While China and the US are redefining geopolitics, Europe is facing a win-win situation

  • Officials in Europe have taken a different approach from the Biden administration, preferring a softer stance on China.
  • “From China, the EU is the most important high-income market to which it still has largely unrestricted access,” the analyst said.
  • Figures from the European Statistical Office show that China was the third largest buyer of European goods in 2021.

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’s paintings

As the US contemplates withdrawing from China, Europe may soon find itself in a difficult position.

US President Joe Biden has taken a harsh tone on China for most of his term so far, calling it the world’s second largest economy the most serious competitor to America. Diplomatic dialogue between the two hit a more turbulent period earlier this year when Washington accused Beijing of using munitions spy balloon to obtain intelligence from US military facilities.

“The US hawkish policy towards China means that China needs to improve relations with Europe to mitigate the effects of export controls. Therefore, China has an incentive to work hard to improve relations with the EU,” Anna Rosenberg, head of geopolitics at the Amundi Institute, told CNBC via email.

Officials in Europe have taken a slightly different approach than the Biden administration, preferring a softer stance towards Beijing, recognizing its importance to the European economy. This is shown by the data of the European statistical office China was the third largest recipient of European goods in 2021

“The EU is in a very different situation from the US, which is clearly seeking a political withdrawal from China,” Jacob Kirkegaard, a non-resident at the Peterson Institute for International Economics, said by email.

“From China, the EU is the most important high-income market to which it still has largely unfettered access. This in turn greatly reduces the likelihood that China will actively try to limit trade with the EU,” he said, adding that China “has a lot to lose in a trade war with the EU.”

The president of the European Commission, Ursula von der Leyen, has pushed in recent months for Beijing’s risk mitigation policy – reducing dependence on the country in critical sectors such as raw materials and semiconductors. Yet European officials are nowhere near backing a complete severance of economic and diplomatic ties.

“The political need to reduce risk in EU-China relations is completely different from that of US-China relations. In a world characterized by competition between the US and China, the EU is the most important economic partner for both parties – this gives the EU significant political advantages compared to both Beijing and Washington,” Kirkegaard also said.

According to data from the European Council, the EU’s single market, where goods and services move freely across borders, is home to 23 million businesses and over 450 million consumers.

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

US rhetoric towards China has softened somewhat after the G7 leaders’ meeting over the weekend, where Biden warmed up about risk mitigation rather than completely separating the world’s two largest economies.

Beijing would not like the idea of ​​the G7 leaders meeting to criticize China’s policies. In the aftermath of the assembly, China imposed a ban on its companies from buying from US chip maker Micron.

Alicia García-Herrero, a senior fellow at European think tank Bruegel, said Europe might not find itself in an easy situation amid US-China tensions.

“I actually very much doubt that will happen,” she said, referring to the prospect of Washington and Beijing looking to Europe for economic links.

“China is taking a lot of retaliation against Europe in many ways, and the feeling that Europe is increasingly dependent on China – this kind of strategic dependence on green energy is becoming more pronounced,” she said, noting that Beijing is aware of the leverage that continues as Europe moves towards a more sustainable economy. The largest supplier is China several critical raw materials in the world, according to a study published by the European Commission, that are used in products such as electric vehicles.

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