How should Europe respond to the implications of its entanglement with China? The country is an inescapable partner, yet it poses a challenge to the sustainability of our economies, our principles for international action, and ultimately our security. Can Europe avoid a costly decoupling from China and maintain mutually beneficial ties while remaining true to itself, to its values and interests? How can Europe play its cards right while navigating the US-China new "cold war", and assert itself globally?

To foster the debate raised by these questions, four European China and international relations figures from France, Germany and the UK joined forces to provide a wide-angle assessment of China’s current trajectory and of what is at stake for Europe. Importantly, they cap this analysis with a set of concrete and detailed recommendations addressed to Europe and its decision-makers. 

This joint policy paper is published by Institut Montaigne in partnership with the German Institute for International and Security Affairs (SWP) and the Centre for European Reform (CER).

The China challenge is now commonly reduced to a seductively elegant formula, endorsed by the European Union itself, and according to which China is a cooperation partner, an economic competitor and a systemic rival. But can relations with China be neatly compartmentalized? The fact is that systemic rivalry now permeates the other two dimensions, and that the Chinese Communist Party (CCP) leadership will always assess cooperation through the lenses of its implications for their systemic rivalry.

Admittedly, cooperation is still attractive with a state that has become the most important trading partner for most countries. Many European companies feel they cannot afford to abandon this market. Cooperation with China is also essential in most global challenges such as climate change, pandemics or the proliferation of weapons of mass destruction. But China also aims to project itself globally with a toolbox that includes persuasion, coercion, corruption and cyber action, mixing inducements with threats. There is almost no international commitment or legal obligation that China is not ready to breach if its interests require it. Beijing is also seeking to reform global governance in line with its own preferences and perceived needs. The rivalry is real. 

The Belt & Road Initiative (BRI) is a case in point of China’s commercial and diplomatic expansionism, and gives the notion of systemic rivalry a concrete meaning. With the BRI, the People's Republic of China (PRC) has succeeded in presenting itself as a helpful donor worldwide - this is a significant achievement on the world stage. 

Another example of how systemic rivalry currently dominates Europe-China relations concerns economic competition. Since the military and security sectors represent an important driver of innovation, competition between national innovation systems not only relates to socio-economic prosperity, but also to geopolitical rivalry and national security. China’s almost total endorsement of Russia’s narrative regarding the Ukraine conflict, its opposition to sanctions and the risk of further practical support are now a question of vital interest to Europeans.

Of course, the economic relationship with China has been a source of prosperity for consumers and companies in Europe, but at the cost of painful adjustments to competition from China, which has displaced European industrial production and employment. Current efforts in both China (the dual-circulation economy project) and in the West (concerns about supply chain vulnerabilities) notwithstanding, economic interdependence between China and the EU seems destined to survive into the future. Economic incentives will continue to promote this entanglement, while political and strategic concerns will seek to contain and curb it. 

In China’s economic partnership with Europe, the two sides do not share the same goals. While welfare, wealth, individual happiness and the promotion of global goods are the stated goals for the EU and most Europeans, China perceives the pursuit of wealth as a way to build international power, status and influence. This helps to support the CCP’s legitimacy at home. Fair competition and a level playing field cannot be expected whenever the CCP sees its power at stake. 

Europe draws the implications of China’s increasingly long arm-not only economically, but also militarily, financially, and in terms of potential coercion in many third regions and countries. Xi Jinping will use levers of economic interdependence and weaponize them to advance national power. China deliberately tries to enmesh smaller and weaker countries through one-sided deals so as to make them politically dependent and malleable client states. In a word, China now uses globalization against the West.

The CCP’s overriding ambition is to remain in control of China, and the Party will do everything it considers necessary to consolidate and enhance its power. For Beijing, this implies securing its own sphere of influence in East Asia and making other powers accept its claim to absolute power at home. More than almost anything else, the pandemic and the response to the Ukraine war have shown how the CCP does not hesitate to maintain its hold on narratives and therefore its own power. 

The CCP leadership has recently begun to suggest that its own model is superior to that of the West. With the essential elements of Leninism and modern instruments of centralistic rule at the Party’s fingertips, China is now almost a textbook version of a modern totalitarian state, inclined to indoctrinate at home and abroad wherever the CCP sees it as desirable. Today’s PRC uses ethno-nationalism, develops a quasi-infallible surveillance state powered by digital technologies, and never hesitates to suppress dissent. 

Abroad, the PRC does not hide its territorial ambitions. Xi Jinping’s rise to power has coincided with a new assertiveness in China’s foreign policy. Chinese public diplomacy is contributing to the outside world’s lack of confidence in Chinese leaders "doing the right thing in world affairs", a distrust shared by 78% of the public in Western countries (Pew Research Center). China’s international behavior can only prove them right, with Beijing’s constant reinterpretation of rules that are not to its liking, and with its growing influence over international technical norms.