Welcome to the April issue of our literature review on the systemic conflict with China. EU-China relations have deteriorated dramatically in recent weeks. After the EU imposed sanctions against four Chinese individuals and one entity involved in human rights abuses against the Muslim minority in Xinjiang on March 22, Beijing responded with retaliatory sanctions targeting ten EU individuals and their family members as well as four entities, including the European Council's Political and Security Committee, the subcommittee on Human Rights of the European Parliament and the think tank MERICS.
China's unprecedentedly harsh response has further fueled the debate over how to deal with the People's Republic. Beijing’s retaliatory sanctions have made it unmistakably clear that it is a systemic rival to democracies around the world that will subject liberal values to their greatest test since the early days of the Cold War. Europe must position itself vis-à-vis this strategic rivalry but finds itself lacking a consistent policy. In contrast, the U.S. is in the process of implementing its strategy toward China. Against this backdrop, transatlantic cooperation on China is more important than ever. Early indications are that this collaboration is finally picking up steam. Meanwhile economic and technological competition continues to accelerate.
As usual, I have tried to map the ongoing debate and point out contributions I consider essential readings. Please feel invited to comment on my selection. I look forward to your feedback. Wishing you an interesting read.
In this Issue
1. After the Sanctions: EU-China Relations Enter Downward Spiral
2. After Anchorage: U.S.-China Relations Not Going to Get Any Better
3. Against All Odds: Transatlantic Cooperation on China is Picking Up Steam
4. China’s Rise and Ambitions: The Global Contest between Autocracy and Democracy
5. Economic and Technological Competition: China’s Protected Home Market Advantage
1. After the Sanctions: EU-China Relations Enter Downward Spiral
In short: China opted for escalating rather than reciprocating the EU’s sanctions.
After the EU had imposed sanctions against four Chinese individuals and one entity involved in human rights violations in Xinjiang on March 22, Beijing immediately hit back and slapped retaliatory measures on a host of EU officials and other political targets. The most prominent entity on China's hit-list is the European Council's Political and Security Committee composed of 27 ambassadors. Five members of the European Parliament are on the list as well, including the prominent head of the Parliament's China delegation Reinhard Bütikofer, as well as as Michael Gahler, Raphaël Glucksmann, Ilhan Kyuchyuk and Miriam Lexmann. The subcommittee on Human Rights of the European Parliament was also sanctioned. Sjoerd Wiemer Sjoerdsma of the Dutch Parliament, who called for a boycott of the Winter Olympics in Beijing next year, Lithuanian lawmaker Dovilė Šakalienė, and Belgian lawmaker Samuel Cogolati, who attempted to put up a genocide bill in the legislature, were also sanctioned by Beijing. In addition, the German scholar Adrian Zenz, whose works on Xinjiang's camps have been widely cited, and Swedish scholar Björn Jerdén are also in the list, alongside the Berlin-based China research center, the Mercator Institute for China Studies in Germany. Beijing also targeted the Alliance of Democracies Foundation in Denmark, led by former NATO Secretary General Anders Fogh Rasmussen.
The official announcement by the Ministry of Foreign Affairs of the People’s Republic of China can be read here.
In short: EU-China relations are permanently disturbed by the sanctions.
Diplomatic relations between Brussels and Beijing have taken a sudden turn for the worse, opening a new chapter of overt hostility, distrust and uncertainty, Jorge Liboreiro and Christopher Pitchers report. The dramatic shift took place in a matter of hours on March 22, after the 27 foreign affairs ministers of the European Union announced the first raft of sanctions against China in more than 30 years. The punitive measures were aimed at five targets: four Chinese officials and one state-sponsored company believed to be involved in the human rights violations of the Uyghur Muslim minority in the Xinjiang region. The move from Brussels was synchronized with Western allies. That same day, the U.K., U.S., and Canada announced sanctions against the very same targets, sending Beijing a clear message of unity and coordination. China reacted swiftly and furiously: in an almost instantaneous counter-strike, the Chinese Foreign Ministry slapped sanctions on ten European individuals, including five Members of the European Parliament and three national lawmakers, as well as four entities. Beijing also blacklisted democratically elected officials from the U.K., the U.S. and Canada. In total, more than 30 individuals and entities were sanctioned.
