China in Europe: August 2024

EU Trade Action: The European Union (EU) probe into China’s electric vehicle subsidies; their announcement of amended rates, including a surprise decision to lower tariffs on Chinese-made Teslas from 20 to 9 percent; and China’s response—to announce a widened probe in European protectionism aimed at the European dairy industry—all dominated the headlines. The tit for tat over electric vehicle (EV) tariffs led the typically cautious Josep Borrell, EU high representative for foreign policy, to remark that a trade war could be “unavoidable.” 

PRC Trade Response: Beyond its retributive response, China has also filed a complaint over the tariffs at the World Trade Organization. However, it also has had other legal troubles in Europe this month. After the EU raided Nuctech, a Chinese owned security company, earlier in August, the firm protested, but the EU’s General Court, its second highest, ruled the raids were legal. The raid marks the fourth time the EU has employed its expansive new authority under the 2023 Foreign Subsidies Regulation, designed to fight coercion and unfair trade, a major agenda item for EU President Ursula von der Leyen.

Is Europe Pulling Back?: The EU and China just launched their first round of talks within a new framework that facilitates the flow of industrial data across borders. Meloni vowed to “relaunch” ties with China during her visit in July, after she withdrew Italy from China’s Belt and Road Initiative in 2023. However, following the EU’s tariffs amendments in August, China’s Communist Party foreign affairs newspaper the Global Times reported that talks with Italy for a new automative plant were not progressing well. Outside of the EU, in London, the new Labour government’s “audit” of the UK-China relationship appears to be in full swing. The government delayed implementation of a foreign influence law to decide whether it ought to place China on the stricter of the two tiers under the new regime. At the same time, Foreign Secretary David Lammy announced that he intended to visit China this September. In the private sector, Chinese fast-fashion giant Shein announced plans to construct a new warehouse in the Midlands ahead of its listing on the London Stock Exchange. Finally, UK Prime Minister Sir Keir Starmer told Xi in their first official call that he hopes for “open, frank, and honest” talks between the UK and China.

Semiconductors: The EU also approved Germany’s five-billion-euro subsidy for the construction of a Taiwan Semiconductor Manufacturing Company (TSMC) plant in Dresden to attract chip production to Europe under the EU’s Chip Act. While Von der Leyen and others have avoided framing the decision as geopolitical, both Taiwanese and European officials have referred to the project with veiled comments about de-risking and national security. Nevertheless, according to the South China Morning Post’s Europe correspondent, Finbarr Bermingham, Dutch chip manufacturer ASML exported more chip-making equipment to China than China shipped EVs to all twenty-seven EU states. At the same time, and despite concerns about what the United States considers an ongoing genocide of Uyghurs, European imports from Xinjiang boomed in July according to data released in August. 

Russia and Ukraine: China’s dual-use support for Russia’s war machine remains on Europe’s agenda. The foreign minister of Sweden called for new sanctions against China. The new leadership team between in-coming EU High Representative for Foreign Policy Kaja Kallas and Von der Leyen is likely to be more hawkish on that question, as the South China Morning Post fears. Reacting to Ukraine’s Kursk offensive, the Chinese Ministry of Foreign Affairs called “on all parties to observe the three principles for deescalating the situation, namely no expansion of the battlefield, no escalation of fighting and no fueling the flame by any party.” China has also acknowledged that its ship was responsible for accidentally damaging the Balticonnector gas pipeline last year, but many in the West still doubt China’s claim that it was an accident. At the same time, a new report from Zsclaer, a major U.S.-based cybersecurity firm, and Mandiant, Google’s cybersecurity subsidiary, found that Earth Baku, a cybercrime group backed by China, is expanding its attacks on Europe with a host of new tools, raising concerns about Beijing as a security threat to the continent.