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Introduction

The EU has long been a convinced supporter of open markets and the global trading system, so it seems hard to believe that it introduced the concept of de-risking from China even before the US administration did.
To better understand how we got here, there is a need to contextualise the situation of the EU and its relations with China.

The EU saw China’s entry into the WTO as an opportunity to enlarge the global trading system while continuing to liberalise trade and investment. It was one of the tools within the more general Western engagement policy with China. On the economic front, engagement included companies in China but the scope was smaller than originally expected. Foreign direct investment in manufacturing was welcome only in those sectors that China decided to open and, in most cases, in exchange for technological transfer. Many sectors, especially in services, remained closed and state-owned enterprises were not privatised or subsidies eliminated.

In essence, China never became a market economy and continued to use industrial policy to move up the ladder, while accumulating large trade surpluses, through repressed consumption and limiting market access to foreign competition.

This situation did not get any better since President Xi came to power in 2013. On the contrary, Chinese companies acquired enough size to compete abroad, helped by large acquisitions overseas but without yet opening their own market. The result of an increasingly unfavourable situation, from the EU perspective, led to a Copernican turn in its position towards China in March 2019. While recognising that cooperation was needed in certain areas- especially climate - competition but also systemic rivalry were introduced as key traits of EUChina relations.

Since 2019, two major shocks have led to the worsening of EU-China relations. The first was COVID-19, with China perceived as uncooperative, but also the realisation of the enormous dependence that Europe had developed on China for critically necessary products during a pandemic. The second was Russia’s invasion of Ukraine and China’s support for Russia, against the EU’s interests, which came as a surprise to many.

Both the pandemic and the invasion of Ukraine brought Europe to the full realisation of the need to develop strategic autonomy and economic security, which included reducing critical dependencies on China, especially when economic and national security are at stake. The EU’s second awakening on strategic dependences, namely on Russian gas, only accelerated the EU’s search for a policy solution to such a situation.

Still, by doing so, a new critical dependence – and again on China – became crystal clear, namely the sheer share of renewables imported into the EU from China.