Editor's Note: The EU has rolled out provisional countervailing duties on electric vehicles imported from China since July 5. As Hungary takes the helm of the rotating presidency of the Council of the EU, will its close ties with China reshape the China-EU landscape over the next six months? Dive into this edition of the CCCEU Weekly Update for the latest insights on China-EU dynamics. Enjoy reading and have a fantastic weekend!

As Hungary assumes the rotating presidency of the Council of the EU, the dynamics of EU internal and external relations are set for new changes, heralding in a critical moment for China-EU political and economic interactions.

In recent years, the relationship between Hungary and China has significantly strengthened. In May 2024, Chinese President Xi Jinping and Hungarian Prime Minister Viktor Orbán jointly announced the establishment of a new all-weather comprehensive strategic partnership, marking a new height in bilateral relations. Chinese investments in Hungary are highlighted in new energy and infrastructure sectors, such as electric vehicle battery factories and the Budapest-Belgrade railway project. These projects not only promote Hungary's economic development but also demonstrate the deep cooperation intentions between China and Hungary in the fields of new energy and high technology.

This "pro-China" stance could also have far-reaching influences on China-EU relations. China hopes Hungary will use its position as the rotating EU presidency to promote a "rational and friendly view" and a "more pragmatic policy" towards China within the EU. In April of this year, Chinese Foreign Minister Wang Yi met with Hungarian counterpart Péter Szijjártó and clearly expressed this expectation, emphasizing the need for more pragmatic cooperation and active strategic communication between China and the EU. Szijjártó responded by stating that Hungary opposes "decoupling" from China and welcomes more Chinese investment under the Belt and Road Initiative.

At the same time, the European Council last week adopted the latest 5-year strategic agenda, deciding to "enhance economic security." However, discussions continue on how to achieve more "security" and what role China will play in this. Analysts point out that it is still unclear whether Hungary, like other EU countries, will interpret "greater economic security" as "reducing entanglement with China."

According to Hungarian media reports, after a phone call with Foreign Minister Wang Yi last week, Szijjártó stated that "promoting cooperation with China will be an important goal for Hungary as the EU Council presidency"; "promoting cooperation with China and returning to a stable path can greatly help achieve environmental and competitiveness goals"; and "EU-China relations are crucial and must be based on pragmatic and objective cooperation rather than ideological bias."

Moreover, in Hungary's presidency plans and priorities report, there is mention of seeking constructive and stable relations with major Asian countries, emphasizing a "pragmatic and balanced attitude towards China" as a key goal during Hungary's presidency. Notably, Hungary stresses that "China is an important trade and economic partner" and that "constructive dialogue on economic and strategic security is especially important" in EU-China relations.

The EU's anti-subsidy investigation into Chinese electric vehicles is currently a key issue in China-EU economic relations. This Thursday, the EU announced that it would impose temporary tariffs on imported Chinese electric vehicles starting on July 5. EU member states will later need to vote on a final ruling.

Earlier in June, the Hungarian Ministry of Foreign Affairs and Trade issued a statement opposing the EU's imposition of provisional countervailing duties on Chinese electric vehicles, calling it "unprecedentedly discriminatory and highly punitive." Szijjártó called for an end to the trade war, explicitly opposing the EU's imposition of anti-subsidy tariffs on the Chinese automotive industry and warning that it would harm the EU economy.

Despite Hungary's policies potentially bringing new opportunities to China-EU relations, they also face significant challenges. Under Prime Minister Orbán's leadership, Hungary has been criticized as an authoritarian regime. Orbán's policies have been questioned by the European Parliament and Brussels, especially concerning long-standing disagreements on the rule of law and democratic values. Last year, the European Parliament passed a non-binding resolution questioning Hungary's ability to "credibly" hold the six-month EU presidency.

János Bóka, State Secretary for European Affairs of Hungary, believes that economic relations with China are the biggest challenge the new European Commission will face. On the one hand, Orbán's advocacy of "illiberal democracy" is highly controversial within the EU, with the European Parliament and many member states doubting whether Hungary can act "fairly" during its presidency.

On the other hand, Hungary's strained relations with EU institutions might limit its ability to push policies through. European think tanks point out that while Orbán can use the presidency to set agendas, achieving substantive results without the Commission's support will be difficult. Despite external skepticism, Budapest insists it is ready to take on the "duties and responsibilities" of leading an organization with 27 member states.

In summary, Hungary's pro-China stance and welcoming attitude towards Chinese investment may drive the EU towards a more pragmatic China policy and potentially play a crucial role in the final vote on the electric vehicle investigation in November. However, the conflicts and controversies surrounding Hungary's policies also limit its influence within the EU. Balancing the interests and positions of various member states will be a significant challenge for the EU in the coming months. Whether Hungary can successfully guide China-EU relations towards stable and healthy development remains to be seen.

News

EU imposes provisional countervailing duties on EVs imported from China

The European Commission announced on Thursday it will impose provisional countervailing duties on imports of battery electric vehicles (BEVs) from China starting Friday, sparking backlash from various business sectors.

China to hold anti-dumping hearing on brandy imported from EU on July 18

China's Ministry of Commerce announced Friday that it will hold an anti-dumping hearing on brandy imported from the EU on July 18, 2024. The hearing will be about industrial damage, cause and effect, and public interest in the anti-dumping probe of related brandy products, the ministry said in an online statement.

