The European Union and China are expected to formulate a joint political statement to the United States, seeking to protect free trade from the intended protectionism of the Trump’s administration. At the same time, the European Council adopted a conclusion document at the beginning of March stressing that “trade relations with China should be strengthened on the basis of a shared understanding of reciprocal and mutual benefits”.

Currently, the EU-China bilateral relations are governed by the hope that the Trump shock could lead to opportunities to improve the business environment for European companies operating in China. However, last year was a turning point for the worse in EU-China economic relations as two new trends gained importance in Europe that Beijing has not yet successfully addressed.

First, the European discourse on the EU-China trade is now dominated by the voices calling for screening incoming Chinese investment. They generally mirror concerns regarding Europe’s long-term economic development in face of the ambitious Chinese industrial plans. China’s direct investment in the old continent went up by 77 per cent last year to €35 billion (US$37.3 billion), including the acquisition of advanced technology assets. The current trend pushing for investment screening stems from the perception that there is not an even playing field when it comes to the investment environment in China.

Second, there is a growing concern in the EU regarding a possible linkage between Chinese investment and political influence. The question is still largely theoretical as no one knows how much influence Beijing is gaining in Central and Eastern Europe through its “16+1 framework” – created in 2012 by China and 16 countries in the two regions. The European Commission nevertheless stepped in the contract granted to a Chinese firm to upgrade the Belgrade-Budapest railway, thus sending a powerful signal that China needs to work with the EU.

The possible deterioration of the US-China relations and the possibility that China policy will no longer be on the agenda of the transatlantic dialogue present an opportunity to upgrade the EU-China economies relations. Donald Trump’s changes in US trade policy will likely make relations with Europe and Eurasia even more strategic for China. It is also an opportunity for Europe to act as the balancing power between the US and China in case the US trade policy will indeed become revisionist and/or if China becomes a status quo power in relation to the world trade.

‘Trump Trade Reset Gives China and Europe Opportunity to Rebalance Relations’ –

Commentary by Mathieu Duchâtel – European Council on Foreign Relations (ECFR).

(The Commentary can be downloaded here)