Europe’s Balancing Act with China: A Conversation with Janka Oertel
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I'm Bonnie Lin, Director of the China Power Project and Senior Advisor at the Center for Strategic and International Studies. In this episode of the China Power Podcast, we will be exploring how China's approach to Europe has changed, given their assessments of the Trump administration's policies and how Europe is responding. Is China engaging in a renewed charm offensive towards Europe?

How is Europe balancing its approach to China with changing U.S.-EU relations, while navigating threats posed by China's unfair trade practices and strong support for Russia? To explore these questions, we're joined by Dr. Janka Erdl. Dr. Erdl is Director of the Asia Program and Senior Policy Fellow at the European Council on Foreign Relations.

She previously worked as a senior fellow in the Asia program at the German Marshall Fund of the United States Berlin office, where she focused on transatlantic China policy, including on emerging technologies and China's foreign policy and security policy in East Asia. Prior to joining GMF, she served as program director at Kerbel Foundation's Berlin office.

She was also a visiting fellow at the German Institute for International and Security Affairs and worked at United Nations Headquarters New York. She has published widely on topics related to EU-China relations, U.S.-China relations, security in the Asia-Pacific region, Chinese foreign policy, 5G and emerging technologies, as well as climate cooperation. Yunga, thank you very much for joining me today.

Thank you so much for the invitation. So I'd like to start with some background on China's relationship with Europe. How did you view the relationship between China and Europe before the Trump administration? Yeah, maybe the first question that I would be is like, for which Trump administration? Because obviously there's now two Trump administrations, and actually they have both been quite relevant for the China conversation in Europe. So if I take us back to the Trump one administration, I would say before Trump one,

The China-Europe relationship was very much focused on trade and economic relations, was actually not a very securitized relationship and was not a relationship of fear, but one of opportunity, not one of challenges, but both sort of gains and prosperity. So it was a relatively pragmatic, but also very sort of positive relationship. The first Trump administration coincided with changes in China,

I think everyone who works on China knows that 2017 in particular was quite the year in terms of understanding where Xi Jinping wanted to take things and where the realization about that really also sunk in in Europe. We had not just the Trump administration exerting pressure on Europeans to change their approach, but also the situation within China changing to a degree where Europeans couldn't ignore that something was up and that something wasn't going in the way that they were used to anymore.

And so then we had these kind of four years of Trump's up and down relationship with Beijing, where many Europeans were still a bit of a dependent variable to the US conversation. Where many in Europe were sort of in the gang of those saying, well, if it pleases Trump, if we're a bit more hawkish and we don't actually have a very intense trading relationship with China anyway, we might as well sort of say the right things, whether we believe them or not. I think that phase is now definitely over.

Europe has now moved into a different phase of the relationship where Europe's China problems are actually Europe's China problems. These are not the US's China problems anymore. And this I think is important because we are now in a situation where the Europeans have tried to improve their relationship with China over the course of the Biden years, have tried to sort of put measures in place that will regulate the negative impact that China's economic policy has on Europe,

But where they also had to realize that there was little to no response on the Chinese side and actually attacking the problems or getting at the problems that were there. So now with the second Trump administration, the problem comes from two sides for the Europeans, but the China problem hasn't gone away. Just to follow up, when you say that Europe's China problems are now Europe's problems, not just an extension of American problems, what are the major problems that Europe before the second Trump administration had identified vis-a-vis China?

I think the main point is obviously that the Chinese economy has now become a formidable competitor in all of those areas that are of crucial relevance, particularly for the largest economy in Europe. That is Germany. I sit in Berlin.

So this hits hard at home, basically. China is now a competitor, a rival in all of those sectors that used to be sectors of German dominance, from the EV car industry sector to sort of the wind power industry, to the machinery goods producing industry, to material sciences, life sciences, etc. So I think this is all something that is now a very different kind of situation for the Europeans.

And because Germany is sort of affected at the heart of this, and most of the European economies are quite dependent on the German economy, we have a ripple effect throughout the entirety of the European Union. And so this is something where in the past, this used to not be the case. And now it's not only that European companies, German companies sell less than China and have less market shares,

They also have competition in third markets where Chinese competitors are able to offer their products at much lower prices and still high quality. And they have the competition in the home market in Europe, which leads to massive distortions.

