China in Europe: October 2024
from China Strategy Initiative
from China Strategy Initiative

China in Europe: October 2024

European Commission President Ursula von der Leyen and German Chancellor Olaf Scholz hold a press conference during the Berlin Process Summit, in Berlin, Germany, October 14, 2024.
European Commission President Ursula von der Leyen and German Chancellor Olaf Scholz hold a press conference during the Berlin Process Summit, in Berlin, Germany, October 14, 2024. REUTERS/Lisi Niesner

European and Chinese leaders are jetting back and forth between Asia and Europe to tamp down escalating security and economic challenges. North Korean troops in Kursk, falling European competitiveness, and the escalating trade war are among the issues at the top of their agenda.

November 7, 2024 4:47 pm (EST)

European Commission President Ursula von der Leyen and German Chancellor Olaf Scholz hold a press conference during the Berlin Process Summit, in Berlin, Germany, October 14, 2024.
European Commission President Ursula von der Leyen and German Chancellor Olaf Scholz hold a press conference during the Berlin Process Summit, in Berlin, Germany, October 14, 2024. REUTERS/Lisi Niesner
Article
Current political and economic issues succinctly explained.

European Security: Security tensions between China and Europe rose sharply in October with North Korea’s decision to supply troops to support Russia’s invasion of Ukraine, which will almost certainly further enmesh East and West, much to China’s chagrin. North Atlantic Treaty Organization (NATO) Secretary-General Mark Rutte confirmed the North Korean troops had been deployed to the Kursk front to help Russia retake the remainder of Ukraine’s occupied territory in Russia. Mark Rutte also called China out on its support for Russia on his first day in office. Outgoing Secretary-General Jens Stoltenberg criticized Turkey’s decision to recognize China’s peace plan and urged them to back the Ukrainian peace plan. China responded to calls to increase NATO’s presence in the Indo-Pacific by urging the organization to stay out of the region. Russia further linked between the two conflicts by pledging Russian support for Chinese efforts to take Taiwan. Joint naval exercises between China and Russia highlighted these growing ties, as did the joint pledge from Chinese and Russian defense ministers to expand cooperation. Similarly, trade between China and Russia surpassed $11 billion a month for the first time, according to official data released in September. That came as Chinese export growth fell short of expectations, and Chinese imports from the European Union (EU) fell 3.9 percent year over year. NATO, for its part, sent an aircraft carrier to tour the Indo-Pacific, a sign of the alliance’s growing interest in the region. Both China and Russia reacted furiously. NATO also held joint meetings with their security chiefs and invited Australia, Japan, New Zealand, and South Korea to participate. Later, the Group of Seven also held its first meeting of defense ministers, heightening its collaboration with NATO in the Indo-Pacific. The head of the European Central Bank, Christine Lagarde, called for a defense of the euro in light of the China-Russia push to de-dollarize. In addition, Germany arrested a suspected Chinese operative in Berlin, who allegedly spied on U.S. arms shipments to Israel. The Germany destroyer group Baden-Wuertemberg announced they had been shadowed by Chinese vessels during their voyage through the Taiwan Strait. France also sent a naval vessel through the Taiwan Strait at the end of October.

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Taiwan: Following large demonstrations around Taiwan by the People’s Liberation Army navy and coastguard (called JointSword-2024B), the European Commission (EC) denounced the moves and called for restraint, as did several national governments. The European Parliament went a step further, censuring the exercises and clarifying its position on the One-China policy: the parliament adheres to the principles but rejects Beijing’s expansionist interpretation. The European Parliament also separately voted to condemn actions against Uyghurs in Xinjiang and demand the release of several political prisoners. Former Taiwanese President Tsai Ing-Wen was also in Europe in October, visiting several capitals as well as the European Parliament in Brussels. Finally, Taiwanese semiconductor giant TSMC is now the only major semiconductor planning to construct a factory in Germany after U.S. firm Wolfspeed announced that it was halting plans to build a battery factory in Germany, putting into question Chancellor Olaf Scholz’s reindustrialization plans for a critical mineral refining and recycling industry.

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EU Trade and Tariffs: The biggest story of the month, yet again, was the escalating trade war between China and Europe, which officially went into effect Wednesday, October 30. China purportedly offered a $30,000 price floor for electric vehicle (EV) sales in the EU; however, that was still about $10,000 below the average price of EVs in Europe, so European firms rejected the offer. French President Emmanuel Macron visited Berlin and praised the EC’s decision to impose tariffs. Negotiations are ongoing, with China inviting negotiators to Beijing, but both sides do not have high hopes as major differences remain between them. The situation had prompted multiple figures (including the Head of the EU Chamber of Commerce in China Jens Eskelund, Hungarian Prime Minister Viktor Orbán, and others) to predict that a trade war was now unavoidable. The Global Times, Xinhua, and other Chinese Communist Party outlets did not hold back in October in their lashing of the EU over the tariffs, calling the union “insincere,” and saying it “has no integrity.” They highlighted reports from Bruegel, a leading European think tank; from European auto executives; and from Scholz criticizing the tariff decision. They also criticized the EU’s decision to negotiate with individual Chinese firms rather than the central government. China almost immediately followed the EC’s tariffs with its own on European brandy, reversing its earlier decision not to impose tariffs, a move which it defended as in line with World Trade Organization regulations. The brandy tariffs set off major downturns in European luxury industries, even as many analysts believe that China will not target luxury goods in response. Despite all those difficulties, China-EU trade and Chinese EV sales hit new highs, driving global sales up 30.5 percent according to figures released in October. However, many signs point to increased trade tensions in the coming months. EC Deputy Director General for Trade Denis Redonnet has has promised to protect major EU industries from Chinese competition, including steel, EVs, and chemicals, possibly hinting at other industries the EU will investigate. The next industry the EC has set its sights on, however, is Chinese plywood dumping, as they announced an investigation in September. The EU also announced an investigation into Chinese online retailer Temu’s labor practices and possible violation of the Digital Services Act, with potentially massive fines. Europe’s major airlines—KLM, Air France, and Lufthansa—are also reportedly urging the EU to intervene against unfair Chinese competition as Chinese flights to Europe continue to fly over Russian airspace, cutting costs and times. China’s ongoing dairy probe also ramped up, as it announced the four European firms it intended to test. No word yet on the pork investigation, but considering the relative size of European dairy and pork exports to China—92 percent of Chinese adults are lactose intolerant—China could be reserving its larger weapons for a later escalation. China also announced they were investigating potentially raising tariffs against European car imports.

