India must evaluate EU’s ‘de-risking’ with China

As China is India’s major trading partner as well as a key strategic challenge, New Delhi needs to carefully study the evolving European approach towards China

European Commission President Ursula von der Leyen has just outlined the European Union’s position on China in her landmark speech in Brussels. She asserted that “it is neither viable – nor in Europe's interest – to decouple from China”. Instead, she wants to ‘de-risk’ Europe’s economic and diplomatic ties with China. This is a new twist to EU’s 2019 China strategy where it had labelled China as a negotiating partner, an economic competitor, and a systemic rival.

She also acknowledged that the EU’s relationship with China is “one of the most intricate and important anywhere in the world”. To manage this relationship, von der Leyen will be visiting China between April 5 and 7, along with French President Emmanuel Macron. EU’s foreign policy chief Josep Borrell will also meet his Chinese counterpart Qin Gang in Beijing later this month. German Chancellor Olaf Scholz and European Council President Charles Michel were in China in recent months.

The Spanish Prime Minister, who has just concluded his China visit, is reported to have urged President Xi Jinping to speak with Ukraine’s President Volodymyr Zelenskyy. China has recently unveiled its 12-point position paper on the ‘political settlement of the Ukraine crisis’. Spain is going to assume the rotating presidency of the Council of the EU in July.

Managing relations with a rising and assertive China has been a challenge for all major countries. Europe is not an exception, and is facing a serious dilemma. The EU and China are deeply engaged with each other through more than $900 billion bilateral trade in goods and services. So, decoupling from China is not an option for Europe.

Von der Leyen has acknowledged that how the EU manages this relationship will be a determining factor for Europe's future economic prosperity and security. Although alarmed by China’s aggressive strategic postures, the EU is still trying to avoid becoming part of the US-China geopolitical rivalry in the region.

This has also been clear even from various Indo-Pacific strategies and approaches issued by the EU as well as by some of its members such as France, Germany, the Netherlands, and the Czech Republic. Most European countries have significant economic presence in this dynamic region. Therefore, the EU focuses on how to further advance its economic interests and how to protect its value chains in the region.

For the EU, China is very much part of the Indo-Pacific. Although the Quad nations also talk about an inclusive Indo-Pacific, the centrality of their narrative is to build some kind of platform or forum to balance the impact of assertive China in the Indo-Pacific.

As Russia has become a major strategic challenge, Moscow’s ‘no limits’ friendship with Beijing is becoming a major concern for Brussels. The EU believes that the Russia-China power balance has reversed as ‘China sees Putin's weakness as a way to increase its leverage over Russia’. Both leaders would also like China to use this leverage and pressure Moscow over the war in Ukraine.

If Von der Leyen’s speech is any indication, the EU would like to redefine its relations with China through de-risking diplomatically and economically. It will re-look its ties in the areas of critical technologies such as microelectronics, quantum computing, robotics, artificial intelligence, and biotech. It will also develop instruments to stop leakages of sensitive technologies through investments. The EU is also re-assessing the Comprehensive Agreement on Investment (CAI) with China which was concluded in 2020, but still not ratified.

Despite hawkish rhetoric by the EU, will member states change their behaviour towards Beijing? Macron’s delegation to China will include many business executives including Airbus and Alstom. Earlier, Scholz took about a dozen CEOs from major German firms to China which included Siemens, Volkswagen, and Merck.

As China is India’s major trading partner as well as a key strategic challenge, we need to carefully study the evolving European approach towards China. Since the EU cannot de-couple economically from China, it is striving to develop tools of ‘de-risking’. Despite strong transatlantic ties, the EU is also still trying to separate its relations with China from US-China tensions. How this strategy is implemented will have implications for the Indo-Pacific narrative, and European economic presence in Asia. It may also impact growing India-EU ties.

(Gulshan Sachdeva is Professor, Centre for European Studies and Coordinator, Jean Monnet Centre of Excellence, Jawaharlal Nehru University.)