And then, of course, if you want to sort of add the other main dimension, I don't know whether we want to get into this already now, but obviously the fact that the Chinese leadership has decided to back and support the Russian leadership since the Russian full-scale invasion of Ukraine in 2022 has certainly not helped improve relations between Europe and China.

It has made China a factor in Europe's security order, in the future of Europe's security, to a degree that was previously, I would say, unthinkable for many of the Europeans involved.

And how much do you think this has changed now that we have a second Trump administration, particularly as Beijing looks at what's happening in Washington and looks at the changing U.S.-Europe relationship? Do you think that Beijing still has the same motivations or same drivers in terms of its approach to Europe? Or do you think China is about to or has already changed its approach to Europe? So I think it's important to talk about what has often been termed the Trump offensive.

There is no charm offensive from Beijing vis-a-vis Europe, but Europe would like that to be a charm offensive and therefore everyone is writing about it as if there were a charm offensive happening from Beijing. What is happening is that the Chinese leadership has decided to sort of talk a bit nicer, to be a bit more friendly, to answer phone calls, but there's nothing in substance that has actually changed.

And let me just give you an example of how little has changed and how little enthusiasm there seems to be to really improve this China-Europe relationship. This is the 50th anniversary of the China-EU diplomatic relationship. There was supposed to be a big celebration. The European side had invited President Xi Jinping to come to Europe to celebrate. But President Xi has declined that invitation and has instead invited the Europeans to come to Beijing.

So Sidibeek didn't regard it as necessary to come to Brussels to celebrate 50 years of diplomatic relationship, but he did regard it as necessary to go to the Victory Day parade on 9th of May in Moscow. And I think that sends a very clear message to the Europeans of how important the relationship is and how important the relationship is supposed to be in the future.

I think that's a strategic mistake from a Chinese perspective. I do think that there could be some easier gains if there were some signals that something would change. Let's just say the Chinese leadership is making it awfully easy for all the hawks in Europe to continue on their position and say nothing has really shifted on the Chinese side.

Because there's structurally very little that the Chinese leadership can offer to the Europeans. There's not a lot of market shares that are available. There's not a lot of technology transfer that they would be willing to do. They can only offer investments in Europe, investments particularly in the clean tech sector. And that might prove to be the soft underbelly and something that actually creates disunity among Europeans. So it's really hard to portray that as a massive charm offensive vis-a-vis the Europeans.

So in short, I would say Chinese leadership has not massively adjusted its approach to Europe. It is speaking with a slightly softer tongue, but that will also end if Europe does something to offend Beijing, as we can see with the UK-US trade, well, let's call it preliminary agreement, where there's some clauses on China in there that have already angered Beijing and created a very negative reaction.

And what have you seen in terms of the negative reaction from China to the UK? I mean, it's just that the Chinese leadership has basically pretty openly warned all countries to not enter into agreements with the United States that will be to the detriment of Chinese interests.

And I think that's a warning that one should take very seriously, particularly at a time where Chinese measures are already having a global effect. Just take the critical raw materials export controls that have not been just as a response to the United States and the increase in tariffs, but actually have affected every country around the world and are now really making it difficult for European producers to acquire export licenses for really critical goods

And that can have a very negative effect on Europe's ability to continue to be an economic powerhouse. And that's something that the Chinese leadership does not seem to take very seriously, those concerns on the European side, even if it is those well-trusted German auto manufacturers that are now having trouble acquiring the kind of licenses that they need for going about their business and producing their vehicles outside of China. Janka, you said that you and others have

says that Xi Jinping made a strategic mistake as to not take up the offer to come to Brussels to engage with Europe at this particular moment. And at the same time, Xi went to Moscow. From your perspective, what did Europeans want in terms of a charm offensive from Beijing? Were there many who wanted to potentially rebalance Europe's economic relationship with China given the trade war with the United States? Or what was driving the desire for a Chinese charm offensive?

I think there's a number of things that the Chinese leadership could do if it decided that it wanted to. It could temporarily, at least, agree to a degree of voluntary restraint in exports. It could agree to technology transfer with regard to the Europeans when it comes to, for example, battery manufacturing, etc.

It could agree to larger market shares for European companies, which we have seen during the first Trump administration, where there was an openness to brands, for example, access for a German insurance company or for a German chemical manufacturer to areas that were previously not available to them. So there were previously actual offers on the table. I think it is structurally problematic for the Chinese leadership to make offers of that sort at the moment.

