China ready to turn its attention to Europe in 2020, as US trade deal gets closer

China is preparing to turn its attention more fully to Europe next year, intensifying its engagement with the European Union even as it hammers out the terms of an interim trade deal with the United States.

Diplomatic sources noted progress on Beijing-Brussels ties this month with the signing of a long-awaited “geographical indication” agreement to improve protection for 100 regionally specific products, despite the “huge pressure” from the US on China not to sign the deal because of its impact on US exports.

Dialogue between Beijing and Brussels had been largely sidelined this year by the intensive trade negotiations between China and the United States, the diplomats said, pointing to the cancellation in September of high-level face-to-face talks in Europe.

But the situation changed with French President Emmanuel Macron’s visit to China in the first week of November, which “really made a difference”, according to one source.

State news agency Xinhua credited the signing of the geographical indication agreement to “the joint push” by Macron and Chinese President Xi Jinping.

During Macron’s visit, on November 5, China issued €4 billion (US$4.4 billion) in sovereign bonds in Paris, its first such move in 15 years and also the largest single issue in a foreign currency it has ever made.

Meanwhile, China had become “more comfortable” in its dealings with the US than it was in the early days of the trade war, which began last summer, another diplomat said.

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Back then, Beijing was worried about the potential for joint pressure from the EU and US because of their shared economic grievances over China’s slow opening up of its markets, the unlevel playing field and intellectual property protection.

Those concerns have been allayed by the EU, which has reiterated that it will not take sides in the dispute, and that it disagreed with the US approach to impose tariffs while defying rule-based multilateralism of the World Trade Organisation.

There have also been growing tensions across the Atlantic on a range of issues including trade, security and climate change which have cast a shadow and deepened mistrust between the US and its European allies.

“But China is yet to engage in a serious discussion with the EU on reforming the World Trade Organisation where the US is absent,” the diplomat said.

That could change in 2020, as Beijing seeks to broaden its foreign policy focus beyond the trade war with the US.

“China needs to expand its room to manoeuvre in international relations, such as through ties with the EU, Russia and India. We will not have our arms twisted by tensions with the US,” Feng Zhongping, vice-director of the China Institute of Contemporary International Relations, said at a forum in Beijing on Saturday.

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“5G is the touchstone for China-EU and EU-US ties,” he said, referring to persistent US pressure on EU members to block China’s telecoms giant Huawei Technologies’ access to Europe’s 5G market.

China and the EU will hold their annual bilateral summit in Beijing in April when Chinese Premier Li Keqiang will meet the new EU leadership and, in September, Xi will travel to Leipzig, Germany, for a summit with all 27 leaders of the bloc’s member states.

“We need to intensify top-level communications, but it is unknown whether the 27+1 leaders’ summit will become regular,” a European diplomatic source said.

Also in September next year, after years of negotiations, an investment treaty between China and the EU – formally known as the Comprehensive Investment Agreement – is expected to be concluded. Beijing is also keen to kick off talks on a free-trade agreement with Brussels, once the investment deal is signed.

“Next year will the year of Europe for China,” Feng said. “The investment deal is crucial for stable China-EU relations, and we need to respond to the EU on the investment reciprocity.”

Brussels has been wary of China’s increasing presence in Europe and has adjusted its China policy through a pragmatic mix of cooperation and competition. Faced with its rising economic power and political influence, the EU views China as both “a systemic rival” and “a strategic partner”.

“China is simultaneously a cooperative partner with which the EU has closely aligned objectives, a negotiating partner, with which the EU needs to find a balance of interests, an economic competitor in pursuit of technological leadership, and a systemic rival promoting alternative models of governance,” the EU said in a document in March.

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Beijing is also due to host leaders from Greece and 16 central and eastern European countries in 2020 to increase cooperation and expand the reach of its Belt and Road Initiative, China’s ambitious trade and outbound infrastructure plan, and a potential point of friction with the EU.

With more European countries signing up for China’s belt and road plan, Brussels has frequently urged its members to stick to EU rules and regulations in relation to the projects.

The appointment on November 1 of career diplomat Wu Hongbo as China’s first special representative for European affairs raised concerns in Brussels that it may indicate Beijing’s intention to bolster ties with peripheral EU members and other small players in Europe.

“It is a smart move”, given China’s economic power and the financial need to develop domestic construction in European countries, the European diplomat said.