German Gloom: The car industry is up in arms over the tariffs, as company after company—BMW, Mercedes, Volkswagen, and Porsche—announced continually downward adjusted profit outlooks, all citing China as part of their explanations. The car industry has increased its demands that the EU either back down in the tariff dispute or reform the 2030 diesel mandate—which requires all new vehicles produced from 2035 on to be fully electric—or face a collapse of the European car industry. The auto manufacturer Stellantis, however, has insisted that the EU stick to both commitments. China hosted the sixth China-Central and Eastern European Countries Local Leaders’ Meeting and worked to promote Austrian investment in the Chinese EV industry in an attempt to maintain and expand influence and market access in Europe despite tensions. Chinese automaker Xpeng said the firm still hopes to profit from the European market, and state-owned car manufacturer GAC is reportedly planning to localize EV production in Europe to avoid tariffs.

Hawkish EC Commissioners: The confirmation hearings in the European Parliament for Commission President Ursula von der Leyen’s proposed commissioners began in October, and, as Politico reported, Kaja Kallas, candidate for the EU’s top diplomat, is taking a more critical stance toward China. The EU officially refers to the country as a “partner, competitor and rival,” but Kallas dropped the first two in her letter to the parliament, referring to China simply as Europe’s rival and calling out its support for Russia’s war. EU High Representative for Foreign Affairs and Security Policy Josep Borrell, whose job Kallas hopes to fill, struck a similar tone in his October speech on the Taiwan crisis. The high representatives are not the only ones calling out China, however: commissioners for trade and economics, international partnerships, competition and green transitions, climate, space and defense, and others all singled out China’s security and economic practices as threatening to Europe’s future and promised to take the challenge seriously. Annalena Baerbock, Germany’s foreign minister, who announced plans to travel to China at the end of 2024, has also criticized China. She allegedly argued for Germany to support, or at least abstain from, the EC’s October tariff vote, but Scholz forced a no vote from Berlin. Many analysts have also noted that in overriding Germany on that issue, the European Commission has demonstrated that Germany’s influence in Brussels could be waning.

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Competition With China: Since the release of the Draghi report in September, much of the chatter in Brussels has been about European competitiveness vis-à-vis China (and, as the election approaches, against potential U.S. tariffs). That led to a sustained discussion to reassess Global Gateway, the European response to China’s Belt and Road Initiative, in Africa to boost European competitiveness as recommended by the German Marshall Fund and Politico. Macron also voiced his concerns about falling competitiveness, arguing that overregulation and failure to compete would signal the death of Europe. Researchers agreed: the EU needs to spend €220 billion on research and development annually to keep pace with the United States and China. China has also begun to target the EU wind turbine industry, prompting fears of another solar energy China shock. Also in clean energy, China is working on a battery plant within the EU, and Chinese firm Nuctech, which has faced legal challenges in the EU in 2024 over its ties with the Chinese government, has nonetheless won numerous contracts from the European Union. Finally, Nvidia CEO Jensen Huang said that the EU lags behind both China and the United States in artificial intelligence investments.

Consistent Inconsistency: United Kingdom (UK) Foreign Secretary David Lammy pledged “consistency” in China-UK ties during his trip to Beijing, but the Labour Party’s policy continues to vacillate. The two resumed economic discussions, and Chancellor Rachel Reeves announced she would also visit China soon, but the UK also announced investigations in Chinese biodiesel, tin, and steel imports. Lammy also told China that continued support for Russia would dampen relations during his visit. The UK missed out on China’s visa reforms, which allow eighteen countries in Europe to visit visa-free. Many on the British and American right have criticized the UK-Mauritius deal, which transfers sovereignty over the Chagos Islands to Mauritius, as a major win for China. U.S. President Joe Biden and others, however, hailed the deal as an important act of decolonization and downplayed the risks of Chinese interference in the islands, which host an important U.S. naval base. Tom Tugendhat, shadow secretary for state security, was particularly critical in his commentary on the deal. Outgoing conservative leader Rishi Sunak and Prime Minister Sir Keir Starmer had a fiery exchange in Prime Minister’s Questions over the UK’s China policy. Starmer also promised that Lammy would press China on Taiwan and Hong Kong during his visit, but the Labour government was called out by a Uyghur activist for failing to stand up to China. Chinese Foreign Minister Wang Yi met with Lammy and agreed to resume dialogue. Finally, the British continued to delay implementing the new foreign influence registration scheme as they work out how to address China under the bill’s provisions.

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