China’s new prime minister used his first overseas trip to unveil a new approach to Europe, focusing on areas where both sides agree to avoid a repeat of the troubled relationship between Beijing and Washington.
In Germany and France this week, Li Qiang launched a charm offensive with government officials and business leaders, promising to focus on fighting climate change and announcing debt relief for Zambia at a climate finance summit convened by Emmanuel Macron – a diplomat – in a victory for the French presidents.
Li’s approach signaled that Beijing is taking a two-pronged approach with Europe, trying to keep business ties and climate cooperation separate from more sensitive issues like China’s support for Russia in the Ukraine war.
By contrast, Chinese officials have often made climate cooperation with the US dependent on foreign policy demands.
“Chinese elites view reassurance and dialogue with Europe as a top strategic priority,” said Seaver Wang of the Breakthrough Institute, a California-based think tank. “Because of the Russian war in Ukraine, Europe and the US are more strategically aligned than they have been in decades.”
French President Emmanuel Macron (left) welcomes Li Qiang at the Élysée Palace on the sidelines of the new global financial pact summit in Paris © Ludovic Marin/AFP/Getty Images
Beijing’s new stance comes at a time when the European Commission is looking at ways to “de-risk” its economic ties by reducing its reliance on raw materials from China and limiting exports of cutting-edge technology to the Asian giant, prompted by the country’s broader policies USA is pushing restrictions.
Chinese state media and diplomats have slammed the term and warned European capitals against getting too involved in trade disputes with the US.
In May, China’s Foreign Minister Qin Gang warned his German counterpart that if the EU “attempts to decouple from China in the name of de-risking, it will decouple from opportunity, cooperation, stability and development.”
But Li, whose mandate is to deal with China’s ailing economy, which is increasingly dependent on private investment, took a more conciliatory approach in Berlin. During a round of talks with German companies, Li said that he “understands the security concerns of both sides” and that “protecting against risks is not at odds with cooperation.”
As the concept of de-risking still leaves room for interpretation, “the Chinese side is trying to figure out where the gap is between rhetoric and action,” said Yu Jie, senior research fellow at think tank Chatham House. “Political Europe talks about it all the time, while business in Europe is less interested in it.”
Li channeled some of business leaders’ own fears, warning them: “Non-cooperation is the greatest risk, non-development is the greatest uncertainty.” Martin Brudermüller, CEO of chemical giant BASF, warned in March that while there are risks associated with operating in China, “it but there is also a great risk of not being in China”.
BASF is one of several large German groups, including chipmaker Infineon and the country’s top automakers, that rely heavily on China for both sales and supply chains.
Li Qiang with Federal Chancellor Olaf Scholz, right, in the Federal Chancellery in Berlin © Kay Nietfeld/dpa
A growing number of CEOs, including the heads of Siemens and Mercedes-Benz, are publicly rejecting calls from Berlin and Brussels to diversify away from China, arguing the market is simply too big. In the words of a manager at an automotive supplier: “We are totally dependent on China.”
This development has made German multinational corporations the “most open and probably the most effective lobbying force for more and not less economic engagement with China,” said Yanmei Xie, Europe-China analyst at the consulting firm Gavekal Dragonomics.
Li was joined on his trip to Germany and France by Chinese companies, including battery giant CATL, which has opened a German plant, and solar panel maker Longi, which hopes to build one in the country.
Li also hailed France’s opposition to decoupling and “factional confrontation” in a veiled allusion to the US approach.
Last week, President Xi Jinping met Antony Blinken, the first US Secretary of State to visit Beijing in five years, and announced there was “progress” in stabilizing ties. But just a day later, at a private fundraiser, President Joe Biden sparked outrage in Beijing by calling Xi a “dictator.”
In contrast, during a roundtable discussion with French business leaders, Li said, “The good level of political trust between France and China allows us to see stability, security and mutual growth opportunities in our interdependence, rather than risks.”
As Li was on his way to dine with a delegation of Bavarian officials and companies in a marble-clad hall on Tuesday, the European Commission said it would present a proposal to review foreign investments and improve the implementation of export controls – measures seen as focusing on technology links targeting China. However, the EU member states remain reluctant to take such measures.
Commission President Ursula von der Leyen, one of Europe’s most aggressive politicians in China, called on member states to join the “risk reduction” strategy. However, she acknowledged that “the vast majority of trade and economic relations” with China will remain “business as usual”.
While the Commission’s new proposals remain controversial, German executives remain convinced that more extensive diversification of supply away from China is needed. Some say the Chinese side is overestimating its ability to form a coalition with European companies against de-risking.
“Li’s statement that the business community does not want to reduce the risk is nonsense. “We’ll take care of it,” a German manager told the Financial Times.
Jens Hildebrandt, head of the German Chamber of Commerce in Beijing, said: “We are seeing clear signs of de-risking.” He said some companies were shifting their production from China to other Asian countries to protect themselves from future sanctions or export controls.
“The reasons for de-risking come from multiple quarters. “The Chinese government does not have all the tools to tell German companies that they need to do less de-risking,” Hildebrandt added.
Climate change and the green transition also played an important role in Li’s meetings in Germany. Both sides published a memorandum in which they set out the basic principles of climate cooperation.
Beijing froze climate talks with the US for several months last year, and attempts to resume them have made little progress. But Europe’s more stable relationship with China “helps the West preserve its last beachhead of cooperation with China on climate change, which can never meaningfully be addressed without talking to Beijing,” Greenpeace Asia’s Li Shuo said.
But both climate analysts and German companies warn that they’ve been waiting for Chinese action to cut emissions for a long time, not words.
“Now is the time to deliver. We have to be realistic; Some things they just can’t solve,” added Hildebrandt.
Additional reporting by Patricia Nilsson in Frankfurt