

3 April 2019. <https://thediplomat.com/2019/04/italy-signs-on-to-belt-and-road-initiative-eu-china-relations-atcrossroads/ > Accessed: 29 June 2020.

12

European Solidarity in Action. Council of the European Union. <https://www.consilium.europa.eu/en/ policies/coronavirus/european-solidarity-in-action/ > Accessed: 30 June 2020.

13

Andrew Small, “The meaning of systemic rivalry: Europe and China beyond the pandemic.” European Council on Foreign Relations. 13 May 2020. <https://www.ecfr.eu/publications/summary/the_meaning_of_systemic_ rivalry_europe_and_china_beyond_the_pandemic > Accessed: 30 June 2020.

14

6

Antall József Knowledge Centre of Political and Social Sciences

though the EU pledged to provide a 500 billion euro rescue fund for European countries hit the hardest, the path to economic recovery will not be easy.15 In terms of EU-China relations 2020 was predicted to be a crucial year. This year’s annual EU-China summit has been long awaited, scheduled for this autumn, but had to be delayed amid the pandemic.16 At the summit, the EU was expected to show a unified approach towards China, however, achieving this proved to be even more difficult under the current situation, therefore some claim it was mainly postponed to gain some tactical time for the EU, in order to agree on the substance of the investment deal to be completed and avoid a stand-off over Hong Kong.17 There was, however an online meeting between President Xi Jinping, Premier Li Keqiang and European Commission President Ursula von der Leyen and European Council President Charles Michel, which produced little results and no joint statement, except for a tougher and clearer message from the EU after months of hesitation.

The EU has been less confrontational with China compared to the US in connection with the pandemic, but has formulated a tough stance with regards issues such as human rights, Hong Kong and disinformation campaigns.18 The parties also expressed their commitment to complete the negotiations for an investment agreement between China and the EU that has been in the making for seven years and was the key element of the EU-China 2020 Strategic Agenda for Cooperation and their long-term partnership.19 The COVID-19 pandemic has brought the EU and China into closer cooperation in medical assistance, but at the same time distanced the parties over, for example, how the individual member states deal with China and the PRC’s political communication. While the pandemic posed and is still posing a huge challenge globally and for the EU just as much for China, many underlying issues between them remain to be solved, while some have become more accentuated. China’s actions towards Europe and the disagreement over how to manage relations with China have highlighted already existing frictions among member states.

Nevertheless, the EU should overcome the slow acknowledgement of what challenges can China pose and work towards formulating a working common strategy towards China. Even if a strong EU would be in China’s interest, the way the country handled its relations with EU member states mainly through bilateral channels during the pandemic should encourage the EU to create a stronger negotiating position towards China. The pandemic has been a real test for crisis communication and China’s increasingly active public diplomacy, which

Coronavirus pandemic: EU agrees €500bn rescue package. BBC. 10 April 2020 <https://www.bbc.com/news/ business-52238932 > Accessed: 26 June 2020.

15

China and EU Postpone Leipzig Summit Amid Pandemic. Caixin Global. 6 June 2020. <https://www. caixinglobal.com/2020-06-06/china-and-eu-postpone-leipzing-summit-amid-pandemic-101563807.html > Accessed: 18 June 2020.

16

Europe’s “Sinatra doctrine” on China. The Economist. 11 June 2020. <https://www.economist.com/ europe/2020/06/11/europes-sinatra-doctrine-on-china > Accessed: 1 July 2020.

17

EU leaders talk tough to Beijing over long list of unmet promises. South China Morning Post. 23 June 2020. <https://www.scmp.com/news/china/diplomacy/article/3090198/eu-leaders-talk-tough-beijing-over-longlist-unmet-promises > Accessed: 1 July 2020.

18

EU-China 2020 Strategic Agenda for Cooperation. <http://eeas.europa.eu/archives/docs/china/docs/euchina_2020_strategic_agenda_en.pdf > Accessed: 30 May 2020.

19

7

Antall József Knowledge Centre of Political and Social Sciences

left the member states and the EU divided along already existing fault lines concerning China. In the short term, playing up China’s soft power push might prove to be attractive for Eurosceptic governments within the EU due to domestic policy considerations, but it will not transform China’s image in the long run.

Although the EU’s leadership has begun to toughen its position on China, actions should follow suit. For this of course, the harmonisation of interest among member states would be the most needed. One of the main concerns of the EU is to be caught up in between the competition of the US and China which seems to remain a defining feature of international order in the coming years, especially with the US withdrawing from international cooperation platforms and taking up less responsibility globally. Maintaining a working cooperation with Beijing in areas of mutual interests and formulating a coherent EU strategy, while stepping up against its dividing practices will be difficult to manage, however it is of vital importance for the EU—an issue that has become even more pressing amid the pandemic.

8

Antall József Knowledge Centre of Political and Social Sciences