What’s happened?

The EU-China summit was held in Beijing, the Chinese capital, from December 7th‑8th. The meetings discussed trade, regional security concerns, human rights and China’s support of Russia in its war against Ukraine. The engagement failed to ease major EU‑China tensions, however, which supports our view that bilateral ties will worsen in 2024.

Why does it matter?

The summit suggests that EU-China ties are mirroring the structural decline in US‑China relations. In-person diplomatic and business engagements between the two sides will continue (and expand) in 2024, which will help to keep a floor under the EU‑China relationship. However, we see these engagements as part of the cyclical “upswings” and “downswings” in EU‑China ties, without preventing a sustained deterioration in diplomatic relations. These same dynamics are also present in the US‑China relationship.

We consequently retain our view that future trade tensions are likely (although, unlike the US, the EU will take longer to co‑ordinate these measures among its member states). These actions (which will be sparked by EU investigations, rather than Chinese retaliation to souring diplomatic ties or Italy’s exit from the Belt and Road Initiative) will come despite China’s efforts to improve its standing with Europe, including via unilateral policy changes aimed at presenting a more “open” stance to the continent. China’s decision to unilaterally relax its visa rules in December for Dutch, French, German, Italian and Spanish nationals, for instance, reflects its interest in both rebuilding its relationship with Europe, while also addressing the fading attractiveness of its market to foreign investors. In both cases, we do not expect these efforts to see near-term success.

The summit also illustrated the limited willingness of both sides to concede on core issues of bilateral friction. Europe will grow increasingly anxious around the competitiveness of its domestic automotive industries, keeping its trade policy hawkish. Future Chinese efforts to address European concerns will probably be piecemeal, and fail address the fundamental issues spanning the EU‑China trading relationship, including the European business community’s concerns over market access and Chinese data restrictions; the EU’s concerns regarding supply-chain over‑reliance on China, in the context of “de‑risking”; or the bloc’s anxieties around China’s support of Russia and potential security flash points in the Taiwan Strait and the South China Sea.

What next?

China remains an important EU trade partner. Nevertheless, beyond the EU’s probe into Chinese electric vehicles, we assign a high risk that trade tensions will spill over into sectors like medical devices, cosmetics, wind turbines and solar panels in 2024. We also anticipate a further tightening in Dutch technology export controls, given concerns around China’s recent chip advances, as well as lobbying pressure by US policymakers on European officials.

The analysis and forecasts featured in this piece can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.