And this is why they're not coming forward. But there are sometimes these just kind of very low hanging fruit. And that visit to Europe, to Brussels, for example, if you think about it,

If Brussels had welcomed Xi Jinping in Belgium, had invited him and he had come, then you don't send your guest home with a big scolding. You try to come up with something, then you have to deliver something. But if the Europeans are traveling to China, that's already the gesture, then they have to give basically nothing. So I'm not saying it's a strategic mistake as in Xi Jinping hasn't thought about this properly.

I'm pretty sure that the Chinese leadership has considered that it is more important for Xi Jinping to stand in sidelines of the Victory Day parade in Moscow than to go to Brussels. But I do think that with regard to the Europeans, the expectation level on the side of Beijing remains that the Europeans will fall over in the end.

and will not act united and will be what I would call like fissionable material anyway, can be split apart easily. And I'm not sure that that calculation still holds at this time.

In terms of Beijing splitting the European zone, I've also seen a number of reports, including from experts from the Chinese Academy of Social Sciences, mentioning how Europe could be divided, mentioning the domestic politics within Europe, the strengthening of political conservatism, political polarization and fragmentation. But as you're looking at Xi Jinping's invite for European leaders to travel to Europe, what are you seeing so far in terms of responses across European capitals?

So, I mean, I will not deny that European unity has not been necessarily Europe's strong suit all the time. But it is quite striking and remarkable that on the question of responding to China, the level of unity has actually been quite high. And it is, for me, a sign of how relevant this topic has become for most of the European leaders involved.

They do see the challenges. They do see the dangers. They do see the collaboration with Russia as a massive security challenge. They do see the effects on European industry as a massive economic challenge. But there's also, I think Romania and TikTok was really the latest example of that, the Romanian election where there was a lot of

alleged interference from Russia via TikTok particularly, where there is seen a sort of challenge to our overall societal order. If there's one thing that Vladimir Putin, Xi Jinping, and potentially Donald Trump have in common, that it is that a weaker Europe, a Europe in which more extreme forces are in power in individual member states and a less empowered Brussels,

is something that seems to be in their interest. And I think that's something we should take quite seriously. And that's a challenge for the Europeans. But actually, right now, it has created quite a degree of cohesion on the side of Europe. And a lot of the answers that have to be found to the trade and economic problems vis-a-vis China are in Brussels anyway. It's not something that member states by themselves can easily decide.

I did want to touch on some of the areas where we've seen the smaller shifts in China's policy towards Europe. And that includes, for example, on April 30th, China lifting sanctions imposed on five European Union lawmakers in 2021 over their criticism about human rights abuses against believers and other Muslim minorities in Xinjiang.

It seemed like what you were saying, Yanka, earlier was that some of the larger concessions, which could have more of an impact on China economically or could be difficult for China economically, given the state of China's economy, might not be possible. But maybe there is room for some political concessions. Do you see that as a possibility? And how do you view the basically non-economic concessions that China could give Europe right now?

I think the lifting of the sanctions is an excellent example of, in Germany you say, of jumping too short. So when China announced these sanctions, as a response to the European Parliament, the

the European sanctions for human rights violations with regard to Xinjiang. These were seen as a wildly disproportionate response all across Europe. This was affecting not only lawmakers in parliament, but it was also the political and security committee. It was the question of think tanks across Europe, particularly Merix, particularly the China Knowledge Center in Sweden. There were all sorts of individuals put on the list, and it seemed just like a wild lashing out of the Chinese side vis-a-vis the Europeans.

Now, one could have argued these sanctions never really were very effective and they've done a lot more harm than good for the Chinese leadership. They could have just been withdrawn entirely.

But the way this withdrawal has now taken place was super instrumental. It was only for those members of parliament that are acting members of parliament that would impede further collaboration or further cooperation on the official side with the parliament right now and the parliament where the Chinese leadership hopes to revive, for example, the investment agreement, etc. But the sanctions were not lifted against all those think tankers, for example, or the non-current investors.

members of parliament anymore. And I do think that that is something that is noted here in Europe, right? It's not something that goes unnoticed and it's like, oh, well, great, China lifted the sanctions. China very instrumentally lifted some of the sanctions and left those in place that were uncomfortable for it in the first place for actors that it didn't like. And so I'm not sure this has done not maybe more harm than good in lifting these sanctions. And this is what I mean in terms of an actual charm offensive action

looks different to me. And I'm not sure how much of this is incompetence or unwillingness on the side of Beijing to send the right signals to the Europeans. And some of this may just be a misreading of what they're seeing here.