In short: Leading Members of the European Parliament condemn China’s retaliatory sanctions.
In a joint statement following the Chinese sanctions against the EP’s Subcommittee on Human Rights and other European entities and officials leading MEPs declared: "The Subcommittee on Human Rights has a duty to monitor the human rights situation across the world and to promote and protect these rights in accordance with the values and objectives on which the European Union is founded, namely, the principle of universality of human rights. We believe that China’s measures aim to undermine our work. We wish to express our solidarity with other parliamentarians, European universities, think tanks and academics who have also been targeted by these sanctions. Regarding the situation in China, we reiterate our serious concerns about the abuses in the country, in particular the persecution of the Uighur minority in the province of Xinjiang, and the repression of all dissenting and opposition voices. We firmly condemn these acts and the Chinese government’s recent attempts to interfere in the democratic life of our nations and our European Union. As elected Members of the European Parliament, we will continue to actively denounce human rights violations and breaches of international law, and to urge the EU to keep the respect of human rights at the core of all its external policies."
So far, neither the President of the European Council, Charles Michel, nor the President of the European Commission, Ursula von der Leyen, have issued an official statement on China's retaliatory sanctions. German Foreign Minister Heiko Maas declared on Twitter: “We have made it very clear to the Chinese Ambassador in Berlin that the sanctioning of members of Parliament and scientists is absolutely incomprehensible. While we sanction abuses of human rights, Beijing sanctions democracy. We cannot accept this.“
In short: The latest sanctions row could be a turning point in EU-China relations.
The Biden administration has made clear that it will not shift away from the tougher approach on China. But the latest sanctions row has demonstrated that Europe is not without agency in what has falsely been characterized as a binary confrontation, argues Janka Oertel, Director of the ECFR’s Asia programme, in this commentary. To foster European interests in functioning multilateral action and rules-based trade and economic relations, there needs to be a greater focus on the emerging realities in China. If hedging and strategic indecisiveness continues, European policymakers risk new forms of dependency that the Chinese leadership deliberately wants to create, thereby actively undercutting its own sovereignty agenda. “It is time for Europeans to really engage on these issues and not give room to Chinese efforts at winning over select European governments in return for short-term economic gains. Not making these choices will be a strategic and diplomatic victory for China.”
In short: The success of the EU’s multi-pronged strategy towards China depends on Beijing’s China's willingness to accept the logic of differentiation.
In its dealings with China, the U.S. has turned to classic grand strategy with the aim of safeguarding its primacy. In contrast, the EU has been pursuing a less consistent, but much more suitable multi-track approach by defining China simultaneously as a potential partner, a competitor, and a systemic rival. According to Adam Tooze, Shelby Cullom Davis chair of History at Columbia University in New York, Beijing’s latest actions may push the Europeans to full alignments with the U.S. − which would be both momentous and dangerous. In his judgment, Europe's multi-pronged strategy of engagement with China was the correct strategic diagnosis for Europe, but as has now become clear its viability depends on China's willingness to accept the logic of differentiation. Therefore, this multi-pronged strategy is fragile. “On both sides public opinion is a real force. If Beijing antagonizes large segments of European opinion, the tensions and inconsistencies inherent to the multi-pronged détente strategy will collapse into antagonistic fusion. The fact that China has already managed to arouse the shared indignation that it has, at a time when Europe is divided over so much else, is a sign of how labile this balance is.”
In short: The tit-for-tat exchange of sanctions between the EU and China constitutes a clarifying moment for Europe.
China’s decision to respond to the EU’s studiously measured Xinjiang sanctions with a powerful left hook to European lawmakers, EU institutions, individual academics, and leading think tanks (not to mention family members and associates) takes the relationship into uncharted territory. It shows that Europe’s attempt to compartmentalize its relationship with China may be running up against its limits, writes Noah Barkin, managing editor at the Rhodium Group and senior visiting fellow at the German Marshall Fund of the United States, in this blogpost. It also demonstrates that Beijing won’t hesitate to punish Europe if it gets serious about cooperating with the Biden administration. And it shows that, when push comes to shove, Xi Jinping is perfectly happy without that investment agreement he clinched with the EU just a few months ago. According to Barkin, this is a clarifying moment for Europe, which has spent the past years working diligently on its technocratic toolbox of defensive measures, while averting its gaze from the bigger geopolitical choices it faces in an era of great power competition.
