The EU & China: Systemic Rivalry_II

Poster: 中国梦 , Zhongguo meng, ‘The Chinese Dream’, 2015, Designer unknown, Publisher: Wang Xin (王鑫) . In the picture: the uninhabited Diaoyu/Senkaku Islands (钓鱼岛/尖閣諸島), fiercely disputed between China and Japan, and China’s first aircraft carrier, the Liaoning (辽宁舰). © No copyright infringement intended. All rights belong to their respective copyright owners

August 31 2022_As described in Part I, for the CCP the liberal democratic international order (LDIO) has only been a vehicle to realize its dream, the “great rejuvenation of the Chinese nation”. The Party has never really embraced the LDIO, the open market and liberal democracy as its end-goal or final destination. The CCP under Xi Jinping has even turned economics and trade into a zero sum game. The multilateral world order that China propagates is just an order that is economically, technologically and regulatory dominated by Beijing. Moreover, Western democracy is viewed as an existential threat to the survival of the Party and Xi’s digital dictatorship.

The LDIO presumes international cooperation via multilateral institutions (like the UN, WTO & IMF) and is based on human equality, (freedom, rule of law and human rights), open markets, security cooperation, promotion of liberal democracy and monetary cooperation. This order was created in the aftermath of WWII, driven in large part by the US. One of the great strengths of  the LDIO has been its capacity to integrate newcomers, including rising powers, think of Germany and Japan after WWII or Singapore, Taiwan and South Korea in the 70’s, or Eastern Europe after the demise of the Soviet Union. 

Communist China has turned out to be the most problematic example of an industrial late-comer’s integration into the liberal international economy. The PRC’s entry into the WTO in 2001 catapulted the country into phenomenal economic growth, lifting a large part of its population out of poverty and offering foreign enterprises a new production base and the prospect of an enormous market. The LDIO, in others words, has not been static. It can be adjusted, expanded, undermined or strengthened. It can even rebound from serious crises.

Some competition and discord between countries and nations is natural under the LDIO. But as China’s weight in the world economy has grown, severe tensions have arisen between its own economic policies and the principles and norms of the LDIO, of which it has become an ever larger part. Simply put, two distinctly different forms of capitalism can be distuinguished these days. The older “liberal meritocratic” one, based on market-centered economics with democratic politics. And the second, newer form of “state-led political, or authoritarian, capitalism,” exemplified and promoted by Xi’s China. Beijing aims to accelerate its own economic and technological strength by selective engagement with the global economy, completely on its own terms. The dream for a level playing field in business and trade that the West has cherished isn’t shared by Xi and his comrades.

China is the only country with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military and technological power and means to do it. Consequentially we have entered a -most likely- long period of ‘systemic rivalry’: the competition to see which political order will be better at adapting to the changing (international) circumstances. Will it be the all but perfect liberal democratic one with its delicate system of checks and balances? Or  China’s Leninist/neo-totalitarian centralism, as supported by the CCP’s “infallible” leadership? If the latter approach would become prevalent and the norm, the LDIO could face a tipping point, meaning that the original system could become so messed up that it flips over to take another course, based on a completely different set of values and rules.  In short, the PRC under Xi is seriously endangering the LDIO as we know it.  

China challenges Europe’s long-term economic sustainability, its political freedom to act internationally, its values and interests and, ultimately, its security. This is not only a direct challenge, but one which stems from China’s systemic impact on the international system itself. While it perhaps is true that the competition between the two different models of governance does not -unlike last century’s Cold War- involve attempts by either side to transplant its own model of governance wholesale elsewhere, it does meanwhile include numerous Chinese activities to undermine the democratic model through strategies and policies of interference, propaganda, soft power, coercion, intimidation and subversion.

This ‘China challenge’ has become extremely complex in many ways, not the least due to the PRC’s technological-geopolitical rise and economic might, the military-civilian fusion of its defense industries, its military-technological espionage network and its regional and global aspirations and ambitions.

While the democratic world can’t influence or determine (the course of) the domestic policies, events and developments in the PRC, it can and must quickly take action to counter Beijing’s persistent undermining of the LDIO and its related values. It can no longer be business as usual for Europe in the relationship with the PRC, those ‘good old’ days of ‘wandel durch handel’ should be fully left behind very quickly. However, concrete actions to impede the flow of Western capital and technology to China’s military-industrial complex are still largely missing today.

Serious EU action is required to safeguard its people, economy and overall security. It doesn’t mean a full decoupling from China, but a more balanced and realistic approach in the relationship with this new giant. All ties need to be assessed -above all- through the lens of systemic rivalry, which is what the CCP has been doing all along.

