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The EU-China summit faces major obstacles

2023-12-06 08:00:00, Kosova & Bota CNA
The EU-China summit faces major obstacles
China-EU dialogue

The tense situation ahead of the EU-China summit on 7 December in Beijing can be illustrated using the example of e-mobility: What were refrigerators, hair dryers and washing machines from China 20 years ago, now are electric cars. Today they circulate on all continents. For decades, the automotive industry was dominated by European, Japanese and American manufacturers. Today, China likes to point out that it is the largest producer of electric cars in the world and that it is surpassing its former competition. According to Chinese statistics, more than half a million electric cars were exported in the first half of 2023. This corresponds to an increase of 160 percent compared to the same period last year.

Like home appliances back then, China's exports today are above all - cheap. The EU Commission believes they are too cheap. "The price of these cars has been artificially driven down by huge government subsidies," said EU Commission President Ursula von der Leyen. "This distorts our market." World markets are currently "flooded by cheaper electric cars Chinese". In September it announced the launch of an investigation into Chinese subsidies.

High attractiveness

The EU-China summit faces major obstacles
Ursula von der Leyen

Ursula von der Leyen travels to Beijing on 7 December, where the EU-China summit will take place. The President of the Council of the EU, Charles Michel will accompany them. For the first time in four years, top politicians from the EU and China will once again sit down at the same table to speak directly to each other. The 65-year-old von der Leyen may have to defend her decision to investigate electric cars from China, because it has caused great resentment among the Chinese leadership.

China's Ministry of Commerce described the move in September as "pure protectionism". The announcement significantly disrupts and distorts the automotive industry's global supply chains. China is still focusing on ecological products and supports Europe in the fight against climate change, she said.

Offensive in the market

"26 Chinese electric car manufacturers are currently planning to enter the German market by 2025," says Bernd Diepenseifen from consulting firm KPMG. "This number makes it clear what will happen soon. Although the number of cars is still low, this means that the German manufacturers' share may decrease."

The key to the rapid production and deployment of electric cars lies in battery technology, Diepenseifen continued. China ranks first on the Bloomberg New Energy Finance (NEF) list for global supply competitiveness of lithium-ion batteries. The world's largest battery manufacturers are all Chinese. "China has access to raw materials and has the largest production capacity and sales markets."

Competition

But China's first position in this race is highly contested. It is not only about trade and engineering but also about political issues. Xiao Feng, a professor at the China-German University of Applied Sciences (CDHAW) at Tongji University in Shanghai, pointed out the geopolitical factor in e-mobility as early as 2022. "Competition of systems and differences in values" are the biggest challenges for the auto industry. "China and Europe are the main forces in the field of electric cars," Feng said at a Sino-German car symposium in China in October 2022, "but they are also competitors."

The EU's announcement of the investigation is just one expression of the systemic competition between Brussels and Beijing. The EU introduced a control mechanism for foreign direct investment in 2020, known as screening. This can prevent investments that pose a risk to security or public order. This aims to make it more difficult for Chinese investors in particular to access the critical infrastructure of EU countries.

This spring, Commission President von der Leyen also called for a review of European investment in China. The EU must prevent the capital and expertise of European companies from contributing to "improving the military and intelligence capabilities of those who are competitors," von der Leyen said.

Partners and competitors

The EU is China's largest trading partner, ahead of the US. The trade balance between Europe and China was about 850 billion dollars in 2022. For comparison: the balance between China and the US reached 690 billion dollars.

As early as 2019, long before the German federal government presented its China strategy this summer, the EU defined China as a "cooperation partner", "economic competitor" and "system rival".

The EU-China summit faces major obstacles
Footage from the recent meeting between Ursula von der Leyen and Macron in China

The Federal Government has endorsed these EU principles, explained Martin Thümmel, Commissioner for East Asia, South-East Asia and the Pacific at the Foreign Office. "Anyone who argues against these principles is not only arguing against Germany, but also against the EU. This very clearly characterizes the complex relationship we have with China, which cannot be simplified with a black or white picture, but with many nuance."

"China sees Europe as a museum and shopping center, where resistance to oppressive Chinese domestic and foreign policy is quite limited and Chinese companies can buy anything," says Axel Berkofsky, professor of politics at the Italian University of Pavia. in an interview for DW.

The EU as a "great power"

"China now has to prepare not to treat Europe only as a weak and middle power, which will then bend because it wants to sell more cars and machinery to China," Berkofsky said in an interview with DW. Nobody has anything against expanding trade relations, but it's about reciprocity."

The new European confidence is reflected in the action against possible Chinese subsidies.

"The European Union is not necessarily the strongest player geopolitically. But the EU Commission has weight in terms of trade policy and investment policy and can see itself as a major power."

Diplomatic Ice Age

The EU Commission decided for the moment to wait with the ratification of the investment agreement (the EU-China Comprehensive Investment Agreement, or CAI for short). The cause was diplomatic disputes in 2021, after the systematic oppression of Uyghurs in the Xinjiang Autonomous Region became known. Brussels and Beijing imposed sanctions on each other's politicians and institutions.

During the meeting on December 7, it is winter in Beijing. The EU-China summit therefore comes in an ice age in bilateral relations. Whether there will be any meltdown remains to be seen. China is tentatively using diplomatic phrases. On the occasion of celebrating 20 years of comprehensive strategic cooperation between the EU and China on Tuesday, Vice Foreign Minister Sun Weidong said in a meeting with Enrique Mora, Deputy Secretary General of the European External Action Service (EEAS): "China and Europe see opportunities and challenges at the same time. We need to understand our core interests."

It is clear that the essential interests of both parties are in tension, as trade and politics are not separate spheres./ DW

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