EU-China relations - Engaging with a systemic rival

Key messages

• EU-China relations have faced considerable challenges in recent times. On the one hand, our trade and investment relations remain characterised by significant asymmetries, including a lack of reciprocity in market access and an unlevel playing field in some sectors. Therefore, the recommendations that BusinessEurope set out in its 2020 publication “The EU and China: addressing the systemic challenge” remain relevant today. With the increased politicisation of the Chinese business environment, the situation has become even more challenging for European companies in some areas, exacerbated by the lack of international mobility with China since February 2020. On the other hand, new risk factors have emerged such as China’s increased assertiveness and the supply chain disruptions resulting from China’s zero-COVID policy. It is therefore crucial for European companies to thoroughly assess the short- and long-term risks deriving from any overreliance and exposure to the Chinese market and take mitigating measures accordingly. At the same time, China is and will remain a major market for European companies.
• Despite the challenging state of EU-China relations, the EU should keep in mind that China remains a necessary cooperation partner in certain areas – particularly where multilateral solutions are needed – besides being a competitor and a systemic rival. Our economies are strongly interdependent, and we face many common global challenges that need collective solutions. Therefore, the EU should keep engaging with China in areas of interest with the aim of creating conditions for a constructive and balanced cooperation. However, this cooperation will only be possible if there is political willingness and commitment on both sides.
• Addressing climate change and its consequences is one of the biggest challenges of our time. The European Union is at the forefront of the global fight against climate change and European business is committed to achieving a climate-neutral economy by mid-century. However, the fight against climate change can only be successful with the full mobilisation of all countries, and especially China. European business thus calls for more cooperation between the EU and China on policies to tackle the climate crisis whilst ensuring a level playing field for industry, where costs are shared.
• Standardisation is an essential tool to facilitate trade and interoperability, but it can also be used to erect barriers to international economic exchanges. Both the EU and China have an interest in avoiding a decoupling in this field, which would lead to market fragmentation and increased costs for research and development, unnecessary trade barriers and, potentially, unfair competition. The EU needs to work with like-minded partners and China to boost international standard-setting and the adoption of international standards to avoid such an outcome. Moreover, regulatory dialogue could play an important role in helping prevent trade barriers for EU exporters and encouraging regulatory convergence.