In this context, suggests the following possible actions for Europe/the EU

Reduce strategic dependencies & vulnerabilities

  1. The EU needs to align with the US and other democracies (JP, KOR!) on a common definition of what is problematic in China’s economic practices, f.e. regarding Chinese subsidy policies. This is crucial for communicating in multilateral organizations such as WTO & UN why these combined efforts are not part of an anti-PRC crusade, but justified self-defense against extremely harmful and unfair Chinese practices. Such a common definition and combined effort could make it difficult for the PRC to frame it globally into its favorite narrative of the ‘arrogant, neo-colonial West against harmless China’. Instead of aiming for its own trade agreement with Beijing in the hope of circumventing or reducing these unfair Chinese actions, the EU should first reach a common understanding with its allies and harmonize as much as possible its own approach/negotiation towards the PRC with the US, Japan, South Korea and Australia. Last but not least, economic coercion by China against individual EU member states should be resolutely opposed.  EU member states and leaders need to agree asap on a common definition of coercive economic behavior and implement the anti-coercion instrument as proposed by the EU Commission whenever necessary.
  2. Any future economic agreement with the PRC should at least be based on the principle of reciprocity. The EU also needs to enforce rules that allow suspension of service contracts with enterprises from China (and other countries) that refuse to grant reciprocal market access or to implement international social, labor and environmental conventions
  3. There should be preferably no or only an extremely limited future role of Chinese companies in critical European infrastructure or strategic industries, in order to prevent Beijing can leverage its power over or even immobilize Europe’s system of public works or key industries. If existing Chinese participation is judged to be a security threat, a phase out trajectory should be mandated: f.e all  EU member states should phase out Huawei from their 4G/5G telecom networks by a specific date.   
  4. the EU should help to co-ordinate and speed up efforts by European companies to diversify investment and supply chains in areas of critical vulnerability that have been identified over the past 2-3 years (electronics, chemical, minerals/metals, and pharmaceutical/medical products). It would perhaps help the CCP realize that the world doesn’t center around China (yet). More European cooperation and alignment should be sought with like-minded countries around the globe as well as with upcoming countries as India and Brazil. The EU could f.e. join the US initiated Chip 4 alliance (US,TW,JP,KOR) that seeks to build more safe and secure semiconductor supply chains or try to align with the QUAD’s (IND, AU, US, JP) initiative to tighten cooperation in rare earth supply.
  5. The EU should mandate a ban on the import of products made by forced labor and have European companies comply with this ban: the EU, USA, Japan and other like-minded countries should co-work to better track and trace such goods and penalize those international companies that don’t stick to the codes of conduct based on internationally accepted labor and human rights standards embodied in conventions of the ILO and the UN
  6. the EU needs to set up and implement an in-bound investment screening framework with criteria to be applied across all Europe, in particular for investments targeting critical infrastructure or strategic industries. It should become mandatory for individuals owning or managing off-shore entities investing in the EU to show a proof of identity
  7. a pan-European science and technology human exchange screening process/framework in education and research needs to be established to prevent unwarranted technology acquisition by third parties. It will also have to be discussed and decided if students/researchers from autocratic, non-free countries such as China are (sometimes) better excluded from certain R&D fields related to f.e. semiconductors, quantum computing and A.I., photonics and aeronautics for reasons of national security and whether new ‘country-neutral’ legislation would be required to enable this. The same screening mechanism should be implemented by all member states, while info and results need to be exchanged between authorities & academic organizations and between member states. The door for academic exchanges with the PRC could remain open for at least non-sensitive R&D or studies, in order to keep alive a network with/inside China and to stay in touch with potential forces for change inside the PRC. Yet any academic exchange or R&D program should also be based on the principle of reciprocity.
  8. The EU should discourage high level EU politicians from joining Chinese companies. The EU should also formally register lobbyists (in Brussel) who work on behalf of the PRC or other autocratic regimes
  9. The EU should define and implement a strict export control regime on upcoming sensitive- and dual usage technologies, ICs/products and know-how, in close alignment with the US, Japan, South Korea,  Australia and Taiwan. Perhaps a new international body should be established to look after the implementation of such a new export control regime
  10. The EU and likeminded countries should discuss, review and decide if also an outbound investment screening framework towards the PRC should be implemented. Rules should be set up to block forced or unwanted technology transfers via Sino-European joint ventures.