In short: Seven concrete measures to protect Europe from economic and political coercion by China.
China’s recent personal and economic sanctions have sent a strong message to Europeans, but there are concrete ways for the EU to build up its resilience against economic coercion, writes Jonathan Hackenbroich, a policy fellow for economic statecraft and the head of ECFR’s Task Force for Protecting Europe from Economic Coercion, which brings together high-level European public and private sector actors to analyze a range of policies Europe could adopt to improve its resilience. Drawing on this systematic consultation process, the ECFR toolbox analyzed concrete options for the EU to resist economic blackmail and punishment such as Chinese sanctions, and to avoid them in the first place. Based on this toolbox, Hackenbroich suggests seven measures to protect Europe from economic and political coercion by China.
In short: European companies face a dilemma between values and short-term interests. Yet, with the Biden administration a new window of coordination arises.
Defending values other than with words is seldom cost-free. This is even more true in the case of such a large state as China, argues François Godement, Senior Advisor for Asia to Institut Montaigne, in this blogpost. In starting to sanction China’s most glaring human rights abuses over Xinjiang, Europe faces a dilemma between its values and short-term interests.
China’s huge and growing state-driven economy has means of retaliation that go far beyond legal or overt action. Abdicating values - conceding preemptive capitulation - also has a cost, as it empowers the other side to ask for more and to intrude freely in our own space.
There is no easy way out of this dilemma, Godement points out. But most European companies still have far more interests with the U.S. economy, Therefore, the new American administration offers an opportunity for coordination and compromise that should be seized.
2. After Anchorage: U.S.-China Relations Not Going to Get Any Better
In short: In Anchorage the U.S. and China have taken the important first step toward a more stable relationship by acknowledging the true nature of their relationship.
The very public dustup between United States and Chinese officials in Anchorage, Alaska, during the Biden administration’s first official meeting with China, may have seemed like a debacle, but the exchange was actually a necessary step to a more stable relationship between the two countries, argues Thomas Wright, Senior Fellow at the Brookings Institution, in this article. By pursuing a strategy of competitive engagement − meeting with China but seeing it through the lens of competition − the Biden team flushed Beijing’s true intentions out into the open for the world to see. In his remarks, contrasting “Chinese-style democracy,” as he called it, with “U.S.-style democracy,” China’s top diplomat, Yang Jiechi, implicitly acknowledged that the U.S.-China relationship is, and will continue to be, defined by a competition between different government systems: authoritarianism and liberal democracy. Thus, “by getting real in Anchorage, both sides have taken the important first step toward a more stable relationship by acknowledging the true nature of their relationship.”
In short: In dealing with China, the U.S. needs to shift to a framework predicated on risk management.
“As President Joe Biden takes office, the United States’ China policy and U.S.-Chinese relations are both undergoing a revolution”, writes Evan S. Medeiros, Penner Family Chair in Asian Studies at the School of Foreign Service at Georgetown University, in this article. “Not since President Richard Nixon’s visit in 1972 has such a fundamental shift taken place in American perceptions, strategies, and policies toward Beijing.” In his view, the U.S. must forge a relationship with China defined by an uncomfortable paradox: deep and complex interdependence on the one hand and rapidly diverging interests − regarding security, economics, technology, ideology, and more − on the other. To address this paradox, Washington needs to alter the fundamentals of its policy. For years if not decades, U.S. policy focused on risk mitigation − adopting policies that sought to downplay disagreement, minimize friction, reduce competition, and expand cooperation. New times, however, call for new thinking. Washington now needs to shift to a framework predicated on risk management. “This means expecting and tolerating friction and tension, even using it judiciously; accepting certain risks and costs to U.S. actions but also rejecting others; balancing multiple and competing interests, as opposed to trying to reconcile them; acknowledging that some disagreements cannot be solved; and using dialogue and cooperation as necessary but not pursuing them as ends in themselves. The objective of this shift is to build a policy that reflects the competitive core of the relationship but also builds durable ties that can withstand the two countries’ irreconcilable interests.”
