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An EU-China summit has not been listed in Germany’s official outline of priorities for its presidency of the EU Council. Photo: Reuters

Coronavirus pandemic mires European Union’s market drive into China

  • A landmark September summit with the leaders of China and the European Union appears to be off, possibly putting an investment agreement on the back burner
  • As the bloc struggles to speak with one voice on China, objections are growing around the continent to Beijing’s handling of the coronavirus
Germany’s plan to spearhead European Union efforts to gain more access to China’s markets looks to be at risk of stalling as the Covid-19 pandemic upends economies. 

German Chancellor Angela Merkel planned to welcome Chinese President Xi Jinping to Leipzig in September for a first-of-a-kind summit with the 27 EU heads of state or government, plus the presidents of the EU Commission and Council. 

But the meeting is not listed on Germany’s official outline of priorities for its presidency of the EU Council, which it takes up in the second half of the year.

On the weekend, German Foreign Minister Heiko Maas said it was too early to say if the summit with Xi was still on. 

An EU diplomatic source agreed, adding: “It’s still not decided whether it would be a physical or virtual meeting. I don’t expect a decision before June.”

Germany already has its hands full – focused on the fight against Covid-19, a potential second wave of infections, reopening the continent, and dealing with what is forecast to be one of its worst economic performances on record.

Overall, the economies of the euro zone are expected to contract by about 7.75 per cent this year – far worse than the 4.5 per cent contraction that marked the worst of the 2007-08 financial crisis. 

“Europe is experiencing an economic shock without precedent since the Great Depression,” EU Economy Commissioner Paolo Gentiloni said last week.

While some fear the economic turbulence has weakened the bloc in negotiating with Beijing over an investment protection agreement, a deal that the EU wants to level the investment field and create new markets for European companies in China, a source with direct knowledge described the ongoing EU-China talks on the deal as "intensive".

"The key for the progress of negotiations would be about reaching an ambitious outcome on state-owned enterprises (SOEs), the disciplines for which have been a major focus for discussions on level-playing field," he said. "The EU insists that SOEs engaged in commercial activities should behave commercially – just like any other private business."

With China’s economy expected to recover faster than Europe’s, there is less incentive for China to make concessions on issues such as wider market access for foreign businesses. 

For now, the EU and Chinese negotiating teams are still in contact, with Chinese Vice-Premier Liu He holding his first publicly announced dialogue with European Commission vice-president Valdis Dombrovskis last month. 

“The talks with China are still ongoing [under the pandemic] but the Chinese side is, as always, very tough on issues like market access,” an EU source with knowledge of the talks said.

The bloc has long complained about stringent Chinese requirements for foreign businesses. According to the EU Chamber of Commerce in China, the biggest challenge facing European firms in China is a legal regime that favours Chinese state-owned enterprises over private ones, and domestic firms over foreign companies.

If the Leipzig summit is off, the momentum for an agreement – expected to be concluded by the end of this year – would also falter, the source said, given that the final say on a deal rests with Xi.

There have been other setbacks. European Commission President Ursula von der Leyen and European Council President Charles Michel cancelled a visit to Beijing in March due to the Covid-19 outbreak.

The talk in Brussels is now about whether they will have a videoconference with Chinese Premier Li Keqiang or if von der Leyen will join her old boss Merkel, who was planning her 13th trip to China as chancellor in July.

Another hurdle is how the pandemic generated criticism in Europe towards China for its handling of the coronavirus. The French foreign minister summoned the Chinese ambassador over social media posts the French labelled as disinformation, while the Swedish government called for an investigation into how China handled the public health crisis. Italy’s hardest-hit area of Lombardy threatened to sue China. 

The EU’s leadership joined the chorus in criticising China, with von der Leyen calling for an investigation into the origin of coronavirus. The EU has also been lobbying for a draft resolution at the World Health Organisation demanding an investigation. 

In addition, Von der Leyen has pledged to “redefine the EU’s relationship” with the world’s second-biggest economy, which the bloc has referred to as a “systemic rival” and “strategic competitor”.

Her foreign policy chief, Josep Borrell, added that the EU had been “a little naive” over China. Meanwhile, Maas said the coronavirus crisis had shown the need for the EU to speak with “one voice” when it came to the increasingly tense relations with China.

The problem for the EU last week was that, when it tried to speak with one voice through its ambassador to China, Nicolas Chapuis, it turned out surprisingly weak.  Chapuis walked into a wave of criticism after it was revealed he had buckled under pressure from Beijing to amend an opinion piece in state-run newspaper China Daily to mark the 45th anniversary of EU-China diplomatic relations. 

Chapuis admitted deleting – at the insistence of China’s foreign ministry – a sentence that stated factually that the Covid-19 outbreak started in China. Outrage was swift in Brussels because the top China envoys of the 27 EU member states had also signed off on the article. 

“Chapuis has crossed a red line. Instead of apologising for the grave failure to uphold European values, he continues to defend his decision,” said Reinhard Bütikofer, who chairs the European Parliament’s China delegation. “He cannot represent the European Union in Beijing any more. He has to go or to be sacked.”

Another source said that in a recent conversation with the ambassador Chapuis “said to the effect that he wasn’t sure whether China or the US was a bigger issue for the EU”.

“Everyone there was shocked,” the source said, declining to be identified to discuss the matter.

The EU has said Chapuis made his own decision about the opinion piece without telling Brussels, but that he had the support of the leadership. 

“This decision, taken under great time pressure, was not the right one to take. This has been made clear to the ambassador,” EU foreign affairs spokeswoman Virginie Battu-Henriksson said, adding that Chapuis “continues to have our confidence” as he “is an outstanding expert of China and thus an asset” to the EU’s diplomatic service. 

With the bloc’s point man in Beijing falling short of having the “full” confidence of Brussels, the EU will be relying on Merkel to use her political capital – if she has any to spare – to make headway in EU-China relations.

This article appeared in the South China Morning Post print edition as: EU drive for more access to China’s markets at risk