MNI: China Advisors - EU Talks Hinge On Europe Deal With U.S.

The outcome of the upcoming China-EU Leaders’ Summit scheduled is likely to depend on Brussels' negotiations with Washington by the July 9 deadline to avoid steep U.S. tariffs, advisors in Beijing told MNI, noting that the EU's recent hawkish rhetoric appears designed to placate concerns in Washington.

If Brussels secures a good U.S. trade deal ahead of the Beijing summit later the same month, it may feel less urgency to make substantial progress with China, and the meeting could serve as little more than a symbolic gesture marking 50 years of diplomatic ties, said Cui Hongjian, professor at the Academy of Regional and Global Governance, Beijing Foreign Studies University.

Cui remains cautiously optimistic regarding potential agreements in areas such as electric vehicles and the digital economy, despite a recent speech by European Commission President Ursula von der Leyen, who warned a new “China shock” was underway and accused Beijing of economic blackmail and undermining trade rules.

“Europe is still pursuing a balancing strategy, that it will lean towards the U.S. on certain issues at certain times, but it will not completely abandon the Chinese market,” said Cui. (See MNI: China Advisors Hopeful Of US Trade Deal By Mid-August)

“The commission is currently refusing any new contacts ahead of the summit, making significant agreements less likely,” said Ding Yifan, deputy director at the Institute of World Development, under the State Council's Development Research Center, following reports Brussels had declined an economic meeting usually held ahead of the annual leaders’ summit.

Nonetheless, communication channels between China and the EU remain open and effective, said Dong Shaopeng, president at the Beijing Silk-Road Cooperation Association, noting that China’s economic leader Vice Premier Helifeng was in regular contact with European counterparts ahead of the July meeting.

“The summit is expected to proceed as scheduled with President Xi Jinping meeting European leaders in line with the standard annual protocol of the meeting,” Dong said, after Western media reported that China's top leader was not yet confirmed. “The EU’s fundamental economic challenges require a more collaborative approach with China, not less.”

RARE EARTH

Given recent EU worries over China’s export controls of rare earths, Beijing could use the summit to extend the green channel approval process and increase export quotas, Dong added.

“The EU may initially hope to avoid being involved in China's rare earth control in response to the U.S. tariffs, but China is increasingly emphasising a general, law-based approach in its foreign policy,” said Cui, indicating limited room for negotiations on easing exports for military use. China is simply taking a reciprocal approach against the EU’s tightening controls over exports of dual military-civilian application, he said.

An EU diplomat close to the trade talks agreed with the Chinese assessment that much depended on the outcome of Brussels’ negotiations with Washington, but noted that Beijing was not afraid to use any available leverage as it sought a deal with Europe.

“The EU certainly cannot abandon the China market, although it seems to put some brakes here, like cancelling the prep meetings,” the diplomat said, “There are also hidden threats like reciprocity to EU's export controls. If EU wants autonomy in semiconductors, it needs rare minerals. And it is not for granted.” 

He Weiwen, a former economic and commercial counsellor at the Chinese Consulate General in San Francisco and New York, and now senior fellow at the Center for China and Globalisation, said China can streamline and quicken the approval process for rare earths, but that it had to ensure materials do not end up in weapons. European attempts to secure alternative supplies of rare earths will take years, He noted.

China should improve its trade imbalance with the EU, by expanding imports and clarifying its subsidy policy, said He. He noted that China’s exports to the EU in the first five months increased 50.2% compared with the same period in 2019, while imports from the EU declined 3.7%. (See MNI: China, EU CAI Hopes Fade, Focus Shifts To Green, AI)