SAIC requests a Commission hearing on EV tariffs

Chinese carmaker SAIC Motor said Friday it will defend its rights in accordance with the law and formally request the European Commission to hold a hearing. The announcement came after the European Commission imposed additional tariffs of up to 37.6 percent on SAIC on Thursday.

The investigation involves commercially sensitive information, such as requests for chemical formulations related to batteries, which is beyond the scope of a normal probe, SAIC said. The European Commission made errors in its determination of subsidies, such as counting subsidies for new energy vehicle (NEV) purchases received by Chinese consumers as a subsidy rate for vehicles sold in the EU, the company said.

German car industry opposes EU tariffs on Chinese EVs

According to Xinhua, the German automotive industry on Thursday opposed the EU punitive tariffs on electric cars from China, set to take effect on Friday. Additional tariffs of up to 37.6 percent will be introduced provisionally while talks with China continue. A final decision on the tariffs will be made by early November. Until then, importers must deposit guarantees equivalent to the potential duties. The extra duties "are not suitable for strengthening the competitiveness of the European automotive industry," Hildegard Mueller, president of the German Association of the Automotive Industry (VDA), told Xinhua in a written interview.

China, Switzerland to start talks for FTA upgrade ASAP

China and Switzerland on Monday signed a memorandum of understanding and agreed to officially start negotiations for the upgrade of the Sino-Swiss free trade agreement (FTA) as soon as possible, according to Chinese Ministry of Commerce.

Chinese Minister of Commerce Wang Wentao held talks with Swiss Federal Councilor Guy Parmelin, also head of the Federal Department of Economic Affairs, Education and Research on Monday, discussing the robust development of Sino-Swiss economic and trade relations.

Brussels Airport celebrates inaugural Juneyao Air flight to Shanghai

Juneyao Air successfully operated its inaugural flight, HO1659, from Shanghai to Brussels. Departing Shanghai Pudong International Airport at 01:35 a.m. Beijing time, the flight landed at Brussels International Airport at 07:30 a.m. local time in Belgium. The launch of this route aims to enhance convenience and foster economic and trade exchanges between China and Belgium.

New Dutch government sworn in

The new Dutch government was officially sworn in on Tuesday at the Huis ten Bosch Palace in The Hague, more than 220 days after the general elections in November last year.

Following the honorable discharge of the former government, 16 new ministers were sworn in, followed by 13 state secretaries. The new government was formed after intense negotiations among the four coalition parties: the Party for Freedom (PVV), the New Social Contract (NSC), the People's Party for Freedom and Democracy (VVD), and the Farmer-Citizen Movement (BBB). The coalition leaders, including PVV leader Geert Wilders, agreed that none of them would become the prime minister.

UK general election: Labour hammers Tories with historic election win Rishi Sunak

Politico reported that a triumphant U.K. Labour Party is back in power in Britain after winning a historic landslide election victory over the ruling Conservatives.

Defeated Tory Prime Minister Rishi Sunak resigned on Friday morning after losing the snap election he called six weeks ago, having led his party to the worst-ever defeat in its 190-year history.

Lufthansa gets EU nod to buy $350 million stake in Italy's ITA

According to Reuters, Lufthansa won EU antitrust approval to buy 41% of ITA Airways for 325 million euros ($350 million) on Wednesday after ceding routes and slots, with the news boosting rival IAG's shares and hopes for its takeover of Air Europa.

What are the experts talking about?

China-EU New Energy Vehicle Industry Dispute: Status, Causes and Prospects

Author: Ding Chun, Zhang Mingxin,

Source: International Economic Review

China and the EU are two giants in the global automotive industry. China's position in the new energy vehicle field has been rising, with its market share increasing from 25% in 2010 to 32% in 2021, while the EU's share has dropped from 24% to 19%. This shift has raised concerns in the EU about declining competitiveness, prompting it to adopt more defensive economic and trade policies. The EU has taken a series of measures to protect its domestic new energy vehicle industry, including an anti-subsidy investigation on Chinese electric cars. Ursula von der Leyen, President of the European Commission, has clearly stated that the EU will not repeat the disputes encountered with the photovoltaic industry.

Despite views that the dispute could be resolved through a "price undertaking agreement," the likelihood of a compromise over new energy vehicles is low, especially as the EU seeks to "de-risk" its engagements with China. Given the importance of the automotive industry to the EU's economy, the direction of this dispute will profoundly affect Sino-European economic and trade relations.

Re-energising Europe's global green reach

Authors: Giovanni Sgaravatti, Simone Tagliapietra, Cecilia Trasi

Source: Bruegel

The goals of decarbonisation, competitiveness and strategic autonomy will underpin the implementation of the European Green Deal during the 2024-2029 European Union institutional cycle. To strike the right balance between these sometimes conflicting objectives, EU policymakers should focus on both domestic and international aspects of the Green Deal. Domestically, they must ensure implementation of the agreed climate plan, avoiding inaction or delay. Internationally, they must establish a new green-diplomacy and partnerships strategy, which will support global decarbonisation while addressing competitiveness and strategic autonomy concerns.

The current EU approach to green diplomacy is uncoordinated, lacking a clear strategy and appropriate resources. Given the EU's limited share of annual global emissions, supporting decarbonisation abroad is fundamental to meet the global net-zero emissions goal. The EU's green diplomacy and partnerships need to be strengthened and expanded in a pragmatic and coherent manner.

Please note: the English version of this issue is slightly different from our Chinese one. The views and opinions expressed in this article do not necessarily reflect the official position of the CCCEU.