Europe wants a recent relationship but is wary of retaliation

Europe is charting a recent way forward for its relations with China, but officials within the region say they’re wary concerning the risk of retaliation in the event that they get it fallacious.

There was growing momentum behind the thought of de-risking from China. At a G7 meeting in late May, each the U.S. and Europe agreed to scale back their dependency on Beijing — quite than completely cut ties.

The U.S. has develop into increasingly more vocal about China’s threat to national security lately. Policymakers in Europe, meanwhile, have taken a more cautious approach — aware of how essential the Chinese market is for its domestic firms.

A senior EU diplomat, who takes part within the negotiations among the many 27 EU capitals but didn’t need to be named resulting from the sensitive nature of the problem, told CNBC there may be “definitely” awareness that China might retaliate. “But that is exactly why we want to debate this,” the identical diplomat said.

One other anonymous official, who works on the EU for certainly one of the most important European economies, also said: “You may all the time have countries frightened of this or that, nevertheless it does not imply we shouldn’t do it.”

The entire bloc is determining what de-risking from China means. Ursula von der Leyen, president of the European Commission, the manager arm of the EU, described it as raising specific concerns that the EU has with Beijing, including over human rights, but in addition negotiating fairer competition and market access.

On Tuesday, the commission suggested the EU should review its foreign investment screening policy in addition to toughen up its export control regulations. The institution didn’t say these ideas had been developed due to China directly, nevertheless it said the bloc needs to attenuate risks “within the context of increased geopolitical tensions and accelerated technological shifts.”

The 27 heads of state from the EU will debate the subject at a summit later this month.

The Chinese embassy in Brussels was not immediately available for comment when contacted by CNBC Thursday.

Lithuania, a Baltic nation within the northeast of Europe, is example of a nation aware of potential China retaliation. In 2021, it became the primary European country to have a Taiwanese representation office that went under the name Taiwan. Most nations within the region use the name of town Taipei.

China condemned the move as Beijing considers Taiwan a part of its territory, with no right to independently conduct diplomatic relations — subsequently not needing its own representation in Lithuania. Consequently, China withdrew its ambassador from Lithuania and it imposed a customs block on Lithuanian imports into China.

“For years the West said economic cooperation would persuade dictators to support [a] rules based international order. But all we did was feed their economies while letting them break all the foundations. China is betting that we are going to repeat this error. It is time to try something else,” Gabrielius Landsbergis, Lithuania foreign affairs minister, said on Twitter in April.

Earlier this month, the European Commission called on more EU nations to ban the Chinese telecoms groups Huawei and ZTE.

To date, 10 countries in Europe have banned or restricted the 2 firms from their 5G networks. They’re concerned about risks posed by these two firms to the safety of the bloc.

China slammed Europe’s stance and added that the commission had no legal basis to ban the telecom giants, in line with Reuters.

An EU official, who didn’t need to be named resulting from the sensitive nature of the problem, said: “We have not seen the identical level of retaliation” off the back of that announcement when put next to individual countries.

But the identical official said: “If we act under a typical framework we will likely be in a much stronger position with regards to retaliation.”

European leaders are still determining find out how to reshape relations with what they’ve described as a more assertive China, but their staff is aware that there’s a tricky balance to attain between reducing dependencies from China while not upsetting it.