In short: Why U.S.-China Strategic Competition will not be like the U.S.-Soviet Cold War.
Many commentators have been predicting a new Cold War between the United States and China. In the second half of 2020, in various speeches, government documents, articles, and tweets, the Trump administration basically declared a cold war on China. Critics of such a policy might say that the United States is creating a self-fulfilling prophecy: by declaring a cold war, Washington is unnecessarily creating one. But nothing akin to the U.S.-Soviet and U.S.-Chinese Cold War of the 1950s and 1960s is in the offing, regardless of what strategies the United States itself adopts, Thomas J. Christensen, Professor of International and Public Affairs at Columbia University in New York, argues ion this article. China’s vital position in the global production chain and the lack of struggle for ideological supremacy between authoritarianism and liberal democracy mean that the rise of a new Cold War is unlikely. Two factors would need to change to produce something akin to the U.S.-Soviet Cold War. If China were to start a conscious campaign to bolster authoritarianism and undermine democracies around the world, then U.S. and Chinese allies would quickly begin butting up against each other. If Beijing were to swap out parts of the global production chain with Chinese rather than foreign producers and rely less on global markets, then China might be more willing to accept the cost of an ideological struggle. Until China breaks sharply from its recent past on both scores, a U.S.-Chinese cold war will not occur.
3. Against All Odds: Transatlantic Cooperation on China is Picking Up Steam
In short: The EU and the U.S. are launching a forum to discuss a common approach to China.
After their meeting in Brussels on March 24, U.S. Secretary of State Antony Blinken and EU High Representative for Foreign Affairs Josep Borrell announced the launch of an EU-U.S. dialogue on China to discuss concerns such as security, human rights and economic reciprocity. As Josep Borrell declared: “We agreed to launch the European Union-United States Dialogue on China as a forum to discuss the full range of related challenges and opportunities. We decided to continue meetings at the senior official and expert levels on topics such as reciprocity, economic issues, resilience, human rights – human rights, security, multilateralism, and areas for constructive engagement with China such as climate change. We share an assessment of China’s role as a partner, as a competitor, and a systemic rival, as we used to say here in Europe.” This was exactly the outcome Beijing wanted to avoid through its sanctions, and it came after a week of extraordinary turmoil in EU-China diplomacy.
See also the EEAS press release: United States: Joint press release on the meeting between High Representative/Vice-President Josep Borrell and the U.S. Secretary of State Antony Blinken, Brussels, March 24, 2021.
In short: Beijing’s hostile moves consolidate calls for transatlantic cooperation, but Europe has other concerns.
Ove the past few months, China has sparked more division than consensus between Washington and Europe. While the U.S. has taken a tough line and imposed trade sanctions over the treatment of China's Uyghur Muslim minority, Brussels has taken the opposite approach and in December agreed a landmark trade deal with Beijing that was intended to boost big European investors in China. China's unexpectedly harsh retaliatory sanctions have fundamentally changed the situation. Stronger transatlantic cooperation on China is now the order of the day, report Stuart Lau, Rym Momtaz and Jakob Hanke Vele. There are, of course, still significant obstacles to a fully-fledged EU-U.S. alliance on China. Powerful pro-business interests in Europe are still more interested in the investment deal than China's crackdown against Uyghurs and pro-democracy activists in Hong Kong. Despite these commercial considerations, however, is has become clear that the political stakes are now much higher for Europe.
In short: Germany is going to be a loser in the growing China-U.S. competition.
The prospect of intensifying China-US geopolitical and (geo)economic competition is bad news for Germany, which has high value trading and investment relationships with both countries, writes Markus Jaeger, Research fellow in DGAP’s America program, in this commentary. The U.S. and China are Germany’s first and second largest export markets. Intensifying China-U.S. geostrategic and (geo)economic competition is likely to land Germany between a rock and a hard place. China-US rivalry may lead both the US and China to pressure Germany to support their respective policies, including economic decoupling, export controls, investment controls, etc. Germany’s economic dependence on both China and the U.S. make it particularly vulnerable and susceptible to diplomatic pressure from both Beijing and Washington. “The intensification of China-US competition will create many losers. Germany is going to be one of them.”
