The EU’s ‘Systemic Rivalry’ China doctrine is being tested - and appears to be faltering

While Europe is busy facing Putin’s threatening moves at the border with Ukraine, a diplomatic, economic and political debacle seems to be unravelling on the EU-China front. The Lithuanian crisis, which broke out in the wake of what is China’s most overt act of economic coercion in Europe yet, does not seem to be ebbing. Instead, reports from European businesses have highlighted how the supply chain bottlenecks created by China in its crusade against the Baltic state are starting to affect operations across the continent. With the Comprehensive Agreement on Investment (CAI) now basically defunct, and ever-hardening stances vis-à-vis Beijing in Brussels, it appears to be difficult if not impossible to sustain the doctrine of ‘systemic rivalry’, adopted by the EU in 2019.

There was a time when Europe (and the US) were looking at China in a rather paternalistic way. In 2003, the EU unveiled its ‘strategic partnership’ approach. Chris Patten, at the time Commissioner for External Relations and previously last governor of British Hong Kong, summed up the outlook in these terms: “We have a major political and economic interest in China’s successful transition to a stable, prosperous and open country which fully embraces democracy, free market principles and the rule of law, and we will do our utmost to support this transition process.” It took 16 years to realise that things were not exactly going down this way.

In March 2019, the Juncker Commission released a “strategic outlook” on EU-China relations, which labelled the former partner as a “systemic rival”. The key takeaway seems to be a desire to toughen-up the EU’s stance on China without compromising economic ties. The idea in Brussels was that, under this new approach, a common strategy on this issue would have entailed a compartmentalisation of specific areas of the relationship: hedging against threats such as Huawei, drawing red lines on human rights concerns while maintaining a positive cooperation on investment flows.

The US took a different path on this. The overall strategy of Trump’s administration appeared to be to ‘go after’ Beijing on a wide range of different issues, from the economy to Taiwan, attempting to hit hard wherever they could. Biden seems to have normalised this position at the White House. China is now seen as a ‘strategic rival’, in what is indeed a much more confrontational definition. Squeezed between an unpredictable but generally hawkish US stance in the wake of the Presidential election, and by a China that was hoping to undermine transatlantic ties, the EU felt confident in its newly forged direction.

In an increasingly tense world, however, it is questionable how long it can last. President Von der Leyen herself, in picking the driving principles of her mandate, adopted the adjective ‘geopolitical’ for her Commission, a move that aimed at further politicising the EU executive after Juncker’s own ‘political’ turn five years earlier. In organising the work of the College, Von der Leyen imagined a close coordination between various departments, under major macro-areas of policy execution. For instance, the Commissioner’s group “A Stronger Europe in the World”, chaired by the relatively weak EU High Representative, intends to link issues from trade to defence.

In itself, this administrative organisation appears to sit uncomfortably next to the idea of ‘systemic rivalry’ with China, which assumes an approach that has been referred to as ‘technocratic mitigation’, where “the common objective is to address systemic challenges posed by Beijing through technical, theoretically country-neutral instruments, rather than targeted political actions”. Instead, it hints at a willingness to avoid isolating policy areas, and especially at a major push for the EU Commission to take a political stance on international affairs.

Such inconsistency between words and deeds is another sign of weakness and confusion in Brussels on this topic. In addition, there are two other reasons for why the EU’s current China strategy is poised to fail. One is the longstanding and well-known impossibility to separate economy and politics when facing the Communist Party of China. The other is the attempt by the Commission to play on technocratic ground while operating in an institutional context that is highly politicised.

The Comprehensive Agreement on Investments, which was especially pushed by both Xi Jinping and Angela Merkel, does provide a good case study to understand what is at stake. The CAI was agreed in principle in December 2020, only to be declared quasi-defunct in March 2021, as the EU and China engaged in a reciprocal sanction-slapping round. The strategy pursued by Europe was heralded as a success, given that it caught Beijing off-guard when the EU imposed a series of sanctions on China following human rights abuses in Xinjiang. In brief, ‘systemic rivalry’ appeared to be alive and thriving as the Continent engaged China constructively on the economic front while refusing to budge on human rights issues. It was mainly Xi Jinping that called off the deal, enraged by this sidestep. In China, it is unconceivable that one should push through an economic deal and then “betray” the other part with sanctions. Nevertheless, while the EU put its foot down in this case, it also shot itself in it: there was not going to be any economic engagement, at least for now.

Efforts to go back to the talking table with China and to work on a “multi-faceted” approach look increasingly bleak. This is also because, as the CAI row shows, the Commission is not acting in a vacuum. It may think that a neutral, case-by-case strategy based on technocratic management of Beijing’s threats, such as that of predatory investment, is the way forward. Still, it also must face the fact that the EU is a plural environment, where actors are mostly driven by political concerns. From Parliament all the way to member states, views towards China are imbued with both political and economic considerations simultaneously, to the extent that a shift in one can trigger a move in the other. An example of this was Merkel’s approach, which has been often criticised for tuning down criticism of China on human rights issues in order to defend German economic interests.

With China overtly coercing an EU member in response to an essentially political action, officials in Brussels seem paralysed. With its aggressive stance towards Lithuania, China has laid bare the impossibility for the EU to de-link economics and politics in this respect. Indeed, an economic attack against a member state affects all others, without there being a way to counter this. The new trade weapon, being forged by the Commission to this end, is a clear example of the inherent contradiction between a technocratic approach and geopolitical pull-factors. In a ‘politicisation-by-stealth’, the Berlaymont is trying to bend the self-imposed doctrine of ‘systemic rivalry’ to achieve ends that are more in line with a vision of strategic competition. Crucially, however, this only elicits further divisions within the bloc, as it raises eyebrows regarding the overall mandate and limits of the Commission.

The EU thus needs to move away from the ‘systemic rivalry’ outlook formulated in 2019 and towards a more strategic, comprehensive approach. While the technocratic nature of the Commission may suggest that it is possible to deal with China on separated and isolated fronts, the reality of things means that this cannot happen when facing Beijing. The country under Xi Jinping has grown even more likely to weaponise economics for political reasons, and there is a risk of passive reaction vis-à-vis China, if not of outright failure, in the absence of clearly identified responsibilities and powers that can truly act geopolitically. Indeed, the EU may end up speaking one way and being forced to act in another, as the CAI and the Lithuanian cases demonstrate. Such a situation will worsen member states’ disunity, produce institutional misalignment, and ultimately expose Europe to China’s whims.