Based on the EU Foreign Subsidies Regulation that took effect in January, the EU started to investigate subsidies for Chinese electric vehicle (EV) companies. The investigation was launched 10 days before the EU-China High-level Economic and Trade Dialogue. Although Chinese and European vice presidents would continue to communicate with one another, the EU has insisted on carrying out the investigation.
Tesla’s EVs made in China and Zhejiang Geely Holding Group Co, which owns Volvo Cars Corp, might also be investigated. It looks like the EU has become more high-handed. Would the bloc be able to stop relying on China?
In addition to a growing trade deficit with China, the EU realized that China has become a strong competitor. EU officials decided to confront China directly, indicating that Beijing could either collaborate or go its own way. As EU experts suggested, European nations share a large enough market and they should be fine without China.
China has expressed its concerns about the investigation, but at the same time, the EU confirmed that it would not entirely decouple itself from China. Instead, it would try to lower the risk while demanding that China “do more” to mitigate concerns about the risk it poses.
The EU described how European corporations were not satisfied with China’s lack of fair competition and its politicized business climate. Neither were they happy about China’s relationship with Russia amid the war in Ukraine. They also said that Beijing’s new Foreign Relations Act, Counterespionage Law and the Measures for the Security Assessment of Outbound Data Transfer would all increase the danger of investing in China.
Meanwhile, after Japan experienced the 2008 global financial crisis, the 2011 Tohuku earthquake and tsunami, collisions with Chinese ships in 2012, the disruption of supply chains during the COVID-19 pandemic and a recent dispute over the release of wastewater from a nuclear plant, Tokyo has continued to reduce its dependence on China.
Likewise, due to the trade conflict between Washington and Beijing, 48 percent of US corporations said that they would decrease investment in China or postpone plans.
However, the EU, after having evaluated the risk, still desires access to the Chinese market and wants Beijing to be a good player. Perhaps the EU sees China as a dear friend and believes it would not experience what happened to Japan and the US.
The EU has deliberated over its dependence on China and seems to believe that the situation would not change until 2035. The EU needs rare earth minerals, solar panels, EV batteries and other key items from China. Most likely, its automaking industry would be destroyed because of China’s cheap EVs.
Confronted by the danger of national security and economic threat, the US and Japan have already turned to investment in Southeast Asia, enhancing trade ties with ASEAN and India. The EU must diversify its investments and reduce dependence on China through legislation and innovation. It also needs to reassess its subsidies strategy.
However, the EU — and Germany in particular — is still fond of big markets such as China and has failed to recognize the instability of such markets. It should remember the lesson of relying too much on Russia.
The greatest risk is that the EU might empower a rival that will one day destroy it.
The EU should recognize the truth as soon as possible.
Chang Meng-jen is chair of Fu Jen Catholic University’s Department of Italian Language and Culture, and coordinator of the university’s diplomacy and international affairs program.
Translated by Emma Liu
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