eu china puzzle pieces

Navigating EU-China Relations After the European Elections

June 4, 2024

Between June 6-9, European Union (EU) citizens will vote for their representatives in the 720-seat European Parliament for the upcoming five-year term. The outcome of these elections will shape the EU’s policy toward China during this period, with the political balance in Parliament and the next European Commission deciding on future China-related legislation. Having a clear understanding of the potential impact of the elections on EU-China relations will help businesses operating across these two markets anticipate risks and spot opportunities. 

The EU’s Political Fragmentation Will Impact its China Policy

The EU’s political landscape is becoming increasingly fragmented. Centrist parties are projected to suffer significant losses in the European Parliament—seats that will likely be claimed by far-right parties, such as Identity and Democracy (ID) and the European Conservatives and Reformists (ECR). Views towards the EU’s top priorities, such as achieving strategic and technological autonomy, are equally fragmented even within the same political spectrum. For instance, the ECR maintains a strong anti-China stance, while the ID group has a more lenient approach. These two groups are anticipated to make significant gains in June.  

Such fragmentation will make it harder for member states to achieve a common position, thereby raising uncertainty for Chinese companies and global companies operating in China on how best to navigate the European business environment. This is already apparent in the members states’ divergent positions towards the bloc’s political and economic relationship with China. While at least eight member states (including France, despite its welcoming attitude overall) have restricted the deployment of Chinese technology in 5G networks and Italy recently left the Belt and Road Initiative (BRI), other members such as Spain and Hungary appear more eager to attract Chinese investment.  

Beijing’s Approach to Europe

Amid this political fragmentation, Beijing will seek to secure champions—or at least friendly voices—within the EU, thus preventing the bloc from closely aligning its China policy with that of the United States. China’s intentions were evident in President Xi Jinping’s high-profile visit to Europe last month. President Xi chose France, Serbia and Hungary as the destinations for his first trip to the continent in five years. The three countries share similar ambitions (to varying degrees) to distance themselves from the United States’ economic and ideological influence.  

As President Xi highlighted during his trip, China continues to see the EU as an “important partner.” Amid intensifying trade tensions with the United States, the EU—which accounted for 13.2% of China’s global trade in 2023—indeed remains a key trading partner for Beijing.   

Where Should Companies Direct Their Compass?

The dozens of cooperation agreements signed with France, Hungary and Serbia during President Xi’s visit highlight areas of shared interest that might be expanded at the European level. Notable areas include:  

  • Agriculture: China promised to increase imports of agricultural products from France and Serbia and established a working group on agriculture with Hungary. 
  • Aviation and aerospace: A memorandum of understanding (MOU) between Airbus and China’s National Development and Reform Commission shows the clear connections in the supply and demand of technical knowledge in aviation. There are also opportunities for China and Europe to intensify collaboration in the space industry, fuelled by a similar (though in some respects contrasting) desire to counter U.S. dominance in the sector.   
  • Artificial intelligence (AI): France and China’s joint declaration on AI and its governance could represent a first step to wider collaboration in this area at the European level. Indeed, AI governance is a global challenge and political turnover in the United States could provide more space for EU-China dialogue.  
  • Energy: Securing energy resources remains a key priority for both sides, with opportunities for the exchange of best practices on nuclear energy, particularly between China and France.  

The agreements signal China’s intention to project a positive image as a reliable partner. In these sectors, global companies can play a crucial role in maintaining dialogue and enhancing the stability of commercial relations between the Chinese and European markets.  

What Does This Mean for Companies?

These agreements spotlight areas where companies can build their resilience in the face of increasing geopolitical tensions. Indeed, global companies might have an opportunity to position themselves as the facilitators of an increasingly delicate relationship between politically distant, but commercially co-dependent, powers. Maintaining an open dialogue with policymakers and national authorities will be crucial for companies to remain ahead of future regulatory challenges resulting from commercial tensions between the EU and China. In this context, a defined set of messages and narratives will be fundamental in every company’s public affairs toolkit. Moreover, cross-regional working groups, industry associations and chambers of commerce will be strategic platforms to foster grassroots collaboration as the basis of a broader strategy to contribute to the easing of commercial tensions.  

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