Unified geopolitical response

  1. If the EU would like to have any geopolitical impact, it needs to be unified in its international response. This demands that in foreign policy, decisions should no longer be based on unanimity, but on qualified majority vote, preventing single countries such as Hungary or Greece from blocking key foreign policy decisions including sanctions
  2. The EU, US & Japan need to better align their individual responses (f.e. EU’s Global Gateway initiative, Indo-Pacific strategies, the G7 Build Back Better World)  to China’s global programs, such as Belt & Road & the recently launched Global Development Initiative. There ideally should be one overarching, highly visible initiative under the umbrella of one name and/or organization coming from the democratic world targeted at the Southern Hemisphere (Africa, South-East Asia and Latin America). Lofty announcements should be quickly followed by concrete action and deeds to develop alternative sources of growth and boost demand and f.e. reduce barriers within the European single market to balance greater Chinese protectionism
  3. The EU and the US and likeminded countries should make much more coordinated efforts to gather support in the UN and multilateral organizations (such as standardization bodies), including forming flexible alliances with other countries to oppose China’s growing influence and regional claims (f.e. over the South China Sea). The moribund WTO needs to be revived.
  4. The EU should avoid that a more assertive stance towards the communist regime in China will grow into Sino-phobia in Europe.  National governments should engage and keep the Chinese (speaking) community on the Continent informed in its communication and clearly separate the Chinese government from the Chinese people.  The EU should combat much more strongly propaganda that’s distributed by Chinese state media on European airwaves or social media. The EU could f.e. co-work with Taiwan and launch a Taiwanese TV channel across Europe to provide the Chinese speaking community with another, democratic source of information. The available written Chinese media should no longer be dominated by PRC sponsored publications. The EU could expand cultural relations with Taiwan and support the creation of Taiwanese cultural centers across Europe to counterbalance the Confucius institutes sponsored by the PRC.  The EU’s Taiwan/One China policy should be harmonized as much as possible with the US, Japan and Australia and China’s sovereignty claims over the island should be resolutely and publicly rejected in all international fora. 
  5. The EU should decide to issue targeted sanctions at individual leaders in Hong Kong such as ex-Governor Carrie Lam and her successor John Lee who have actively been contributing to the total downfall of freedoms in the city, violating the Sino-British joint agreement.
  6. The EU needs to prepare for an escalation path in case the PRC decides to support Russia militarily in the war in Ukraine or to use Europe’s currencies and financial markets or other ways to help Putin evade the sanctions imposed on Russia. Such an escalation path is also needed in view of China’s increasingly aggressive stance towards Taiwan
  7. Given the American priority to focus militarily on Asia, future US military contributions to Europe are likely to be far more limited compared to those today. Europe has benefitted enormously from the US’ focus on preventing communist China’s dominance of Asia, by guaranteeing the freedom of the seas, protecting the LDIO and safuarding various countries (and their national sovereignty) in that region. The future approach that probably would work the best is for the US to concentrate on China in Asia and maintaining stability in the Indo-Pacific, while remaining committed to NATO but alongside much greater efforts by Europe for its own self-defense. NATO’s European members should assume greater responsibility for providing the majority of the alliance’s future conventional military forces. The European allies need to quickly develop, ready, and accommodate the forces required to deter any Russian invasion of a NATO ally.   

Above are just a number of suggestions to counterbalance the PRC’s actions and behavior, the list is by no means exhaustive. Apart from these more ‘defensive measures’  Europe itself will of course need to step up its game: more innovation and skillful use of its know-how, creativity and expertise will be required to compete economically with the Chinese (and Americans!). Yet unfortunately the systemic rivalry has already started to pervade Europe’s relationships with the PRC on all levels: it overshadows the natural economic competition between countries and diminishes the prospects for any trustworthy, serious ‘partnership’ with China, be it on climate, WMD control, global health policies or control over (outer)space.

The two prongs of technology innovation, the civil and military applications of scientific knowledge, will no doubt continue to merge, not only in the PRC but also in the West. Europe seems to lag in both, especially in technologies with military implications that pitch Europe’s humancentric attitude to technological innovation against the merciless power-centric approach followed by the CCP.

However, we shouldn’t get intimidated and paralyzed by the Chinese propaganda, fellow travellers and Western doomsayers  who constantly tell us that the West is in an irreversible decline, that China is already technologically miles ahead of us and that the era of the PRC’s dominance and superiority is inevitable. As we again have been able to observe this year, Xi’s China still has its own fair share of troubles as well as plenty of economic,  technological and even political headaches. It is by no means guaranteed it can easily overcome them by continuing to subvert the LDIO, by seeking self-sufficiency and by sticking to a one Party, neo-totalitarian surveillance state. This should provide the EU an extra motivation to uphold and defend the LDIO and its underlying values and rules more resolutely and consistently, by looking more energetically for alliances and closer cooperation with likeminded countries around the globe.

Tough times and decisions lie ahead. Will there be enough support for the position that the EU should align with like-minded countries to counter not only Russia but also the PRC? It remains to be seen if the EU and its allies will have the willingness and capability of putting security, values and principles over profit in the relationship with the PRC, especially as the world has already started paying a heavy economic price for the on-going war in Ukraine.

Also refer, f.e.:

Henk Shulte Nordhold, Is China nog te stoppen?, Amsterdam 2021

Ian Bond, François Godement, Hanns W. Maull, Volker Stanzel Rebooting Europe’s China Strategy, Berlin, May 2022 (