EU-China Relations Fray Amid Trade Tensions and Cybersecurity Concerns
Rising mistrust between Brussels and Beijing intensifies as the EU hardens its stance on trade, cybersecurity, and illicit commerce.
Dear Readers of Eurasia Dispatch,
Welcome to the latest issue of the newsletter! As always, there is a lot to unpack after this week.
EU-China economic ties are under strain after the EU Commission President’s hawkish statements at the G7 meeting and the EU’s decision to pull out from the EU-China High-Level Economic and Trade Dialogue. On top of that, the EU is cracking down on AliExpress for distributing illegal products. At the same time, the Czech President equated the level of cyber threat emanating from China and Russia.
Without further ado, let’s get down to business! This week, Eurasia Dispatch covers:
Institutions
Member states
Business
Commentary
INSTITUTIONS
EU-China economic ties under strain
Last week, the EU took a few strong steps in managing its economic relationship with China. Brussels snubbed the EU-China High-Level Economic and Trade Dialogue, citing the absence of progress on trade disputes. Furthermore, at the G7 leaders meeting in Canada, EU Commission President Ursula von der Leyen criticised China for coercive trade practices and distorting global markets by subsidising its companies. Her comments were interpreted by the media as a ‘direct appeal’ to U.S. President Donald Trump, who holds similar grievances about imbalanced trade with Beijing. China called von der Leyen’s comments biased and baseless, arguing that they reflected double standards. Subsequently, EU trade commissioner Maros Sefcovic and China’s commerce minister Wang Wentao held a video call to alleviate tensions.
The Eurasia Dispatch Take: China’s rare earth export controls, implemented in April and disrupting European industrial production, were obvious triggers behind the EU’s recent actions. Ironically, China’s export controls on certain rare earths and related agents came shortly after U.S. President Trump’s reciprocal tariffs in early April, suggesting that they were aimed more at retaliating against the U.S. rather than punishing the EU. However, the controls added further strain on EU-China trade relations, which were already fraught due to various ongoing tariff disagreements between the two sides.
It is important to remember that all is not lost—an unnamed EU official reportedly stated that the bloc would participate in the dialogue if there were agreements to implement. However, it appears that progress will only be made upon concessions—possibly on the electric vehicle, dairy, pork, and brandy fronts—from China.
MEMBER STATES
Czech President: Chinese cyber threat to Europe equal to Russia’s
Czech President Petr Pavel told the Financial Times that China and Russia pose similar cyber threats to Europe, as his country has seen ‘cyber attacks coming from both directions and almost at the same level.’ His comments came shortly after his government accused China of hacking the Czech foreign ministry. According to Czechia’s foreign minister, China accessed unclassified documents pertaining to Asia.
Until recently, Russia had better cyber capabilities than China, but Beijing has caught up with Moscow. However, there is a difference in the goals of their malicious cyber activities: while Russia pursues sabotage, China seeks to collect data that could damage its opponents’ image, according to the Financial Times article.
The Eurasia Dispatch Take: Europeans often lump together China and Russia—a perceptual baggage rooted in history and the two country’s similar ruling systems. This practice is problematic, because the two states present different challenges and opportunities for Europe. All the same, this Financial Times article showcases that in the wake of the Ukraine conflict and China's purported support for Russia, the European perception of Russia and China as a bloc against the West is strengthening, to the detriment of ties between Brussels and Beijing.
BUSINESS
AliExpress in the EU’s crosshairs
The EU disclosed preliminary findings of its ongoing investigation into AliExpress which it started in March 2024. The findings suggest that the Chinese online marketplace is not doing enough to avoid the distribution of illegal products—such as unsafe child toys or counterfeit clothes—via its platform. The verdict in the case is not final yet. However, if AliExpress fails to win over EU regulators, it may get fined up to 6 per cent of its global turnover. The company pledged to cooperate with the authorities.
The Eurasia Dispatch Take: AliExpress is the latest in a long line of Chinese companies facing challenges in the EU. In March, a corruption scandal shook the European Parliament, and Huawei—one of China’s top telecom companies—came under suspicion of bribing parliamentarians. In May, TikTok was fined €530 million for illegally transferring European user data to China. In the same month, Shein was accused of using illegal sales tactics to manipulate European users. Most of these cases are still under investigation, but the reputational damage to Chinese companies in Europe has already been done.
