Editor's Note: Greetings! This week, rumors about EU Commission appointments fueled speculation, with Ursula von der Leyen's EPP reportedly securing key positions, expanding a more hawkish stance on China. On Monday, the EU's climate chief announced tighter hydrogen subsidy rules to protect local businesses. On Thursday, Chinese Ministry of Commerce has launched a survey on a barrier investigation into the EU's FSR. Dive into this edition of the CCCEU Weekly Update for the latest insights on China-EU dynamics. Enjoy reading and have a fantastic week!

Focus

This week, Euronews and German newspaper Die Welt reported on the leaked list of nominations for the next EU Commission cabinet members. According to the reports, Ursula von der Leyen's European People's Party (EPP) has emerged as the dominant force, securing several key positions. In addition to significant roles in "trade" and "industry and strategic autonomy," the EPP is expected to secure positions in employment, housing, competition, and health—traditionally held by candidates from the Socialist and Liberal parties.

Additionally, analysts suggest that while the EU pursues industrial and protectionist policies, its decision-making seems increasingly aligned with 'French interests.'

The "Most Powerful" Commissioner? Thierry Breton

According to Die Welt, Thierry Breton, the current Internal Market Commissioner and an EPP member from France, is about to be reappointed and oversee "industry and strategic autonomy." Analysts suggested that the appointment, along with an excutive vice president, would grant him substantial control over trade, defense, and industrial policy, marking him as one of the most influential figures in the new Commission.

The South China Morning Post deemed that the appointment was "somewhat unexpected," breaking the rumors of discord between Breton and von der Leyen. The report noted that Breton is known for his protectionist tendencies and, in EU-China relations, has often played the roles of 'bad cop' and 'good cop' alongside French President Macron. During his tenure as Internal Market Commissioner, Breton pushed for investigations into anti-subsidy measures on Chinese electric vehicles, imposed restrictions on high-tech semiconductor exports to China, and intensified scrutiny of Huawei's 5G operations and TikTok content moderation.

Trade Commissioner: Wopke Hoekstra

Both reports indicate that Wopke Hoekstra, the current Climate Action Commissioner from the Netherlands, is the front-runner for the position of EU Trade Commissioner. Hoekstra has recently taken a more hawkish stance on China, openly stating that the EU faces a "China problem," emphasizing the need for balanced trade relations and stringent rules to protect European interests. In a recent speech at Eindhoven University of Technology, Hoekstra stressed that "China is fundamentally challenging the EU, and we cannot naively ignore this issue." He also announced that the EU is formulating stricter guidelines to ensure that funding for hydrogen projects benefits European companies.

For a long time, the Dutch semiconductor giant ASML has been caught between U.S. export controls and Chinese demand, leading to increasing considerations in the Netherlands regarding economic security and autonomy. According to South China Morning Post, Sander Tordoir, Chief Economist at the Centre for European Reform, stated, 'Hoekstra is a sensible choice for Trade Commissioner: his stance on trade with China and broader trade issues positions him between von der Leyen, Germany, and France. Furthermore, Hoekstra is also from the European People's Party, and analysts suggest that such an appointment could help to "balance" Breton's power.'

The Three Confirmed Leaders: Von der Leyen, Kallas, and Costa

The new EU leadership trio—Commission President Ursula von der Leyen, High Representative for Foreign Affairs and Security Policy Kaja Kallas, and European Council President António Costa—was agreed upon by six EU leaders, including German Chancellor Olaf Scholz and French President Emmanuel Macron, in June.

Von der Leyen, a known "hawk" on China, is committed to reducing EU reliance on Chinese supply chains, with "de-risking" and "economic security" as key components of her agenda. Kallas, nominated as the EU's top diplomat, is recognized for her strong stance against Russia, which is expected to influence her approach to China. Costa, the former Prime Minister of Portugal, facilitated significant Chinese investments in Portugal, including during the financial crisis when Chinese companies acquired stakes in Portuguese energy and banking sectors. Analysts suggest that Costa's deep connections, including his relationship with the incoming Chinese ambassador to the EU, could provide a balancing perspective within the EU's internal policy debates on China, helping to mediate differing viewpoints and offering a broader range of strategic options for the EU.

Von der Leyen is reportedly set to announce the final appointments for the Commission next Wednesday. As the EU increasingly adopts a more assertive and self-reliant stance towards China, the ability of the new Commission to build internal consensus and craft balanced, strategic policies will be pivotal in defining EU-China relations in the coming five years. The evolving dynamics within the Commission are thus critical to monitor closely.

News

The MOFCOM launched a survey on a barrier investigation into the EU's FSR

On September 5, 2024, the Chinese Ministry of Commerce launched a survey on a barrier investigation into the EU's Foreign Subsides Regulation, a move which experts view as a proactive step toward de-escalating tensions.

CHINA opts not to impose tariffs on EU brandy

China Daily reported that He Yongqian, Chinese Ministry of Commerce spokeswoman, said at a news conference on Thursday, that while brandy imported from the bloc involves dumping, no temporary anti-dumping measures will be imposed in this case for the time being.

