China-EU summit: Beijing open to discuss trade disputes in pursuit of 'strategic trust', analysts say

The China-European Union summit, with diverging priorities from both sides, is unlikely to lead to concrete outcomes over economic concerns and the war in Ukraine. But Beijing will be open to discuss trade disputes, analysts said, as it seeks to rebuild "strategic trust" with the bloc.

On the eve of the first in-person leader meetings between China and the EU since 2019 - a video conference was held in 2022 - Foreign Minister Wang Yi called on both sides to engage in dialogues to avoid "bloc confrontation" amid geopolitical complexities.

Chinese President Xi Jinping and Premier Li Qiang will host meetings with Ursula von der Leyen and Charles Michel, respectively the leaders of the European Commission and the European Council. Those cap a series of high-level exchanges this year as Beijing and Brussels have tried to mend ties while the EU has largely aligned with the US in taking a tougher stance towards China.

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EU officials have low expectations for the one-day summit, saying there will be no joint statement or major deliverables, as the bloc plans to take a firm stand over trade, human rights in Xinjiang and Ukraine - all issues that have strained bilateral ties for years.

European Commission President Ursula von der Leyen and Chinese President Xi Jinping in Beijing on April 6, 2023. Photo: Xinhua alt=European Commission President Ursula von der Leyen and Chinese President Xi Jinping in Beijing on April 6, 2023. Photo: Xinhua>

Thursday's summit will reflect whether the two sides share a genuine willingness for rapprochement, particularly crucial at "a new phase of uncertainty in the EU-China relations", said James F. Downes, an assistant professor in international relations at Hong Kong Metropolitan University.

"It is telling that in the run-up to the EU-China Summit that the level of commitment and expectations from both sides has been rather muted, if not drastically toned down from previous summits," he said.

Ding Yifan, a researcher who specialises in European affairs at the Development Research Centre of the Chinese State Council, called the summit an opportunity for Beijing to rebuild strategic trust with Brussels, although he said Brussels might be less inclined to do so.

But he said the thawing between China and the US following Xi's discussions with US President Joe Biden last month in California could prompt the bloc to rethink its own stance on China.

"This kind of contact between China and Europe is meaningful because [China] can try to re-establish strategic trust through this kind of contact and dialogue," Ding said.

The summit "will not see them at loggerheads", he said. "The Europeans will also think about [its stance on China] ... Europeans will realise that although the US seems to be very determined to confront China, it will also make concessions in negotiations. There will be arguments but an easing of tensions too."

At their meeting, Xi and Biden agreed to manage tensions, resume military-to-military communications and address climate change and the fentanyl crisis in the US. No breakthroughs were achieved in deep-rooted issues such as Taiwan and military competition in the Indo-Pacific, however.

Ding did not expect immediate outcomes from the Beijing summit on thorny issues like the EU's subsidy investigation into Chinese electric vehicles or China's export curbs on graphite, a key material for EV batteries.

Brussels accuses Beijing of exporting overcapacity in its manufacturing sectors and announced a subsidy inquiry on Chinese EVs in October, saying that cheap electric cars from China had damaged the interests of local manufacturers.

In the same month, China imposed export controls on graphite, which was widely seen as a countermeasure to US tech curbs. The restriction, which started on December 1, is also expected to affect Europe, which has focused on transitioning to "green" technologies in recent years.

Brussels has also been taking a "de-risking" approach in its relations with Beijing, as it has long complained about the EU's €400 billion (US$431 billion) trade deficit and has sought to reduce what it calls economic over-dependence on China.

China and the EU have also clashed on an alleged unofficial economic embargo that Beijing placed on Lithuania since Vilnius allowed Taiwan to open a diplomatic office there under its own name last year.

Zha Daojiong, a Peking University professor specialising in China's economic relations with Europe, said China will seek to persuade the EU to keep "global supply chains as free of political or regulatory disruptions as possible".

Brussels has always wanted Beijing to tackle the trade imbalance between it and the European market, said Abigael Vasselier, director of policy and European affairs at the Mercator Institute for China Studies in Germany.

But the summit might mark the first time the EU tells China that "there will be consequences" if the structural trade imbalance is not addressed, she said.

