Source: GT    Published: 2023-12-05

The 24th China-EU Summit will be held in Beijing on Thursday. The relationship between China and Europe has shown considerable resilience in the face of the tumultuous events of the last few years. Two of the most divisive factors - COVID-19 and the Ukraine war - have retreated in the European public mind over the last year. The biggest single geopolitical factor turning Europeans against China has been the Ukraine war and a widespread European belief that China, at least implicitly, supported Russia. Skilful Chinese diplomacy has largely defused this, and many Europeans now hope China might become a major broker in any peace settlement. One of the key factors that have served to mellow European attitudes has been a growing view that China is a constructive force for peace on the global stage. The general picture is one of improving relations between Europe and China, with even the UK moving from a position of hostility and demonization to a more realist approach based on the need for a positive relationship with China because of its growing importance. The appointment of former prime minister David Cameron as foreign secretary is a powerful symbol of this.

The pivotal relationship between Europe and China, of course, is that with Germany. The fundamental basis of this has been and remains economic. For seven consecutive years, China has been Germany's most important trading partner. The most influential and consistent pro-China voice in Germany is that of business. A strong feature of the present more conflictual era in global politics is the growing importance of the political class compared with the business class. Increasingly, it is the political class that has been calling the tune, notably in Washington DC, but also more generally in the West. In the era of globalization between 1980 and 2016, it was the opposite: The political class generally played second fiddle to the business class. We can see this tendency in Germany too, but such is China's economic importance to Germany, that the business class - from its continuing support for Huawei in 5G to its strong opposition to the introduction of tariffs on imported Chinese electric vehicles - still predominates in the making of Germany economic policy, despite considerable opposition from numerous politicians to Huawei, for example.

So what are the prospects for China-Europe relations? Can these positive signs be sustained and built upon? Perhaps the biggest negative is the widespread European support for derisking, as championed by European Commission President Ursula von der Leyen. It speaks to continuing European support for America's policy of channelling Western investment and supply lines away from China. And this is closely linked to Europe's willingness to place restrictions on the export of some advanced semiconductor technology to China, much to the latter's chagrin. The EU is still party to US efforts to restrict and obstruct China's economic progress. The EU remains, in this respect, and of course in others, closely allied to the US. This will be a continuing restraint on Europe's relationship with China, though countries will vary in the extent to which they are prepared to do America's bidding. What is clear is what we know and should expect: The ties between Europe and the US remain deep and long-term, even if they have important differences and markedly contrasting interests. The Ukraine issue is a powerful reminder of Europe's bond with the US.

Looking forward, it is important to emphasize that Europe's future in the short and medium term remains clouded in uncertainty. We live in very unstable and unpredictable times and Europe is absolutely no exception to this. There are two powerful illustrations of this. First, economic. The European economy is more or less stagnant. The Italian economy has barely grown at all for two decades, in fact for much longer. The UK economy is now in zero growth mode while real living standards have hardly risen since the 2008 financial crisis. It is widely believed that the German economy is now in recession. Furthermore, there is little prospect of any significant improvement for the foreseeable future and the political consequences of this may be profound. The lack of economic growth combined with the stagnation in living standards is a powerful cause of growing political fragmentation and the rise of the far right. The victory of Geert Wilders and his Freedom party in the recent Dutch election is a sobering warning of this. It is a sign of the times: The French far right, the German AfD, and the Austrian far right are all on the rise. This could severely complicate matters in the European Union, making policy increasingly difficult to formulate, especially on immigration, which is a huge issue in many countries. In such circumstances, we can expect Europe to become more inward-looking, defensive, and volatile, an introversion which is likely to be reinforced over the coming period by the proposed extension of the EU to 10 or more new member states.

How this will impact on China and on China-Europe relations is difficult to predict, though it is not easy to be optimistic. There are two key issues. The first concerns Chinese electric vehicles. 2024 will begin to see a growing volume of Chinese EV exports to Europe. Chinese EVs will undoubtedly gain a large share of the car market in most European countries. The cry for protectionism can already be heard, especially in Germany, where von der Leyen has lent her voice to the idea. It is strongly opposed by the German carmakers for fear of Chinese retaliation against German car exports to China. This is undoubtedly going to be a hot potato in many European countries, above all in Germany, by far the biggest carmaker in Europe. The second issue is the growing trade deficit between China and the EU, which has more than doubled since 2016. Again, the cry for protectionism is likely to be very loud and may chime with a growing inward mentality.

The outlook for Europe is not good. Continuing economic stagnation will mean that Europe's importance to and place in the world will continue to shrink. Europe will matter less and less. All of this, of course, is a powerful case for a much stronger economic relationship with and collaboration between Europe and China. But that still seems a very long way off. It would require strong consensual support in Europe, of which there is, as yet, no sign, indeed, it has weakened over the last decade. But we should never forget tumultuous times open up new potential opportunities - alongside, of course, new potential dangers.

The author is a visiting professor at the Institute of Modern International Relations at Tsinghua University and a senior fellow at the China Institute, Fudan University.