EU to update strategy on ‘rival’ China

The European Union will revise its official approach to China in summit meetings next week, after its executive body named Beijing a “systemic rival”.

The communication, geared to jump-start discussions at the March 21-22 European Council, outlined 10 suggested points of action on China, including ensuring security for the fifth generation of mobile networks and thoroughly screening foreign direct investment in the EU.

The move hints at Brussels’ on-guard stance with regard to Chinese influence over 5G networks, as well as concerns about China’s state-owned enterprises impacting the European market, as Beijing builds economic and political clout.

While urging stronger ties with China on fronts like human rights and fighting climate change, as well as upholding the 2015 Iran nuclear accord, the memo described Beijing as “an economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternate models of governance.” Its contents are intended to be adopted at next week’s summit and incorporated into the body’s basic China strategy.

The memo also called for China to work with the EU toward reforming the World Trade Organization.

Germany and France have shown particular caution toward Chinese companies’ growing investments in infrastructure and high-tech industries in the EU. But countries in Central, Eastern and Southern Europe are hoping for Chinese funding.

Beijing is deepening cooperation with Central and Eastern Europe in particular through regular “16+1” summits with a group of 16 EU members and Balkan states. Italy, a core EU member, has expressed an openness to signing onto China’s Belt and Road infrastructure initiative, breaking step with the rest of the body.

“Neither the EU nor any of its Member States can effectively achieve their aims with China without full unity,” the European Commission wrote, adding that all member states have “a responsibility to ensure consistency with EU law, rules and policies.”

With regard to 5G networks, the memo said the Commission would adopt a recommendation toward building common cybersecurity policy after discussion at next week’s summit.

The U.S. has asked EU members to bar Chinese telecommunications giant Huawei Technologies from participating in building 5G infrastructure due to security concerns. Though the European Commission memo did not mention Huawei by name, it warned that foreign involvement in “supply of critical equipment can pose risks to the EU’s security,” especially in 5G networks “that will be essential for our future.”

The Commission said it would review EU rules to make sure neither China’s state-owned companies nor aid provided by its government can distort European markets, aiming to “identify gaps” by year’s end. For instance, though the EU currently forbids “state aid” in which governments obstruct fair competition by providing support for certain companies, the ban only applies to measures taken by member countries.

With regard to government procurement, the memo urged China to open its market wider to European businesses, and said it would publish guidance by mid-2019 asking foreign bidders seeking to participate in the EU procurement market to meet high standards on the environment and workers’ rights. The move appears aimed at preventing a rise in Chinese participants from setting off excessive price competition.