Right. So from your perspective, there's mistakes that China has made in the past when it comes to engaging with Europe. And then the measures that China has taken, at least with the lifting of sanctions in this case, was only a half, probably not even a half measure. Right. It was a partial measure that was far from addressing any of the original concerns that Beijing's lashing out Europe had.

That makes a lot of sense in terms of viewing this not as anywhere linked to a charm offensive, though I've seen a number of Chinese analysts characterize this as Beijing's attempts to improve relations from Europe. But the way you're describing it and explaining it,

I think you're absolutely right. I think this is what I mean in terms of, I think the perception is on the Chinese side, we're doing a lot and we're actually trying to make a lot of these offers and they're actually not reciprocated in the way that we expect. Whereas the perception on the European side is, hang on, if you really wanted to do something, there'd be so many other things that you could do that would make our life easier.

And there seems to be a massive miscommunication between the two sides as well in terms of what the expectation level really is. I think this is an excellent example. Are there other examples on the economic side in which you're seeing China, from their perspective, offer something, but from the European perspective, it either falls incredibly short or is misperceived as being very instrumental and not really addressing any of the fundamental issues?

I think the foreign direct investment question is one that is similarly structured in a way. So greenfield investment, Chinese, particularly electric vehicle, battery manufacturing being set up in Europe. Now, technically one could say, well, that's a great thing, right? China puts money into the European economy. Chinese companies build a factory. They create jobs in Europe. Why would that not be a good thing, right? That's sort of on the

basis of just the economic relationship. Now, let's take the national security argument aside and the potential dependency argument aside, but just the economic kind of engagement itself

If you build a factory that is no tech transfer, final assembly only, most of the pre-products being imported from China, value added generation in Europe is very low. And that's not necessarily a fantastic offer. That's okay as an offer for some of the countries that are used to this kind of economic relationship from other players as well.

But for example, for Germany, that just isn't a particularly interesting offer. If there's no value added created here, if there's no technology transferred here, if there are no ecosystems being created on the ground, then it just becomes a way to dodge a tariff barrier and not much of an actual investment. And I think that's where the kind of misperceptions lie, where from a Chinese perspective, it's like, well, hang on, but we can invest.

And from a European perspective is, but hey, hang on, this investment is not good enough. This is not the kind of investment we want to see. And we don't want to see the kind of investment that is actually just designed to create disunity and to pull Europeans apart for decision-making processes later on, because that's

Every time you have an investment on the ground, every time you create jobs on the ground, you actually do create political leverage as well. And this kind of political leverage is something that can be used and where there is a concern and a worry that it will be used for also political reasons. Perfect. Thank you. I think those are two real good examples to illustrate why there is quite a bit of a media narrative on the charm offensive, but in reality, how that's not the way that Europeans are perceiving it.

I did want to transition to look at China-Europe relations from the perspective of Europe and what could be changing, if any, calculations on Europe's end in terms of thinking about either engaging with China or potentially working with China. And I know one of the big issues that Europe is dealing with right now is how to understand the, I guess, changing transatlantic relationship.

under the second Trump administration. And of course, there's been quite a bit of pushback from Europe on the tariffs that were imposed from this Trump administration. To what extent do you see the European reassessment of its relationship with the United States impacting internal discussions within either in Brussels or within European capitals of what that means in terms of how they want to structure their relationship with China? Are you seeing any of these discussions being linked? Or do you see these discussions as completely separate right now?

No, I think it would be a lie to say these discussions aren't being linked in some part of Europe. There is obviously a conversation about what does this do to our other trading relationships, right? If the relationship with one of our most important trading partners becomes strained and becomes problematic, what does this do to all of our other relationships? But at the same time, I think there is an understanding in Europe and in many European capitals

Particularly in Brussels, though, that unfortunately there is no kind of quick automatic China fix that offers itself for the kind of trade and economic problems that we're experiencing with the new Trump administration. And so this might make for a nice headline in a newspaper to say the U.S. is pushing Europe into China's arms again.

But in reality, that's not what is happening right now. That's not what we're seeing. What we're seeing is a European Commission that is continuing with great defense measures, that is continuing to think about sort of export surges from China and how to respond to them. We continue to have a European Commission that is very careful about the exposure that it has to China. Yes, there's a little bit of a softening, I would say, in the tone, a softening in the narrative.

But I don't see a policy shift in Brussels when it comes to the sort of China relationship

China-related challenges that Europe faces in the economy. And quite frankly, I don't see a massive policy shift and not even a rhetoric shift in major capitals. In Berlin, for example, we have a new chancellor who is speaking quite tough about China and is saying, you know, we're not going to be absorbing all of China's overcapacities. We're not going to continue to bail out companies if their China risk is too high. They're talking about strategic de-risking from China.

They're continuously mentioning China's relationship to Russia as a huge security challenge for Europe in the long run. And I do think that that's something that despite the fact that the trans-authentic relationship isn't in top shape, that just doesn't go away. You mentioned from Brussels' perspective that no quick automatic China fix. Is there, for example, a longer timeline? And you also mentioned some of the softening in tone in terms of Brussels' approach towards China.

Do you think there is some assessment within Brussels or in different European capitals, if they take a longer view towards China, there could be some adjustments perhaps on the margins that Europe could do that could better improve your economic and trade conditions with China?

I mean, yes, there's tons of things that could change and could change for the better, but it would all require Beijing to move. It will require Beijing to make a better offer for Europe. It will require Beijing to change some of its predatory practices, and it will require Beijing to change its policies. And this is something that we're currently not seeing. Now, if China was willing to actually change its approach vis-a-vis Europe and to actually sort of adhere to rules jointly agreed upon,

And if it were to actually, for example, start talking about voluntary restraint and other things, then obviously there could be a conversation had.

But there's no trust left in the relationship to say, oh, this will be fine from a European perspective. It's so difficult with regard to the U.S. right now. Therefore, China does provide us with a fantastic solution and a fantastic option here. Market shares of European companies in China are going down. They're not going up. There is not more that is being exported to China. It's less.

challenges of major players in the European industry with regard to China are growing. Localization pressures are high. So right now, there's just nothing that we can see that structurally has changed on the Chinese side. So I think this is where, as one would say, the ball is in Beijing's court. If it wanted to change the relationship with Europe, there are a million things it could do. But right now, I don't see that that is actually happening.

And it's possible that this could be outside of your expertise, but from your perspective, as Europe is struggling and figuring out its path forward, given the tariffs it's facing, given its difficult relationship with China,

Is Europe looking more towards other democracies? Is Europe looking more towards the global south? Or is Europe still very much in the exploratory phase of thinking through how to deal with this pretty challenging situation? Europe is in a pretty active phase right now in terms of trying to negotiate trade agreements across the world. One of the very prominent ones being obviously India, where the entire College of Commissioners, more than 20 people went to Delhi and

There was a political decision to find a trade agreement before the end of the year, which is very, very ambitious for everyone who knows how slowly the Europeans are moving on these questions and how difficult it is to negotiate anything with Europe, much less within Europe. This is quite an ambitious task.

The Australia Free Trade Agreement, there is a conversation about Mercosur. So all of these things are obviously reactions to the new kind of trade and economic reality that Europe is facing. For a continent that is very much embedded into global economic structures, that has a lot of champions in small and medium-sized enterprises that have worked across globalized supply chains for decades,

This is obviously a situation that is very frightening. Localization of supply chains, pressures in the supply chains, export restrictions, uncertainty. All of this is really difficult and challenging. So trying to get some sort of order back into the situation is something that the Europeans are quite focused on right now.

The question is, if your two largest trading partners outside of the EU, China and the US are both operating in a less benign spirit, then it becomes very challenging to sort of find quick fixes for the solution. But on the long term, in the longer run,

what Europeans are trying to do is de-risk and diversify and diversify trade relations by having trade relations with many other players and seeking common ground with those that are interested in maintaining, I would say, like a baseline of rules and a baseline of a rules-based order in which one can rely on a degree of certainty in an economic and trade relationship. Most of the partners that you mentioned in terms of Europe negotiating new trade deals were individual countries.

I also heard CPTPP. Is that also top in terms of European considerations of diversification? Yeah, CPTPP. I'm not an expert on that, but there are many conversations around whether it is better to have sort of an association agreement, whether becoming a member is a bit of a difficult story because of other overlying legal problems with this. That's a slightly more difficult and different story.

But obviously, these are all conversations that are being had at the moment. Where are the new rules organizations? Where are the new baselines for rules-based trade?

What are the new players that are going to be sort of the interesting players moving things forward? With a number of the CPTPP players, the EU already has free trade agreements and has structured their relationship differently. Yeah, it's just a new phase for Europe in which it has to rely more on these bilateral agreements and less on a sort of WTO focused order.

And we know that most of our allies and partners have been also closely watching the US-China trade discussions, the back and forth to protect tariffs, and of course, the most recent meeting in Geneva. How is Europe viewing or Brussels viewing the US-China trade dynamics? And to what extent are you worried that this could have additional either direct or indirect fallout on Europe?

Yeah, I think this is obviously something that is viewed with great concern from a European perspective. Everything that creates massive amounts of uncertainty and prohibitive trade barriers between our two largest trading partners is something that cannot be in Europe's interest. I think the de-escalation has been perceived with a degree of relief.

But I think it is also a bit of a false relief because obviously we're still at tariff levels that are insanely high and so much higher than they were before so that the effect on global trade is still going to be very significant. When it comes to

potential diversion effects that this can have. There's a bit of unclarity about how impactful this is really going to be. I think in sectoral terms, it's going to have a lot of impact. When it comes across the board, it's not probably as much as some may expect. So I think this is a sort of mixed reality that we can see there. But it's also really hard to say how exactly those dynamics are going to play out in the future.

I think what Europe is getting ready for is just a longer, a prolonged period of uncertainty in trade relations, a prolonged period of higher tariffs, and a prolonged period of greater localization in supply chains. And it is a big scramble now to get ready for this kind of new age of trade and economic relations.

Thank you, Yang Ge. I do want to move to the security and defense dynamic that you were talking about earlier with Xi Jinping's travel to Moscow, as well as the recent Xi-Putin meeting in which both leaders agreed to further deepen their comprehensive strategic partnership.

When European leaders saw that Xi went to Moscow instead of coming to Brussels, what was their initial reaction? I think you suggested some of it already, that this was clearly Xi prioritizing Russia over Europe. Did that perception cause any shifts or changes to the Torshigin thing or China in any way?

It sends a message at a tricky time, right? So you remember, though, the 4th of February 2022 joint statement between Russia and China, which did not receive, I would say, the necessary kind of attention in Europe at the time. It was perceived as, yeah, yeah, this is like a political statement. This is now the unlimited friendship. Yeah, yeah, yeah. It wasn't really taken that seriously. And then after the full-scale invasion happened later in February, Russia

I think there were many people in Europe that were thinking, oh, goodness, Beijing will now realize how much of a mistake it has made in signing that statement with Moscow. This is not going to be in China's interest. And I think this is something that Europeans have consistently been struggling with and say, well, but this cannot be in China's interest.

And this has been something that has also been said about Moscow, of course. This cannot be in Russia's interest. I think this is something that particularly here in Berlin, many have believed until the very day of the full-scale invasion that this cannot be in Moscow's interest. And why would they do something like that?

And I think this is a lesson that the Europeans and particularly the Germans here in the last three years have learned is that it does seem, at least from a European perspective, that it very well is in Beijing's and Moscow's interest to very, very closely coordinate, to cooperate strategically.

to align their policies, and that this is perceived in Beijing as being advantageous, and that even if this comes at the price of a slightly less good relationship with Europe, that this is a price worth paying. To be fair, Europeans have not made Beijing pay a super high economic price for this. There's so far not a huge set of economic sanctions, for example, against Chinese companies or a breakdown of diplomatic relations between Europe and Beijing.

I think there was a big desire from a European perspective to solve these questions with Beijing in a sort of cooperative fashion. But obviously, it has an effect on how the relationship can and will be structured in the long run. The trust level is at a historic level.

As Europe looks at the deepening China-Russia relationships, as well as the changes in U.S. policy towards both Russia and Ukraine, do you think moving forward, there might be more appetite for Europe to ask China to pay a larger economic price for its support of Russia?

Or do you think that Europe will need to balance perhaps those who are making those calls to put more pressure on China with the economic difficulties that Europe is facing? Yeah, I think this is a tricky balancing act for the Europeans at the moment. It is also a question of what Beijing is doing. So right now, I would say,

What the Chinese leadership has managed to do is to stay below a certain threshold of not too openly providing Russia with full weapon systems, of not too openly providing such direct support, staying at the level of sort of providing critical goods and items that keep the war machinery running

but that have a degree of plausible deniability behind them. So I think this is something that is increasingly difficult for the Europeans to navigate, because how do you navigate the fact that semiconductors or diggers or body armor, that all of these goods are coming from China, that the trade with China is keeping the Russian economy afloat.

How do you balance that in your overall relationship? I think Europeans have been very good in the sort of last year of the Biden administration to coordinate their messaging vis-a-vis Beijing. Every European leader that went to China has sort of had the same message and said, you know, we need to work on overcapacities, but you also need to work on not working so closely with Russia anymore. This is our core security interest. We really, really need you to change your approach on this.

This has become a little less coordinated, I would say, because everyone is, of course, in slight panic mode in Europe when it comes to the future of our security relationship with the US, the future of our economic relationship with China. There's just a lot of fires burning at the same time, while Russia does not seem to be willing to give in on any of the and make any concessions.

and stop the war in Ukraine. So I think this is a tricky situation where a lot of different elements have to be hedged and balanced against. But we do see that particularly the new German leadership seems to be willing to be a bit more open and out front and quite sort of

pushy when it comes to Russia and be a bit more direct and clear about what the demands are. It is a bit more willing to put sort of strength behind those arguments as well and has been messaging China very clearly. I do think there is an expectation that when push comes to shove, that China could change its approach if the price were to be raised. Whether and when one will do that will probably rely on a range of different factors.

The new German approach is quite extraordinary with goals to become the largest army in Europe. That is quite a change from before. As you mentioned, that's a lot of strength behind those arguments. There's a lot of other players that also want the largest army in Europe. So it's a good kind of battle for being first here. There is an understanding in Europe now that

The reinforcement that we've always hoped for or that we've always banked on, where that would come from the United States in case there ever was a direct confrontation between Europe and Russia, that we can no longer be 100% sure that that reinforcement would be coming. So now we have to be that reinforcement ourselves.

And have to strengthen our security on our own terms and have to sort of ramp up production of military goods, ramp up our military readiness. All of that takes time. And this is why I think this is a very careful navigating as well that you see on the European side, because from one day to the next, this is a very difficult spot that the Europeans could be put in.

And this is by no means saying that this is not the Europeans' fault. I mean, they've waited way too long for taking the measures that are necessary to have more what was called strategic autonomy or European sovereignty. But this is now something that then also has a ripple effect for the China conversation because

I'm hearing many times here in the European conversation that we don't want to create a new dependence after ending others. And so the dependence on Russian oil and gas has been ended, but there's also no strong desire to continue to be massively dependent on the United States. But there's also no desire to be dependent on China. So it's sort of finding a new balance under very, very adverse circumstances.

That is the big challenge for Europe's leaders. And it will definitely come down to Germany, France, Poland, Italy, and Brussels to figure out what to do next.

And in terms of finding that balance, I know Europe in the past couple of years has also been active in engaging countries in the Indo-Pacific. And part of it has been to deal with increasing Chinese aggression and coercion there. Obviously, we saw quite a bit of work with NATO and the IP4. So as Europe is more concerned with what's happening at home with Russian aggression, as well as increased China-Russia relations, is

Is there also discussion with Europe about either the need to do more with countries in the Indo-Pacific to check Chinese aggression? Or is some of that discussion being balanced by the need that Europe needs to focus much more at home, given the U.S. may be less present in Europe moving forward?

I think there's multiple dimensions to this. So I think from a kind of strategic perspective, the Indo-Pacific strategy that the Europeans have is quite alive. There's always been a differentiation between the level of engagement of different member states. I would say France has not stopped being interested in the Indo-Pacific also from a German perspective.

The interest is still there. There's a continued focus on joint military exercises, high-level visits to the region from military perspectives, but also politically, a lot of focus on the trade and economic side of things as well. I think there is an understanding that obviously Europe will not be the crucial player when it comes to security in the Indo-Pacific per se.

but that it is an increasing reference point also for questions of hybrid warfare, that it is an increasingly interesting partner also for defense cooperation in the defense industrial place for all those players in the Indo-Pacific that would like to diversify their relations there. So I think this is something where we will continue to see Europe to play a role, well not play,

play the leading role, but I don't think that that's the expectation level of the countries in the region. But I think there's a lot to be shared in terms of lessons learned for the future of warfare from the situation in Ukraine. There's a lot to be discussed when it comes to undersea cables being cut and how to defend under these new circumstances.