In short: Transatlantic cooperation is urgent and necessary to prevent China from remaking the international rules-based order to its singular advantage.
China presents the United States and its partners with the most serious set of challenges they have faced since the Cold War. Left unaddressed, they will harm the fundamental vital interests of democratic nations everywhere. Collective action between the U.S. and its European partners, coordinated with like-minded nations in Asia, is needed to deflect these challenges. This study by the Atlantic Council's Scowcroft Center for Strategy and Security (lead authors: Hans Binnendijk and Sarah Kirchberger) presents a blueprint to guide the United States and its partners in meeting the challenges posed by China. Drawing on the research and opinions of hundreds of experts, policy makers, and academics in the U.S., Europe, and Asia, it delves into three broad trends and analyzes five major areas in which Chinese actions threaten transatlantic interests: human rights, coercive diplomacy, predatory economic practices, technology competition, and security challenges. In doing so, the study identifies areas of convergence, divergence, and asymmetry in transatlantic attitudes towards China, arguing forcibly that a transatlantic response is urgent and necessary to prevent China from remaking the rules-based order to its singular advantage. It concludes with ten recommended steps for minimizing divergences as a means to building a coordinated transatlantic blueprint for confronting, competing with, and, where possible, cooperating with China.
4. China’s Rise and Ambitions: The Global Contest between Autocracy and Democracy
In short: China will subject liberal values to their greatest test since the early days of the cold war.
After the collapse of the Soviet Union in 1991, liberal values were ascendant around the world. The challenge from China will subject them to their greatest test since the early days of the Cold War, The Economist argues in this lead article. What is more, China is more tightly coupled with the West than communist Russia ever was. This presents the free world with an epoch-defining question: how should it best secure prosperity, lower the risk of war and protect freedom as China rises? It starts with building up the West’s defenses. Institutions and supply chains must be buttressed against Chinese state interference, including universities, the cloud and energy systems. “Greater resilience allows openness and a tough stance on human rights. By articulating an alternative vision to totalitarianism, liberal governments can help sustain the vigor of open societies everywhere in a confrontation that, if it is not to end in a tragic war, will last decades. It is vital to show that talk of universal values and human rights is more than a cynical tactic to preserve Western hegemony and keep China down.”
In short: A strategy that requires the U.S. to cast aside its values and ideals would be unwise and unrealistic.
Chinese leaders appear to believe that efforts to increase China’s power and influence cannot fully succeed unless the global order becomes one in which an autocratic superpower can flourish. They are promoting authoritarianism beyond their borders for much the same reason that Americans extoll democracy abroad: they expect to be more secure and influential in a world that shares their political values. Therefore, emphasizing the ideological nature of the U.S.-China contest is critical, argue Hal Brands and Zack Cooper in this article. “What ultimately attracts many U.S. allies and partners is the belief in an international order, rooted in democratic values, that allows many nations to flourish. If the United States drops this principled argument − if it is simply one great power competing with another − the United States will lose its most important appeal.” Leaving values and morality to the side would eliminate one of America’s greatest advantages and make it harder to rally coalitions at home and abroad. Hal Brands is Henry A. Kissinger Distinguished Professor of Global Affairs at the Johns Hopkins School of Advanced International Studies. Zack Cooper is a Research Fellow at the American Enterprise Institute and Co-Director of the Alliance for Securing Democracy.
In short: The U.S.-China rivalry is not just a geopolitical conflict but also an ideological struggle between the People’s Republic and the democratic world.
