EU racing to devise new China strategy with ‘de-risking’ at its core

The European Union is cooking up a new China strategy, with commission chief Ursula von der Leyen’s “de-risking” concept at its core.

In Brussels this week, top-level officials and ambassadors held informal talks to get the ball rolling on what is expected to be a frenzied bout of policymaking.

There was no disagreement on the broad contours of de-risking, which will look to wean the bloc off Chinese supplies of critical commodities, while also restricting European investments in certain hi-tech sectors in China.

The policy was first floated by von der Leyen during a speech in Brussels last month, and she subsequently explained it to Chinese President Xi Jinping in Beijing.

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According to a person who was present, Xi showed no reaction, but he did push back on von der Leyen’s insistence that the EU’s trade deficit be reduced, telling her that the EU should stop deploying trade weapons that interfere with the flow of goods.

EU members find the de-risking policy idea much more palatable than decoupling, which they view as economic self-harm.

It is likely to affect a small amount of trade in sensitive areas, while also potentially restricting some European investment in hi-tech sectors in China, such as artificial intelligence and advanced robotics.

At this week’s meeting in Brussels, the chiefs of cabinet for von der Leyen and European Council President Charles Michel, along with EU foreign service secretary general Stefano Sannino, sat down with ambassadors from the 27 member states to put the wheels in motion.

One diplomat said it was “easy to agree on the economic stuff”. But on more political issues, such as Taiwan, a combined position might be more complicated to land on.

Recent public spats over how the EU should deal with Beijing, and what exactly its messaging should be over Taiwan, have injected the policymaking process with a new sense of urgency.

Concerns about China’s relationship with Russia persist – even as officials welcomed a call between Chinese President Xi Jinping and Ukrainian counterpart Volodymyr Zelensky this week.

Successive crises, in the Russian invasion of Ukraine and the Covid pandemic, have dragged the EU’s dependencies on China into the spotlight.

The lukewarm response from the “Global South” to sanctions and UN resolutions against the war has come as a shock to Brussels. Its new China strategy is likely to prioritise building bridges with so-called “swing states”, with a leaked internal document seen by the Post naming Brazil, Chile, Kazakhstan and Nigeria as the main targets.

The EU’s foreign service staff are currently writing a “position paper” to steer the discussion. This will be debated by foreign ministers in Stockholm next month, then kicked up to national leaders in June.

Immediately after their meeting in Stockholm, the foreign ministers will meet their Indo-Pacific counterparts in the same city. One notable absentee will be China, as the Europeans look to turbo-boost outreach to countries also harbouring concerns about Beijing.

The timing is no coincidence: painfully aware of the need to court the region, Brussels was eager to secure maximum attendance on the European side and worried that officials might not fly in for a separate meeting on Asia.

And in an effort to ensure the Indo-Pacific countries keep coming back, Taiwan will not be named on the agenda or in any communique, said a source familiar with the discussion.

At the same time, the EU’s trade department is devising an “economic security strategy”, also aimed at China, that will propose new trade weapons such as outbound investment screening to keep critical technology out of Beijing’s reach.

The pair of policies has the potential to redraw the EU’s approach to China, even if there is no appetite to drop the 2019 designation of Beijing as a partner, rival and competitor.

Officials see de-risking as being compatible with the “triptych”. There is also a realisation that it would be difficult to agree on an alternative.

“It is not about reinventing the wheel … obviously, describing China as a partner, a rival, a competitor – that’s still valid, it was very well summarised at the time,” EU foreign policy chief Josep Borrell said this week.

There are signs that the concept is already beginning to seep through into policy. In Germany, Bloomberg reported this week that the government was considering restricting exports of some chemicals used in high-end chip manufacturing to China.

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“De-risking is now the word in everybody’s mouth. Decoupling is not the order of the day. In terms of language and principles, there has been consensus – France and Germany are on the same page,” said Nils Schmid, foreign affairs spokesman for the Social Democrat Party that leads Berlin’s coalition government.

Some Brussels officials gleefully texted on Friday that their language had been picked up in Washington, hours after White House national security adviser Jake Sullivan said: “We are for de-risking and diversifying, not decoupling.”

Others, however, cautioned that the process was just beginning, and that the hard work lay ahead.

“If only policy was as simple as just saying stuff,” said one European diplomat. “Everyone agrees with the narrative. But the actual policy is genuinely hard to do.”

An official involved in economic policymaking bemoaned the stringent timelines. “We can have a proposal ready for you tomorrow if you just want an announcement,” he said, implying that a substantive piece of legislation should take more time.