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Chinese Premier Li Qiang’s Europe trip good for trade, but EU de-risking push makes matters ‘more co

  • Li visits top EU economies Germany and France on first trip abroad since becoming premier in March

  • While trip may help reset EU trade ties, de-risking with China is ‘an overarching trend that will continue to deepen’, observer says

By Kawala Xie

June 25, 2023

Chinese Premier Li Qiang and German Chancellor Olaf Scholz ahead of a press conference in Berlin on Tuesday. Photo: dpa

Chinese Premier Li Qiang’s trip to the top two European Union economies has helped to reboot trade ties with the bloc, but roadblocks remain as Brussels pushes its de-risking strategy with China, analysts said.

Li’s visit to Germany and France last week was his first trip abroad since becoming premier in March.

Arriving in Germany on Sunday, he held high-level meetings with government officials including Chancellor Olaf Scholz and visited some of the biggest names in local manufacturing like BMW and Siemens. Later in the week, Li was in Paris, where his itinerary included a global financing pact forum hosted by the president of France.

Senior officials accompanying Li included National Development and Reform Commission head Zheng Shanjie and Commerce Minister Wang Wentao. About a dozen cooperation agreements were signed during his six-day tour, including one on setting up a climate change and green transition dialogue mechanism with Germany and another on deeper cooperation with French aviation giant Airbus.

However, though his German and French hosts assured Li they would not seek decoupling with China, a recently released EU security road map emphasising a de-risking of Beijing ties still cast a shadow over his tour.

Wang Yiwei, a professor of international relations at Renmin University and European studies specialist, said Li’s trip would have a positive impact on putting China-EU relations “back on the right track”.

“With China’s relations with France and Germany as the starting point, China and Europe’s relationship is back on the right track. Economy and trade will gradually return to becoming the bedrock in China-EU relations,” he said.

“Europe can make good use of China’s huge market and its strengths in the green transformation,” Wang said. “At the same time, China can also seize [business opportunities that will become available] in Europe.”

Gregor Sebastian, economics analyst at the Germany-based Mercator Institute for China Studies think tank, said while the German economy could benefit from China’s strengths in green tech, such as electric vehicle batteries, such cooperation could run counter to Brussels’ de-risking agenda.

Hence, China was likely to bank on Germany – the EU’s biggest economy – to help shape the bloc’s de-risking strategy, with a greater emphasis on free and fair trade, according to Sebastian.

“With regard to Brussels’ recent moves to strengthen trade defence instruments, China may seek Berlin’s support in trying to maintain free trade between China and the EU,” he wrote in a note published on the think tank’s website.

Li’s visit to Europe came as the EU rolled out a plan to tighten outbound investment screening and export controls, especially on sensitive technologies, in a move seen as targeting China.

While in Germany, Li discussed the idea of “de-risking” at a round table with top executives, saying the “greatest risk” was actually not to cooperate.

“We understand that all parties have their own security concerns, and what is important is how to reasonably define and prevent risks,” Li told the German business leaders. “Failure to cooperate is the greatest risk, and failure to develop is the greatest insecurity.”

He doubled down on this idea when he met the business community in France on Wednesday, asserting that “mutual dependence” was an inevitable result of globalisation and promising a further opening up of China’s market.

Scholz, often seen as maintaining a balancing act between China and the EU, reaffirmed that his country did not seek to decouple but would need to ensure “a level playing field” for German companies.

Wang at Renmin University said Germany was likely to still largely comply with the EU’s “de-risking” strategy, but its own “smart de-risking” approach – proposed by Scholz – will play out differently across sectors. It will also allow German businesses greater flexibility in dealing with China, he said.

But according to Ding Yifan, an expert on Europe and a senior fellow at the Beijing-based Taihe Institute think tank, Germany’s de-risking approach will continue to cast a shadow over trade relations with China.

“I don’t think it will be that easy [to reduce Germany’s concerns about China],” he said.

“Although Germany did not say ‘decoupling’, in fact this is a very cunning approach … it can end its cooperation in the name of [de-risking] at any time.”

Ding had a more positive outlook on China’s cooperation with France, given the “gentle” remarks by French President Emmanuel Macron.

Macron sparked a backlash during his visit to China along with European Commission chief Ursula von der Leyen in April, when he said the EU should not blindly follow the United States on its Taiwan policy, in remarks seen back home as favouring Beijing.

He also objected to Nato’s plans to open a liaison office in Japan, seen as an attempt to curb China’s growing military presence in the Indo-Pacific.

French President Emmanuel Macron with Chinese Premier Li Qiang ahead of an official dinner at the Elysee Palace on Thursday. Photo: AFP

Meeting Li in Paris on Thursday, Macron and French Prime Minister Elisabeth Borne spoke highly of bilateral relations and vowed to continue high-level strategic and economic dialogues with Beijing.

Li and Borne witnessed the signing of multiple cooperation agreements in the aerospace and nuclear energy sectors. The Chinese premier also doubled down on his rejection of “decoupling”, while calling on the EU and France to maintain “strategic autonomy” – a term referring to policies independent of the United States.

“[France and China] are being pragmatic,” Renmin professor Wang said. “China and France will celebrate the 60th anniversary [of diplomatic relations] next year. Cultural and tourism activities are now in full swing. Economic and trade cooperation will pick up steam. I think this is a good sign.”

French Finance Minister Bruno Le Maire, who attended the Sino-French business community dinner welcoming Li to Paris on Wednesday, also said he looked forward to more cooperation, while urging greater market access for French firms.

Chinese Premier Li Qiang and French Finance Minister Bruno Le Maire arrive for a business community dinner in Paris on Wednesday. Photo: AFP

Philippe Le Corre, a senior fellow at the Asia Society Policy Institute’s Centre for China Analysis, said the French business community had yet to regain its confidence in the Chinese market after the country largely shut out foreign business under draconian Covid-19 control measures.

“I think de-risking is the correct way to characterise France’s China policy,” Le Corre said.

On Friday, Li addressed the closing session of the two-day Summit for a New Global Financing Pact in Paris, where more than 40 world leaders and organisations gathered to discuss debts of developing countries and climate reforms – areas where China is playing an increasingly important role.

“China will unequivocally reject trade protectionism and all forms of decoupling and severing of supply chains,” Li told the forum.

Jean-Pierre Cabestan, research fellow at the Paris-based Asia Centre think tank, said China’s relationship with France and Germany had become “more complicated, contentious and competitive than before”.

Issues such as Ukraine and Taiwan that have strained China-EU relations were raised in Li’s meetings with both French and German officials. Li did not respond to Scholz’s request for China to pressure Russia on Ukraine during a joint press conference, while none of the Chinese readouts mentioned Taiwan or human rights.

“De-risking … is an overarching trend that will continue to deepen”, which is what worries China, Cabestan said, adding that the push for “de-risking” rather than “decoupling” may not entirely reassure China.

“Li Qiang has on purpose chosen the two main economies of the EU for his first trip abroad. There is a clear diplomatic intention and message: cultivate Europe to weaken any anti-China united front led by the US,” he said.

“Will it work? On the economic front, to some extent; on the security front, I doubt it.”


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