Whether we call it great-power competition or a new Cold War, there’s no denying the U.S. and China are engaged in an intense long-term rivalry. But many observers, especially foreign-policy generalists and realists, seem to believe that the U.S.-China conflict is driven by geopolitics, not ideology. They are ignoring the ideological nature of China’s Communist regime, writes Andrei Lungu, President of the Romanian Institute for the Study of the Asia-Pacific (RISAP). For many Westerners who have never experienced a communist system, it is almost impossible to understand how Chinese hard-liners think: the belief that democracy is bad because it creates diversity and thus chaos; the obsession with control; the reflexive distrust of anything foreign; the sheer paranoia of containment, encirclement, and foreign coalitions ganging up on China; the conspiratorial mindset of “foreign hostile forces” and “black hands” secretly subverting the political system; and the utter unfamiliarity of how democratic and open societies function. Therefore, this is not just a U.S.-China conflict but one between the People’s Republic of China and most of the democratic world. “Just because it looks different than the Cold War doesn’t mean ideology is dead. Ideology is in the driver’s seat. Buckle up.”
In short: More evidence of China's crimes against humanity in Xinjiang.
The Chinese government is committing crimes against humanity against Uyghurs and other Turkic Muslims in the northwest region of Xinjiang, according to this new Human Rights Watch report. The Chinese leadership is responsible for widespread and systematic policies of mass detention, torture, and cultural persecution, among other offenses. The report authored with assistance from Stanford Law School’s Human Rights & Conflict Resolution Clinic, sets forth the factual basis for that conclusion, assessing available information about Chinese government actions in Xinjiang within the international legal framework. It calls for coordinated international action to sanction those responsible, advance accountability, and press the Chinese government to reverse course.
In short: To prevent China’s techno-authoritarianism from gaining traction, the U.S. must help craft a truly democratic techno-political system.
Surveillance is a fact of life for Chinese citizens and, increasingly, for those who live in countries that have adopted Chinese surveillance technology, from Ecuador to Kyrgyzstan. Even more worrisome, this ecosystem of Chinese-based technologies carries with it a set of values that undergirds the Chinese state − a form of twenty-first-century authoritarianism that marries social control and efficiency. The U.S. has kneecapped Chinese technology giants in the name of national security and human rights. But the U.S. and its tech companies also have a checkered history with the very ideals they claim to uphold, Maya Wang, China Senior Researcher at Human Rights Watch., points out in this article. To prevent China’s techno-authoritarianism from gaining traction, the U.S. must reverse course and start leading by example: it must reform its own surveillance practices, protect citizens’ privacy and security, and work with allies to set rights-respecting global standards for tech firms to follow.
In short: China’s tech-enhanced authoritarianism is a direct systemic threat to liberal democracies.
In the final thematic report of the Sharp Power and Democratic Resilience series, Samantha Hoffman describes how the People’s Republic of China (PRC) leverages emerging technologies to undercut democracies’ stability and legitimacy while expanding its own influence. The PRC’s development and global export of “smart cities” technology, for example, showcases the character of tech-enhanced sharp power and authoritarianism. The Chinese Communist Party (CCP) does not distinguish basic public goods, like traffic safety or the prevention of violent crime, from the authoritarian suppression of pluralism and dissent. Instead, it blends the two together. The PRC prioritizes regime security over essential rights and uses these technologies to monitor its populace and control society. Beijing’s active role in international standards-setting enables the PRC to exploit emerging technologies to enhance its sharp power capabilities. If PRC-originated technical standards are adopted internationally, PRC-made systems will enjoy greater interoperability and market access around the world in ways that erode democratic integrity. Samantha Hoffman is a senior analyst with the Australian Strategic Policy Institute’s International Cyber Policy Centre.
5. Economic and Technological Competition:China’s Protected Home Market Advantage
In short: By bullying Western corporations, China may be overplaying its hand.
China’s antagonistic response to concerns over the use of forced labor in Xinjiang suggests that its leaders believe that the Chinese market is simply too lucrative for Western firms or governments to abandon. They may be overplaying their hand, argues Minxin Pei, Professor of Government at Claremont McKenna College, in this article. Undermining its economic prospects, Beijing is attacking private corporations, like the Swedish apparel retailer H&M, for having expressed concerns over forced-labor allegations. China’s leaders remain convinced that its market is simply too important to abandon. They should recall that, not too long ago, they were absolutely certain that the U.S. could not afford an economic decoupling from China. They were wrong then, and they may well be wrong now. The difference is that, this time, Beijing cannot afford a decoupling, either. “China can afford an economic decoupling with the US (though it will be costly). It cannot afford a simultaneous decoupling with the rest of the major Western economies.”