The three challenges of EU companies working in and with China
Jens Eskelund, president of the European Union Chamber of Commerce in China, talked to Nikkei Asia about European companies’ challenges in their cooperation with China. First, EU companies are “hostage” to US-China competition. As China restricted the exports of rare earth materials after the United States imposed the reciprocal tariffs, industrial production in the EU saw disruptions—showing that European companies can become collateral damage in the U.S.-China trade showdown. Second, European companies are concerned about China’s economic slowdown that might negatively impact their profits. Third, overproduction in China leads to cheap Chinese exports to Europe, challenging the pricing power of European firms. Overall, Eskelund thinks that Europe and China “need to find a new model of cooperation that ensures that the benefits of trade and collaboration are being distributed in a more equitable manner."
The Eurasia Dispatch Take: So far, the EU and China failed to reach common ground on how to approach the ‘new model of cooperation’ mentioned by Eskelund. The upcoming EU-China summit on 24-25 July will give the two sides an opportunity to lay down the groundwork for a new modus operandi. The EU’s key priority is to secure reliable supply of rare earth elements, while Beijing is looking for a reduction of the hefty import tariffs imposed by Brussels on China-made battery electric vehicles. If breakthroughs are made on those fronts, success may snowball into compromises on disagreements involving dairy, plywood and tyres.
COMMENTARY
A reality check for the EU’s lithium ambitions
According to a recent analysis by Agence France-Presse, the EU faces a trio of challenges in its quest for transportation decarbonisation and securing a resilient supply chain for lithium, a key component in the batteries that power electric vehicles. First, the EU is late to the game. Beijing has already established a significant presence in this realm, which makes China nearly indispensable: it ‘currently produces more than three-quarters of batteries sold worldwide, refines 70 percent of raw lithium and is the world's third-largest extractor behind Australia and Chile’. Second, the EU has been big on rhetoric, but light on action: instead of making concrete investments, it has mainly been signing memoranda of understanding. Finally, the EU supports supplier countries like Chile and Argentina to develop more complete supply chains—instead of just extracting and exporting—but there is no guarantee that this approach will pay off, as Latin America currently lacks a local electric vehicle market demand to absorb the output.
The Eurasia Dispatch Take: China may be a key player in the lithium supply chain, but the EU does not need to replace it to drive transport decarbonisation. Rather, it should develop indigenous production and processing capacities, as well as supply chains less dependent on China. On the former, China could even become a partner to the EU and a source of technology transfer. Overall, the fate of the EU’s lithium quest will depend on realistic goal setting and its ability to pursue new cooperation models with its partners.
Central Asia in the diplomatic centre stage once more
Chinese President Xi Jinping travelled to Kazakhstan to attend the second China-Central Asia Summit—chaired by Kazakh President Kassym-Jomart Tokayev and attended by Kyrgyz President Sadyr Japarov, Tajik President Emomali Rahmon, Turkmen President Serdar Berdimuhamedov and Uzbek President Shavkat Mirziyoyev in addition to President Xi—on 16-18 June. In his keynote speech, President Xi elaborated on the China-Central Asia Spirit—a new political slogan meaning that the participants conduct their relationship based on mutual trust, respect, benefit and support for joint development. He also pointed out that unilateralism, protectionism and hegemonic behaviour is bound to backfire, and warned the international community against regressing to the ‘law of the jungle’.
The key outcomes of the summit included more than 50 cooperation documents and the establishment of cooperation mechanisms on trade, poverty reduction, education and desertification control. Furthermore, advancing technological partnership was a key element at the summit. The participant countries pledged to cooperate on the development of artificial intelligence, and Kazakhstan and China signed agreements on ‘high-voltage direct current (HVDC) transmission, digital energy, pumped storage hydropower plants, solar energy, hydrogen technologies’.
The Eurasia Dispatch Take: President Xi’s visit comes after the first EU-Central Asia summit in April, and the first Italy-Central Asia summit in May. Like China’s, the EU’s priorities in the region similarly focus on energy, trade and investment. However, the EU is a relative latecomer, as this was already the second China-Central Asia summit. Nevertheless, there is great potential for Europe-Central Asia cooperation, because regional states follow a multi-vector foreign policy that strives to diversify foreign partnerships.
BEFORE YOU GO
Trade tensions, technological and energy cooperation shaped the Eurasian discourse these weeks. Developments on these fronts will reverberate across global politics, trade, and defence. If you are interested in how these processes evolve, stay tuned for further updates in the next issue of Eurasia Dispatch! Thank you for reading, and we’d love to hear your thoughts—feel free to share your insights and feedback.
Until next time,
Eurasia Dispatch
P.S. As always, I am grateful to my editor.
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