China's Hygreen Energy, partners to invest $2.2 bln in Spanish green hydrogen projects

Chinese electrolyser manufacturer Hygreen Energy said on Tuesday it and its partners would invest more than 2 billion euros ($2.21 billion) in green hydrogen projects in the southern Spanish region of Andalusia. The plans include a new plant to produce electrolysers - which use electricity to split water into hydrogen and oxygen - and green hydrogen plants.

Mercedes-Benz to increase investment in China

According to Reuters, Germany's leading luxury automaker Mercedes-Benz announced on Wednesday that, along with its Chinese partners, it would invest an additional 14 billion yuan (1.97 billion U.S. dollars) into the Chinese market, increasing its product portfolio in the country.

France to be guest of honor at upcoming manufacturing convention in China

Xinhua reported that France will be the guest of honor at the 2024 World Manufacturing Convention, which will begin on Sept. 20 in Hefei, capital of east China's Anhui Province.

German Cabinet Approves EV Tax Incentives Amid Volkswagen Woes

According to Reuters, German Chancellor Olaf Scholz's cabinet approved additional tax incentives for company fleets of electric cars only days after Volkswagen AG threatened to close factories in Europe's biggest economy for the first time. The tax breaks, part of a wider package designed to lift sluggish growth agreed on in July, will be worth about €465 million ($514 million) on average annually between 2024 and 2028, according to a briefing paper distributed by the government in Berlin.

Volvo Cars abandons 2030 EV-only target

According to Financial Times, Swedish automaker Volvo Cars scrapped its target of going all electric by 2030 on Wednesday, saying it now expected to still be offering some hybrid models in its lineup at that time. Major automakers have seen slowing demand for EVs partly due to a lack of affordable models and the slow roll-out of charging points, while also bracing for the effects of European tariffs on electric cars made in China.

Draghi says EU is falling behind its rivals in competitiveness

The European Union is falling behind global rivals due to limited innovation, high energy prices and skills gaps, former European Central Bank chief Mario Draghi told policymakers on Wednesday.

Trash-industrial complex fights EU plans to cut waste

According to Politico, Europe won't put its trash up for sale anymore and its customers are not happy. Long accused of dumping its waste in poorer countries instead of dealing with it, the European Union this year decided to restrict waste shipments, preventing certain materials like plastics or chemicals from being sent to countries that cannot treat them properly. 

Ex-Treasury Chief Rubin Sees 'Danger' of US Overreach on China

According to Bloomberg, US politicians should be careful not to go too far with trade restrictions and tariffs on China while trying to safeguard national security, said former Treasury Secretary Robert Rubin.

What are the experts talking about?

Deconstructing the Logic of the "Weaponization" of EU Trade Policy and Legal Responses 

— A Case Study of the Anti-Coercion Instrument Regulation

Source: Institute of European Studies, Chinese Academy of Social Sciences
Authors: Zhang Liying, Gong Wenhao

The "weaponization" of trade policy is a unilateral strategy implemented by the European Union (EU) within the context of geopolitical and economic transformations, grounded in a rules-based international order. The introduction of the Anti-Coercion Instrument Regulation further substantiates the essence of this weaponization in EU trade policy. The dynamic features of this policy—such as diversification of policy tools, institutionalization of interdependence, and a balanced emphasis on both rule-making and rule-defense—have sparked widespread controversy in the international community and raised concerns about systemic risks to global trade.

An analysis of the underlying logic reveals that its effectiveness stems from a combination of unilateral legal norms, structural power, and the pursuit of national interests, with the anticipated outcomes of deterring, obstructing, and demanding compensation from target countries. From a legal standpoint, this policy contravenes general principles of international law and World Trade Organization (WTO) rules. To further strengthen its foreign-related legal framework, China should uphold an international order based on international law, enhance its domestic legal system for countermeasures, reinforce international cooperation, and actively engage in and advocate for the improvement of the WTO's dispute resolution and trade policy review mechanisms.

What if electrification transformed the EU economy?

Source: Think Tank European Parliament

Authors: GUEDES FERREIRA VASCO NUNO

The "What if" publication emphasizes the importance of electrifying end-uses to reduce dependence on fossil fuels and increase renewable energy in the EU's energy mix. This is essential for enhancing energy security and achieving the 2050 climate neutrality goals. As of 2022, electricity accounted for 23% of final EU energy consumption. The electricity mix is almost evenly split between renewable sources and fossil fuels, each contributing 39%, with nuclear energy supplying 22%. Wind energy is the leading renewable source, followed by hydropower, solar power, and biofuels.

Electricity consumption in the EU has been stable for decades but dropped in 2022 and 2023 due to high prices caused by the energy crisis linked to Russia's invasion of Ukraine. However, demand is expected to increase in 2024 as prices stabilize. Currently, electricity is mostly used in industry (36%), households (29%), and the services/public sector (27%), with transport using just 2%. Recent trends show increased electricity demand due to the deployment of heat pumps, electric cars, and electrolysers, adding 1.3% to overall demand from 2021 to 2023.

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.