As China and the United States redefine geopolitics, Europe faces a win-win situation


A member of the People’s Armed Police stands guard in front of the European Union flag at the European Delegation in Beijing, China.

Kevin Frayer | Getty Images News | Getty Images

As the United States contemplates disengaging from China, Europe may soon find itself in an ideal situation.

US President Joe Biden has, for most of his term so far, taken a tough tone on China, calling the world’s second-largest economy a most serious competitor to America. The diplomatic dialogue between the two reached a more difficult point earlier this year when Washington accused Beijing of using a spy balloon for information on US military sites.

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“The hawkish political stance of the United States towards China means that China must improve its relations with Europe to mitigate the impact of export controls. Therefore, China is encouraged to work hard to improve relations with the EU,” said Anna Rosenberg, head of geopolitics at the Amundi Institute. , told CNBC via email.

European officials have taken a slightly different approach than the Biden administration, preferring to take a softer stance with Beijing, acknowledging its importance to Europe’s economy. Data from the European Statistical Office show that China was the third largest buyer of European goods during 2021.

“The EU is in a very different situation than the US, which is clearly pursuing a political disengagement with China,” Jacob Kirkegaard, nonresident senior fellow at the Peterson Institute for International Economics, said by email.

“Viewed from China, the EU is the most important high-income market to which it still has largely unrestricted access. This in turn makes it much less likely that China will actively try to limit trade with the EU,” he said, adding that China “has a lot to lose from a trade war with the EU.”

European Commission President Ursula von der Leyen has in recent months pushed for a risk-reduction policy from Beijing – reducing the country’s dependence on critical sectors such as raw materials and semiconductors. However, European officials are far from supporting a complete severance of economic and diplomatic relations.

“The political need to de-risk EU-China relations is completely different from US-China relations. In a world characterized by US-China rivalry, the EU is the most important economic partner for both – this gives to the EU significant political advantages against Beijing and Washington,” Kirkegaard also said.

The EU’s single market, where goods and services flow freely across borders, is home to 23 million businesses and more than 450 million consumers, according to European Council data.

“We don’t want to fuel the US-China rivalry,” an EU official, who declined to be named, told CNBC due to the sensitive nature of the situation. “We prefer to calm things down… without being naïve,” said the same official.

US rhetoric towards China eased slightly after a meeting of G7 leaders over the weekend, with Biden warming to the concept of risk reduction, rather than completely detaching the world’s two largest economies.

Beijing would not have liked the idea of ​​G7 leaders meeting to criticize Chinese policy. Following the rally, China banned its companies from buying from US chipmaker Micron.

Alicia García-Herrero, senior researcher at European think tank Bruegel, said Europe may not find itself in an easy position amid these US-China tensions.

“In fact, I very much doubt that will happen,” she said of the prospect that both Washington and Beijing will look to Europe for economic ties.

“China is taking a lot of retaliatory action against Europe in many ways and the feeling that Europe is increasingly dependent on China – this type of strategic dependence for green energy is becoming increasingly clear. “, she said, noting that Beijing is aware of the leverage it holds as Europe seeks to develop a more sustainable economy. China is the biggest supplier of several critical raw materials in the world, according to a study published by the European Commission, which are used in products such as electric vehicles.

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