Before setting off for Beijing, von der Leyen told reporters that Brussels had European leaders who "will not tolerate over time an imbalance in the trade relationship" and had "tools to protect our market" - but preferred negotiated solutions.

Beijing, in response, said it had never deliberately pursued a trade surplus, saying Europe enjoyed "a considerable part" of profits through European businesses operating in China.

"Trade data also cannot reflect the benefit distribution pattern of China-EU trade under the integration of global industrial and supply chains. More than one-third of the exports of European companies in China are returned to Europe. On the surface, China has a surplus, but in fact a considerable part of the profits is enjoyed by the European side," foreign ministry spokesperson Wang Wenbin said.

"Buying and selling is a matter between both parties. If the EU imposes strict restrictions on the export of hi-tech products to China on the one hand, and hopes to significantly increase exports to China on the other, this may not be reasonable."

Vasselier expected von der Leyen to deliver the message that "either we address the trade deficit ... [as well as a] level playing field and openness in our systems, or there will be consequences, and the investigation over Chinese subsidies on electric vehicles is just the first step".

But she had doubts about the "tremendous amount of political capital" the EU invested because there had been "very limited results" from sanctions on Chinese companies.

Wang Yiwei, a China-EU relations specialist at Renmin University in Beijing, said that without being able to solve their major trade disputes, there would be little chance of smooth sailing between Beijing and Brussels. He suggested that during their summit the leaders discuss mutually beneficial proposals to solve the EV subsidy dispute.

"If China's electric cars can be produced in Europe, it will provide targeted benefits for European market access and truly solve some of Europe's practical concerns of its interests. Let's see if that will show any good signs in China-EU relations. Otherwise, it will definitely be difficult," he said.

Wang did not think the recent easing in China-US relations would have a major impact on the EU, since Brussels might regard the thaw as temporary. He said the EU would rather stick with its call of "strategic autonomy" to better serve the 27-nation bloc's political agenda.

The EU, Wang said, has already attributed "the decline of its industry and its competitiveness and the economic problems" to "risks from China".

That includes "the Russia-Ukraine conflict, [saying] Russia was not defeated because of China's support", he said.

"Because there are the European Parliament elections next June," Wang noted, "Europe as a whole ... is shifting right, becoming more conservative. Then there will definitely be more blame on China in the future."

Despite disagreement of unresolved issues, the EU could still forge agreement with China on secondary areas such as technological sovereignty, said Sebastian Contin Trillo-Figueroa, a Hong Kong-based China-EU analyst.

"Emphasising realpolitik doesn't necessitate highlighting only the negative aspects; it implies actually pragmatic approaches and foresight," he said.

EU leaders are expected to raise Ukrainian President Volodymyr Zelensky's peace plan in Beijing. Photo: European Council/dpa alt=EU leaders are expected to raise Ukrainian President Volodymyr Zelensky's peace plan in Beijing. Photo: European Council/dpa>

The war in Ukraine - the bloodiest European conflict since World War II - continues to top the EU agenda. While the EU presses China to use its influence on Russia to end the invasion, China has not condemned Russia and instead criticised Nato for prolonging the war.

EU sources have told the South China Morning Post that the EU's top leaders want to push Xi to stop 13 Chinese firms that are linked to the Russian military from gaining access to European-made goods.

They said that if a firm commitment from Beijing could not be secured, the EU might add those businesses to the bloc's 12th package of sanctions on Russia.

Sources said the EU leaders would also press China to re-engage with the peace plan put forth by Ukrainian President Volodymyr Zelensky.

China has its own 12-point peace plan, which calls for a ceasefire through peaceful talks and ending of unilateral sanctions that it said will not help solve the issue. The EU is sceptical of China's plan, saying it is not neutral and lacks details on how to achieve a ceasefire.

Chinese analysts do not expect Beijing and Brussels to achieve much consensus on Ukraine given the wide gap of their positions.

"China has long hoped that the war would end as soon as possible," Wang of Renmin University said.

Beijing's "relatively clear" response, he said, would be: "'Don't point the finger at me. We, like you, also hope for an early ceasefire'."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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