In short: The EU can compete technologically with China, if it focuses on technologies that are environmentally and socially sustainable.
The debate on technological development and the unfolding fourth technological revolution tends to neglect the role of the EU, relegating it to follower status. The leadership positions are occupied by the U.S. and China, who compete with one another for technological supremacy. Yet, despite lagging behind in some areas, the EU is better placed than is often assumed and still stands a chance of guaranteeing the delivery of a technological revolution that is not only environmentally but also socially sustainable, writes Francesca Ghiretti in this policy paper. This is critical in proposing a model of technological development alternative to that of China, in particular, and especially in such sectors as artificial intelligence, supercomputing and digital skills. Francesca Ghiretti is a researcher at the Istituto Affari Internazionali (IAI) in Rome and a Leverhulme doctoral fellow at King’s College London.
In short: The Comprehensive Agreement on Investment (CAI) is better than its reputation.
The EU-China Comprehensive Agreement on Investment (CAI) has been met in some quarters with skepticism on economic and geopolitical grounds. The main criticism is that it provides little new market access in China, and that this small economic gain for the EU comes at the price of breaking ranks with its main political ally, the U.S. Uri Dadush and André Sapir, Non-Resident Fellow and Senior Fellow at Bruegel, reach a different conclusion in this policy paper. They concede that the CAI provides only modest new market access in China, but this is because Beijing has already made progress in recent years in liberalizing its foreign investment regulations unilaterally. The CAI binds this progress under an international treaty, marking an improvement for EU firms insofar as their market access rights can be effectively enforced. Most important, the CAI includes new rules on subsidies, state-owned enterprises, technology transfer and transparency, which will improve effective market access for EU firms operating in China. “From an economic viewpoint therefore, the CAI is an important agreement, and one worth having. However, its ratification by the European Parliament is unlikely while China continues to apply sanctions against some members of the European Parliament and European researchers who have criticized China’s human rights record.”
In short: Beijing is positioning itself to play a core role in the development of the new digital architecture.
This report by Rush Doshi, Emily de La Bruyère, Nathan Picarsic, and John Ferguson is motivated by China’s growing influence in telecommunications and the growing controversy accompanying that influence. However, China’s telecommunications resources, ambitions, and strategic framing are intertwined with those around IT more broadly. For that reason, this report reviews Chinese government, commercial, and academic discussion of both IT generally and telecommunications specifically. It also contextualizes its analysis in terms of Beijing’s program to become a “cyber great power,” also translated as “network great power,” the blueprint for China’ ambitions to leapfrog legacy industrial leaders and define the architecture of the digital revolution. As the authors point out, “A new technological landscape is taking shape. China works to define that landscape. More than ever, it is imperative that China’s ambitions be documented.”
In short: China’s vast protected market distorts competition in the EU and beyond.
China’s vast yet protected home market has allowed some of its firms to acquire a scale that provides them with significant advantages when they compete in other markets. These firms are able to undercut European companies both in the EU and around the world, including in sectors key to Europe’s future economy and security, from energy to telecommunications. The EU urgently needs to incorporate the concept and reality of this “protected home market advantage” into its thinking on China, Agatha Kratz and Janka Oertel urge in this new ECFR report. Europe can defend its own industries by adopting an integrated policy approach, working with like-minded partners around the world, and even prizing open closed parts of China’s domestic market. The EU should also look to enhance its single market – both as a defensive measure and a way to improve its strategic sovereignty. Agatha Kratz is Associate Director at Rhodium Group and Janka Oertel is Director of the ECFR’s Asia programme.
About the Literature Review
Democratic states are increasingly challenged by assertive authoritarian powers. China, in particular, has become an economically successful, technologically advanced autocracy and an ambitious global geopolitical actor who promotes its model as an alternative to liberal democracies and their values. At the Bertelsmann Stiftung, we think (and worry) a lot about this new systemic conflict and its consequences for Germany and Europe – and so do many of our peers in politics, think-tanks, academia or media. In this monthly compilation, Peter Walkenhorst maps the ongoing debate and points to important contributions he considers essential readings. Previous issues of this Literature Review can be found here: