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The CCCEU Weekly Update July 15, 2023: Germany Releases China Strategy

CCCEU| Updated: Jul 15, 2023

Editor's Note: Greetings. Berlin has announced its first-ever China strategy, prompting a mixed reaction among stakeholders. German businesses claimed that the document strikes a balance between the geopolitical crisis and the country's need to work with China on global issues, while Beijing urges Berlin to develop a comprehensive and rational view of China. This edition of the CCCEU Weekly Update keeps you informed of China-EU dynamics. Enjoy reading and have a nice weekend.

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Weekly updates: Focus

In a departure from the usual Brussels-centric narrative, this week's pivotal development in Sino-European relations unfolds in Berlin. At the heart of the matter lies the release of a highly anticipated, long-concealed German strategy paper on China. On the 13th of this month, the German federal government unveiled a comprehensive 64-page document that has reverberated across diplomatic circles, triggering a wave of controversy.

Germany, as the leading economic powerhouse within the European Union (EU), wields considerable influence alongside France across a broad spectrum of EU affairs. Given this prominent position, Germany's approach towards China is poised to exert a profound impact on the trajectory and formulation of the EU's strategy vis-à-vis China.

In the realm of substance, the strategy has captured the enduring gaze of European media, persistently garnering glimpses of its preliminary contents and incessantly deferring the unveiling of the comprehensive document. Consequently, the content possesses a dearth of novelty, save for the long-awaited publication of the strategy itself, bringing forth an amalgamation of anticipated and unforeseen elements.

In line with the EU's established stance, as articulated in the bloc's official 2019 tripartite description, the document sheds light on the unsurprising dynamics between the EU and China. Recent confirmation of this position at the EU summit, which concluded a mere two weeks ago, underscores the steadfastness with which member states adhere to their collective perspective on China. Notably, any immediate prospects for altering this standpoint remain dim. China, for its part, vehemently rejects the characterization of itself as a "systemic competitor" within the framework of the triple positioning.

In acknowledging the pivotal role of China in trade and economic matters, the document astutely acknowledges Germany's reliance on this global powerhouse. China undeniably stands as Germany's foremost trading partner, with bilateral trade surging to nearly 300 billion euros in 2022. However, it is noteworthy that Germany finds itself entrenched in a trade deficit exceeding 80 billion euros with its Chinese counterpart.

Germany's "overdependence" on China takes center stage as experts sound the alarm. In scrutinizing Germany's vulnerability, a critical "weak spot" emerges in the form of imports, with China reigning as the primary source for a plethora of goods including mobile phones, raw materials for solar panels, chemical products, and even essential foodstuffs. The Kiel Institute for World Economics (IfW), Germany's eminent think tank, reveals a reality: approximately 80 percent of laptop computers are imported from China, while an alarming 85 percent of crucial rare earths and raw materials like scandium or antimony, classified as such by the European Union, are sourced exclusively from China.

German companies, including the prominent business association BDI, have reportedly responded positively to the strategy, noting that it strikes a delicate balance between geopolitical concerns and the imperative to enhance economic relations and cooperation with China in tackling shared global issues. Notably, the strategy places the onus on businesses, rather than the government, to reduce overreliance on China, as reported by the FT.

The unveiling of China's strategic vision may present a set of hurdles or engender heightened scrutiny towards Chinese enterprises venturing into Germany, particularly in domains such as advanced technology and critical infrastructure. This unveiling raises potential obstacles and a sharpened focus on Chinese investments, potentially imposing constraints on their activities within the German market.

Beijing has taken note of the "China Strategy," issuing a lucid response that urges the German government to adopt a rational, comprehensive, and unbiased perspective towards China's progress. Emphasizing the mutually advantageous and harmonious nature of their economic and trade collaboration across diverse sectors, China posits this partnership as an avenue for substantial growth rather than a perilous venture.

"To fortify the foundations of their bilateral ties, both nations should strive towards intensifying political mutual confidence and cultivating an environment that diminishes potential risks," a statement from the Chinese embassy in Berlin noted.


Weekly updates: Hot Topics

Borelli: The European External Action Service has a team of experts who can speak Mandarin

The European External Action Service's (EEAS) Strategic Communication, Task Forces and Information Analysis Division has a dedicated team of Mandarin-speaking experts who work specifically on the complex issue of Foreign Information Manipulation and Interference (FIMI) conducted by China1 . The team's focus includes developing a robust understanding of the FIMI tactics and techniques employed by China, projects building resilience and establishing structured cooperation with Member States, international partners and other stakeholders on ways to analyse, expose and (collectively) address those activities. The work of the China team covers the entire information environment outside of China's borders without a specific region of focus, but with priority to FIMI targeting EU societies.


Climate diplomacy

EU, Canada and China co-host the 7th Ministerial on Climate Action (MoCA)

On Thursday 13th and Friday 14th July, Executive Vice-President Frans Timmermans, Canada's Minister for Environment and Climate Change, Steven Guilbeault, and China's Minister for Ecology and Environment, Huang Runqiu are co-convening the 7th Ministerial on Climate Action (MoCA), in Brussels. The MoCA is a major annual ministerial meeting on international climate action attended by Ministers from G20 countries and other key Parties in the UN climate negotiations.


The European Parliament has released an in-depth research report on China's investments in European infrastructure

China's footprint poses specific challenges to Europe's efforts to protect its critical infrastructure.. Chinese companies' access to EU critical infrastructure thus calls for an analysis of threats to Europe's defence and security architecture. infrastructure protection mechanisms, whose codification and implementation remains incomplete, must be extended to be able to scrutinise the risks that China's leverage over non-science investors and Chinese state-linked contractors pose to the EU's critical infrastructure.


The NATO Summit Communique mentioned China as many as 15 times. The Chinese side expressed strong opposition to it

According to a report by Reuters, on the 11th of the local time, a strongly worded communique was issued at the NATO Summit in Vilnius. The communique claimed that China poses challenges to NATO's interests, security, and values through its ambitious and coercive policies. It stated that China utilizes its extensive political, economic, and military tools to expand its global footprint and projection of power, while its strategic intentions and military buildup remain opaque. Furthermore, the communique tarnished China by stating that it is committed to undermining the rules-based international order, including in the domains of space, cyberspace, and the maritime realm. In response, the Chinese Mission to the European Union issued a statement on Tuesday strongly refuting the content concerning China in the communique, stating that it disregards basic facts, and China firmly opposes and rejects it.


The European Parliament has passed the "Chip Act"

On July 11, 2023, the European Parliament passed the "Chip Act." The legislation sets a target for the European Union to increase its global share of chip production from the current 10% to 20% by 2030, in order to meet the demand of both the EU and the global market. According to a press release issued by the European Parliament on the same day, the act was passed with 587 votes in favor, 10 votes against, and 38 abstentions. The legislation aims to support projects that enhance the EU's supply security by attracting investments and building production capacity. In addition to allocating a budget of 3.3 billion euros for chip-related research and innovation, the EU will establish a network of competence centers to address the skills shortage within the EU and attract new research, design, and production talents. Furthermore, a crisis response mechanism will be established to assess the risks faced by the EU's semiconductor supply.


Europe has become an important destination for China's "going global" strategy in the field of new energy vehicles (NEVs)

According to a recent report titled "China's New Energy Vehicles Dream of Europe" by KPMG China, Europe has become a crucial destination for China's new energy vehicles (NEVs) "going global" strategy. The share of China's NEV exports to Europe as a percentage of total vehicle exports has increased from 19% in 2017 to 36% in 2022. Recently, China's NEV production exceeded 20 million vehicles, marking a new phase of high-quality development in the industry, moving from industrialization and commercialization to large-scale production and global expansion. Analysts point out that with China's advantages in scale and expanding market demand in the new energy sector, an increasing number of Chinese-made NEV brands will enter international markets, and the export market for NEVs is expected to continue to thrive.


The China-Europe "Smile" satellite has entered the comprehensive development phase for its flight model. The plan is to launch the satellite in the first half of 2025

On July 13, 2023, the National Space Science Center of the Chinese Academy of Sciences (CAS) announced to the media that the Solar wind Magnetosphere Ionosphere Link Explorer (SMILE) satellite, also known as the "Smile" satellite, has achieved a significant milestone in its mission. As the first deep-level cooperative space science mission between China and the European Space Agency (ESA), the SMILE satellite has received the formal approval of the Mission Level Preliminary Design Review Report from the China-Europe Evaluation Committee Chairman. This marks the completion of the initial phase of development and the transition to the comprehensive development phase for the "Smile" satellite.


The European Commission has launched a new strategy on Web 4.0 and the Virtual World

On July 11, 2023, the European Commission adopted a new strategy on Web 4.0 and the Virtual World, aiming to guide the next technological transformation. According to a press release issued by the European Commission on the same day, the strategy seeks to ensure an open, secure, trusted, fair, and inclusive digital environment for EU citizens, businesses, and public administrations. The press release notes that the internet is evolving at a rapid pace, and beyond the current development of Web 3.0, the next generation Web 4.0 will enable the integration of digital with physical objects and environments and enhance interaction between humans and machines.


China has released its preliminary plan for manned lunar exploration, aiming to conduct scientific exploration on the moon before 2030

On July 12, 2023, the China Manned Space Engineering Office unveiled the preliminary plan for China's manned lunar exploration, with the goal of conducting scientific exploration on the moon before 2030. During the 9th China (International) Commercial Aerospace Summit Forum held in Wuhan on the same day, Zhang Hailian, Deputy Chief Designer of the China Manned Space Engineering Office, stated that China plans to achieve manned lunar landing and scientific exploration before 2030. Subsequently, China will explore the construction of a lunar research and experimentation station and conduct systematic and continuous lunar exploration and relevant technological experiments.


The European Union has launched a Unified Patent System to enhance innovation competitiveness

The European Union has recently launched the European Unitary Patent system, aiming to provide cost-effective patent protection and dispute resolution covering the entire European region for innovators. The new system will simplify patent protection and enforcement throughout Europe, reducing costs and administrative burdens for businesses. It will enhance innovation and competitiveness within the European Union and promote economic growth. According to the European Commission's website, the Unitary Patent system offers a one-stop-shop service for patent registration and enforcement in Europe, helping businesses and individuals obtain a "unitary patent" with reduced costs and administrative burdens. The system is open to all EU member states and has been approved in 17 countries so far, with the ultimate goal of achieving coverage across the entire EU.


Industrial Resilience of the Chinese Economy in the New Situation

By: Yao Yang 

(Dean of Peking University National School of Development, Executive Dean of South-South Institute, Director of China Center for Economic Research)

From: Peking University National School of Development

The initial 30 years of heavy industrial development after the founding of the People's Republic of China played a crucial role in laying the foundation for its industrial base. Today, China's export product composition has returned to being dominated by the machinery industry. Although automation and electronics have been added, it is still building upon the foundation of the machinery industry, but in a more advanced cycle. The transfer of industrial chains is a result of the objective laws of economic development and has a positive impact on the Chinese economy, making it a win-win process.

The Chinese economy has strong resilience, primarily due to two factors. Firstly, we have a profound historical accumulation. The Chinese economy has made steady progress and, for example, when compared to the United Nations Industrial Development Organization's industrial classification, China possesses the most complete industrial chain in the world. Secondly, our technological progress is very rapid. I do not fully agree with the conclusion that China's technological progress has significantly slowed down in the past decade because the calculation methods used to derive this conclusion are flawed.

During the COVID-19 pandemic, the advantages of the Chinese economy were still evident, and the world's reliance on Chinese products increased rather than decreased. The connection between the world and China has not weakened but strengthened. Some people argue that this is a temporary phenomenon and that the world's reliance on China will decline in the future. The reality is that after a global shock, the world will stabilize at a level impacted by the shock and is unlikely to immediately return to the pre-shock level. Therefore, we should have confidence in the reconstruction of industrial chains. The world cannot do without China.


Germany's national security strategy: What does it mean for Europe?

By: Filipe Ataíde Lampe

(Project Manager of the Connecting Europe project at the European Policy Centre)

From: European Policy Centre

On 14 June, Germany's Chancellor Olaf Scholz, together with four ministers, presented the country's first-ever national security strategy. While the strategy successfully addresses the multidimensionality of security in today's geopolitical environment, it falls short of an integrated approach towards Europe. It primarily presents the EU as a framework for possible upscaling of its national security projects.

A more integrated approach towards existing EU tools and frameworks (including the strategic compass, PESCO, or even the European Green Deal), as well as a refined vision for the EU's security as a whole and institutional setting, would be desirable. In this regard, the strategy remains rather vague and should be further strengthened. After more than 70 years of EU membership, Germany's first-ever security strategy underlines a worrying general trend. The Union is increasingly being reduced to an afterthought in Germany's first-ever security strategy. It is, therefore, crucial to link Germany's integrated approach to the Union's political reality, while also considering the security concerns and perspectives of its fellow EU member states.

China also has a prominent role in Germany's new strategy. While condemning Beijing's ambitions to undermine regional stability and international security and its disregard for human rights, Berlin counts on China as a partner to address challenges of mutual interest, such as fighting climate change.