With the end of 2049 soon approaching, looking back on the past 30 years of EU-China relations, the least we can say is that it has been busy, filled with hopes and disappointments, tensions and appeasement. Today the European and Chinese models remain key components of our multipolar world, often in contradiction but bound by the imperative of cooperation and coexistence. As the People’s Republic of China celebrates 100 years since its establishment in 1949, the future of Europe and China’s relationship is back on the table. But for now, let’s just think about how we got here.

Napoleon Bonaparte always considered the Middle Kingdom a sleeping giant and, in time, his prediction proved accurate. China was to wake and shake the world, although not in the way many had imagined. Its entry into the modern world was marked first by successive military defeats. From the Opium Wars of the mid-19th century up to the years after World War Two, China was forced into unequal treaties with Western Powers and its millennia-old imperial system collapsed. China suffered foreign occupation and was relegated to the rank of second-rate power. This period of 1839 to 1949, the century of humiliation, shaped modern China, particularly its foreign policy.

The rise of China, the struggles of the EU

Many Western observers had anticipated that China’s rise to superpower status through the 21st century would be the chance for a wounded country to take revenge on its oppressors, undermine Western interests, and achieve global ascendency. However with little interest in a prophetic clash of civilizations, China focused on building a unique national identity domestically and learnt to trust nobody in the international arena. This was the beginning of Chinese pragmatism and foreign affairs with Chinese characteristics.

Over the past three decades, the Xi Jinping presidency has defined relations between Europe and China. Dealing with China meant dealing with the chairman. In 2018, at the dawn of his second term and after using an anti-corruption campaign to remove political adversaries, Xi initiated the second phase of his plan to exercise total control over the Communist Party of China and, by extension, the entire country. He engraved his personal political doctrine into the country’s constitution and used the full powers of the party apparatus to propagate it. He removed the two-terms limit to his presidency, which was to keep him in power well over the originally planned 2023 deadline. He became the very incarnation of China in a manner not seen since Mao Zedong, the founder of the People’s Republic.

In contrast to a centralised Chinese state with a strong leader, the EU was fragmented. The 2008 financial crisis had severe consequences for European economies. The turmoil pushed the EU to put in place various financial support mechanisms keep the euro stable and support public finances. European economies eventually made it through the storm, but at great cost. Austerity measures imposed by EU institutions created widespread discontent and many felt that their economic hardships were due to undemocratic decisions taken by foreign actors. Until well into the first half of the 2020s, the EU was the designated target for nationalist movements.

China had dealt with the global financial crisis very differently. It made strategic use of its longstanding tradition of successive five-year plans, made possible by the absence of political competition in a one-party system. To maintain growth and keep unemployment low, the Communist Party leant on its state-owned enterprises, ordering banks to increase lending despite diminished international demand for manufactured products. The annual GDP growth was “artificially” kept around the 6-per-cent threshold as China went against the principles of market economy, stockpiling a massive industrial overproduction and seeing its debt skyrocket. This build-up promoted Xi Jinping to unveil his plan to dispose of China’s surplus on international markets, and thus ensure Chinese economic sustainability. The Belt and Road initiative, a modern incarnation of the Silk Road, was introduced in 2013. An infrastructure network to boost trade, its territorial and maritime routes primarily consisted of roads, rail, and port developments through Central and South Asia. Central and Eastern European (members alongside China of the 16+1 summit initiative) as well as Southern European countries were chosen as the Belt and Road’s final destinations, acting as an entry points into the EU, China’s biggest trade partner [read more on Chinese activity in the EU in 2019].

Pushing against an open door

Chinese money never came for free. All the way through to the middle of the 2020s, China bypassed the EU and implemented the Belt and Road through bilateral agreements. It offered long-term loans, which were tied to strategic concessions in recipient countries. The Piraeus Port became a case study of such practices. The China Ocean Shipping Company (COSCO), a state-owned company, became the majority shareholder of the facility following the Greek debt crisis, allowing China to get its hands on the busiest Mediterranean port.

With euroscepticism growing, more countries started looking eastwards to obtain Chinese loans with no political strings attached. Countries like Greece and Hungary, faced with economic and political pressure from Brussels, saw these bilateral agreements as ways to circumvent EU interference and bargaining chips to use against other European leaders. With its growing leverage, China was getting itself ready to flood EU markets with cheap goods sold at a loss.

To make things worse, Beijing’s massive investment in the digital sector had given birth to a flourishing national industry. Technological advances decreased the need to import European high-value products, while simultaneously increasing the EU’s trade deficit with China. By the end of the 2020s, China’s investments had made it a first-class actor of the fourth industrial revolution. From its satellite network to its artificial intelligence capabilities, Beijing was a direct competitor to the US in cyberspace – the EU was confined to a secondary role.

The Middle Kingdom overtook many European markets and became Africa’s number one trading partner by the mid-2020s.

From a geopolitical standpoint, things were not much better for Europe. Increasingly challenged in new theatres, European countries had lost their edge against China in international affairs. Africa was the symbol of this new competition. The EU signed a new free-trade agreement with the African Union in 2020 but this did not stop Chinese expansion on the continent. Adhering to a principle of political noninterference and on the model of the Belt and Road initiative, Beijing invested significant amounts in infrastructure and provided loans in exchange for strategic concessions and mineral resources. The Middle Kingdom overtook many European markets and became Africa’s number one trading partner by the mid-2020s.

