Walking The China-EU Tightrope

As a result of China’s stance on Russia’s invasion of Ukraine, European distrust of China is on the rise. With complex economic ties at play, the EU is pursuing a delicate balancing act to prevent further deterioration of relations. 

For the first time since the outbreak of the Covid pandemic, European Commission President Ursula von der Leyen joined French President Emmanuel Macron on a visit to China earlier this month, where they aimed to use China’s influence over Russia to bring it to the negotiating table. 

However, these two leaders have different approaches to European relations with China. Von der Leyen recently called on Europe to reduce perceived dependencies on China’s economy. Her goal is to see Europe “de-risk” its economic relationship by tightening scrutiny of investment flows and trade in sensitive technologies with China while abstaining from outright restrictions on trade and investment. 

Macron, however, wants to leverage EU-Chinese relations as a mitigating, de-escalatory force. A large delegation of French business representatives accompanied Macron to China, in the hopes that economic ties will help stabilize the relationship and even incentivize China to modify its stance on the war in Ukraine. His subsequent comments that Europe should distance itself from tensions between the U.S. and China over Taiwan, and pursue more strategic autonomy, ignited criticism across the EU and overshadowed the visit itself.

As these diverse and even conflicting goals shape European rulemaking, companies will need policy and organizational resilience. Within the framework of the EU’s balancing act, changes in policy and in rhetoric will be numerous, and businesses need to hedge their operations against potential risks. It is crucial that company leadership have the capacity to understand current geopolitical developments, and adapt their strategy and business models accordingly.