What about the development of drones? What about satellite capacities? All those conversations are alive and real and are being had with partners in the Indo-Pacific region from individual European countries in the security and defense space and more broadly at the sort of European level as well. So I would say it's more a continuation of what we've seen in the past, not necessarily a massive ramp up of activity.

But we are seeing an increasing conversation also when it comes to the defense relationship. For example, Korea being a major provider of military goods to Europe, etc. So I think this is something where we will see a new phase where the shape of it is not entirely clear yet, but where it's certainly not one where Europe is turning away from the Indo-Pacific now.

Perfect. Thank you. And as you mentioned, as Europe improves more its defense and its defense industry, there will be natural opportunities for more collaboration, more cooperation. So I do want to wrap up our podcast by asking you, to the extent it is still possible to look out into the future, where do you see the near-term trajectory of potential EU-China relations, particularly given all these factors that we talked about? Is it more or less the same, or do you think the trajectory will be more one way or the other?

So I was going to joke and say near term, meaning the next two or three hours, which currently is the timeframe that one is able to oversee in the very rapidly changing environment that we're facing. But I would say if we're looking at the next few months, then I don't see a massive shift in Europe-China relations on the horizon. It will be interesting to see what the EU-China summit in July can bring.

Whether a flaw can be put under the relationship, whether there is a stabilization that can be achieved, whether there's some sort of framework agreement that can be found for the difficult question of Chinese investments in Europe in the clean tech space, whether there is willingness on the Chinese side to be more present when it comes to, for example, the negotiations and the COP 30. So all of these matters will be sort of relevant for the relationship going forward.

But I do not expect a massive deterioration nor a massive improvement of the relationship. I think for the Europeans, the interest would be to keep this as stable as possible by sending the clear signal that Europe will not be exploited at a time of particular difficulty from an economic and strategic and sort of security perspective from predatory Chinese practices. But we'll stand firm in sort of moving against that as well.

And would it be correct to say that most in Europe, and particularly Brussels, are not expecting too much from the EU China Summit in July? The expectation level is more limited. I think what we will continue to see is that individual member states and individual leaders in member states will sort of try to dabble with and dangle the China card and will try to sort of woo some Chinese investment into their district or into their country.

That will continue to play a role, but overall, I think the expectation level is that for the relationship to really change, the expectation vis-a-vis Beijing is very high, and that on the two fronts of the relationship with Russia and the trade and economic relationship vis-a-vis Europe, Beijing could do a lot to improve the conditions, and as long as it's not willing to do so,

There will not be a massive breakthrough with Europe on any of the other fronts.

And finally, what are your suggestions for policymakers, particularly those sitting in D.C., trying to observe the EU-China relationship? I think one recommendation you had earlier probably was there is no Chinese charm offensive and Europe is not buying whatever China is trying to do to improve the relationship. But anything else that you want to highlight for American listeners or policymakers who are watching from afar but may not be necessarily in tune to all the details in the EU-China relationship?

It is important to think through what a joint agenda could still look like when it comes to addressing the kind of challenges that Europe and the US both face together. It does seem like that agenda has been dropped at the moment and is not sort of addressed as much as it could. There is an overall willingness on the European side to tackle certain questions of export controls, to tackle certain questions of overcapacity in predatory trade practices, to

to a degree that might not have been there during the first Trump administration at this level. And this could be something where collaboration could be possible, but that would require also, I think, to get the Europe-US relationship onto a slightly more solid footing and to be moving into the zone together of saying there are actual problems here in terms of deindustrialization, future market shares, future industries where we are losing ground, where it would make sense to collaborate.

Perfect, Yang. That was a very excellent discussion of dynamics between China, Europe, as well as European perspectives on what China is doing and not doing. Also very much appreciate your assessment of the relationship between how Europe is assessing what's happening between Europe and the United States and how that is impacting, to some extent, European calculations vis-a-vis China. Thank you again for joining me today for this very comprehensive discussion. Thank you so much for having me.