Beyond the economic and diplomatic dimensions, the EU also rapidly lost ground to its Chinese rival in terms of military capabilities. Under the leadership of Xi Jinping, the People’s Liberation Army expanded its air, strategic, and naval forces, breaking with a long tradition of relying on ground forces to protect the country from invasion. China’s isolationism was over, and Beijing was ready to dispute Western supremacy on blue waters, not only in the South China Sea but in every ocean where Chinese interests were at stake. EU countries, on the other hand, struggled to fund their militaries. More than ever, interventions in sensitive regions were subject to Chinese consent. The world order had changed. Fully multipolar, its leading actors – the US, China, the EU, Russia, and other emerging powers like India – competed for influence and to defend their value systems.

The rebirth of unity

As is often the case when multilateral negotiations are involved, member states struggled to agree on common policies and the EU’s response to the changing balance of power was slow to materialise. When the Chinese giant came knocking at Europe’s doorstep, there were many reasons to believe that it was already too late. However, as the years went on, EU countries understood that unity was their best chance in front of a growing superpower.

By the middle of the 2020s, the most urgent matter was the influx of Chinese goods in European markets undercutting local manufacturers. The EU progressively implemented stricter anti-dumping rules and investment screening procedures [read more on investment screening]). In short, the EU imposed tariffs on imports sold below their cost of production, slowing down the flow of the goods China had stockpiled since the economic crisis. Moving into the 2030s, the EU encouraged investments from private Chinese actors while regulating those with ties to political parties. This had the effect of mitigating the unfair competition between private European manufacturers and the state-sponsored Chinese industry. More importantly, EU member states built a shared system of foreign investment review so as to protect critical sectors such as energy, transportation, telecommunications, finance, and defence. This new legislative framework was developed on the principle of reciprocity. State-led Chinese industry could no longer act in Europe in ways that European countries were not allowed to in China.

EU member states built a shared system of foreign investment review so as to protect critical sectors such as energy, transportation, telecommunications, finance, and defence.

After integration had stagnated for many years, some members took the lead on transnational cooperation which eventually served to showcase the real potential of the EU. In the second half of the 2020s and through the 2030s, countries such as France, Germany, Spain, and Italy shared strategic projects, and were progressively joined by other EU members. This multi-speed Europe allowed willing countries to circumvent the reservations of those members dominated by more nationalistic forces. Large-scale cooperation in the military, energy, telecommunication, industrial and digital sectors, which demanded investments that a country alone could not bear, started seeing the light of day. This put an end to the era between 2010 and 2020 of Chinese strategic acquisitions inside the EU. Purchases that had included the Piraeus Port, the Syngenta agrochemical company, KUKA Robotics, and a major Portuguese energy provider. The EU had learned its lesson and new super-projects made European industry competitive again on international markets, challenging its Chinese and American counterparts.

Finding balance

In parallel to the EU gradually getting back in gear, the Chinese model eventually reached its limit. In the second quarter of the century, European regulation and investment screenings curtailed Beijing’s ambitions and bilateral clashes in South Asia (mainly with India) and political instability throughout Central Asia meant that the new Silk Road could not absorb China’s industrial surplus. Many of the infrastructure projects failed to generate the output Beijing had hoped for and, from the second half of the 2020s onwards, China’s growth slowed. Xi Jinping, who had built his legitimacy on worldwide economic expansion strategy and delivering the benefits of growth to the Chinese people, started to feel his grip on power loosening after two decades of uncontested rule from 2013 to 2033. With growing domestic dissent and increased competition within the party, just like had been envisioned in the last years of Mao from 1969 to 1976, it was time for a turnover and the political end of Xi Jinping.

Thousands of kilometers to the west, the EU was finally starting to develop a coherent continent-wide diplomacy. The growing Chinese competition, the threat of a more assertive Russia, and the unpredictability of its American ally, best embodied by the Donald Trump presidency, had pushed EU countries to come together on key issues and enter international negotiations as an independent actor. From the second half of the 2020s, the EU increasingly engaged with like-minded partners, especially in Asia, where Chinese interests were at stake, using its influence to develop new strategic partnerships. These included historical partners like Australia, India or Japan, but also countries within the designated Chinese sphere of influence such as Association of Southeast Asian Nations (ASEAN) members. Beyond political and economic competition, Europe’s diplomacy opened new doors for cooperation with China where strategic interests were shared on issues such as the normalisation of relations with Iran and putting pressure on Washington and Moscow regarding arms control.

in China, record-high levels of pollution had forced the Communist Party to adopt a proactive stance

After years of policies aimed at counterbalancing Chinese influence, by the 2030s the EU was ready to cooperate with Beijing on the ecological transition and renewable energy. The basis of this partnership was set during the 2015 COP 21 climate summit in Paris, but successive political crises in Europe as between the US and China had thrown most of the original agreement out of the window. However, the EU remained firmly attached to mitigating the effects of global warming while, back in China, record-high levels of pollution had forced the Communist Party to adopt a proactive stance. At the beginning of the 2030s, the equation was simple. Beside the implementation of an alternative model of consumption which would take decades to come good, the ecological transition was to be achieved through developing new technologies in the energy sector. These green technologies are themselves highly dependent on rare earth metals of which China has, by far, the largest deposits. For Europe, large-scale environmental policy depended on Chinese resources and, for Beijing, the urgency of domestic pollution meant that it could not do without European green tech and know-how.

Epilogue

Who could have predicted a 100 years ago that a regime built from a Marxist-inspired peasant revolution would manage to rule one of the world’s most populous countries while becoming a first-class military, economic and technological power? The Communist Party has conclusively rebutted notions of an ultimate victory for the Western liberal democratic model and made its own contribution to shaping a new world order. It brought economic opportunities for some and security concerns for others. It redefined the universality of many principles, introduced its own interpretation of human rights, and challenged ‘the West’ on many fronts. As we head into the post-2050 era, both the EU and the People’s Republic are here to stay. Acknowledging the legitimacy of each other’s models and respecting their core principles will pave the way to a fruitful – and essential – future cooperation.