The more you discuss with China, the better you will understand each other. The more you cooperate with China, the more incentives Beijing will have to pursue a liberal reform agenda. So went the underlying logic of “constructive engagement”, an unofficial approach taken by the EU vis-à-vis China for the most part of the last two decades. From the European perspective, the aim of a sustained engagement with China was of course to cash in on economic opportunities, but also to accompany Beijing’s reforms and support its transition to a market economy, a democracy and a responsible stakeholder in the international order. Constructive engagement justified European support for an early Chinese admission to the World Trade Organization (WTO), back in 2001. It underpinned the conclusion of a comprehensive strategic partnership in the early 2000s. It kept a lid on European suspicions and criticisms of China, in areas that are now at the center of a global competition for leadership, a rivalry that has dramatically escalated since the inauguration of Donald Trump as president of the US: trade, foreign investments, technology, multilateralism, political values.
Constructive engagement was the child of an era: the early 2000s were a period when everything seemed possible. European businesses had high hopes, and so did European policymakers. The Chinese market was opening up. The many tens of millions of Chinese customers who were reaching middle class status were hungry for European consumer goods, and the European appetite for cheap Chinese manufactured goods only grew over time. Meanwhile, the political relationship was buttressed by China’s positive stance toward – and willingness to engage in – multilateral settings. Under president Hu Jintao (2002-2012), China insisted on a “peaceful development” agenda and a vision for a “harmonious world”. It was not a case of blind faith; rather, the EU was confident in the strength of its arguments in favor of liberal reforms and in the Chinese willingness to listen and cooperate.
The 2009 economic and financial crisis represented much of a missed rendezvous. European leaders expected China to bankroll their ballooning debt as a matter of mutual interest, and largely failed to understand China’s perception of their outreach as an indicator of division and decay. It also marked a shift in bilateral relations: European policymakers started to split their attention between their demands for market access reforms in China and vying for Chinese investments at home. Some European countries, like Portugal and Greece, sold some of their strategic assets – like the now-famous port of Piraeus or Energias de Portugal – to Chinese entities. In fact, Chinese investments appeared to focus on key industries, and were largely driven by state-owned enterprises. Constructive engagement remained solidly anchored in bilateral relations, but already signs of mutual frustration were emerging.
The year 2016 constituted the watershed moment. By then it had become clear that president Xi Jinping would not follow in the footsteps of his predecessor. The vision he had for his country was one of great-power standing and more assertive diplomacy. That year, Chinese appliance maker Mideas bought the German robotic firm Kuka, a company that was deemed critical to Germany’s “Industry 4.0” ambitions. Many voices in the European country denounced the deal and called for an intervention of the state – which did not happen. Still, the implications were not lost on the German government and it joined its French and Italian counterparts in calling for a European mechanism to “screen investments from third countries” – a language widely understood to refer mainly to China.
China made a lot of promises, Europeans reasoned, but implementation is far from satisfactory. Chinese investors could freely buy shares in strategic assets in Europe while European companies still faced tremendous difficulties in the Chinese market. Chinese competition gets a leg up, at home and in other markets, from its access to cheap capital. Despite the more than 60 sectoral dialogues in place between the two partners, the EU grew frustrated with what it saw as not only a lack of progress, but also deceptive tactics and self-serving maneuvers by China. Now, the European Commission figured, it was time for China to “walk the walk”.
Illustrating this shift, in June 2016 the European Commission published a new strategy for China, which insisted on the reforms and efforts expected on China’s part. This strategy came out merely a month after the European Parliament voted against granting market economy status to China – in a monumental blow to China’s number one priority in the relationship. The EU was also encouraged in this by various actions taken by China that were seen to undermine European unity and European principles: for instance, China engaged Central and Eastern European countries in a so-called “16+1” (joined by Greece in 2019) format that short-circuited Brussels, and in the Balkans some Chinese investors have been found by European officials to actively undermine good governance, and to openly criticize European standards and norms.
Since 2016, the EU-China relationship has been rocked by the turbulent global climate. The Trump administration’s protectionist agenda, its unclear “America first” policy, its attack on the liberal order that the US had led and sponsored for more than seven decades, and its highly personalized, transactional approach to diplomacy simultaneously transformed transatlantic relations and the already shaky US-China relationship. In China the EU sought a partner in global governance, hoping for instance that Beijing would commit to the Iran deal or the Paris agreement that the US had withdrawn from. In the meantime, China sought to convince the EU of forming a common front against Trump’s tariff offensive. But difficult relations with the US did not obscure bilateral issues and Brussels was not ready to return to constructive engagement.
“Trump is not America” said a European diplomat I met in China, “and the EU is allied to America, not to Trump”. In other words, the EU has come to view China as a “systemic rival”, as a 2019 joint communication from the Commission and the European External Action Service called it, and it was not ready to turn its back on Washington despite major differences in perceptions and interests. In fact, the EU grew firmer on its core demands from China, more strategic in its position, and less “naïve” in its picturing of the relationship. Remarkably quickly it adopted a foreign investment screening mechanism that – while watered down – “demonstrated a formidable capacity to reconcile competing demands from member states with the European interest”, read a commentary by ECFR.
The EU essentially ditched the logic of constructive engagement. However, it is still unclear what kind of engagement could replace it. The EU and China are each other’s main or second trading partner, and they are currently negotiating an investment agreement. Cooperation is necessary. Besides sectoral cooperation, sustained diplomatic ties, economic competition, strategic uncertainty and defiance and growing animosity at the political level, the bilateral partnership features at least two key dimensions that are likely to complicate matters further. The first is the division of the EU, between countries relying on China for investments and as a source of political support and countries seeking to devise a more realistic, strategic approach to the relationship. The second is the power of nationalisms and populisms, which profoundly affects policymaking processes and undermines diplomacy.
The EU has de facto entered an era of “cooperative rivalry” with China. Constructive engagement is gone. The question may not be so much whether the pendulum has swung from one extreme to another, but whether the EU is equipped to shoulder and deliver on this new approach. Member states are far from aligned on this issue, and the turbulences that come from Washington, in the coming months and years, are unlikely to disappear. The only way for the EU to be coherent on this would be to convincingly bolster its “strategic autonomy”, update the 2016 strategy on China, revamp the EU Global Strategy and align these documents with an ambitious political and industrial agenda for the 21st century. That, of course, is a lot, and great-power politics will probably be of little help.