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This week, top European Union leaders are traveling to Beijing for a high level summit where they'll address everything from climate change to trade. The meeting coincides with the fiftieth anniversary of diplomatic ties between the EU and China and could signal a turning point in what's often been a turbulent relationship.
The US, UK and EU sanctioned China for human rights abuses in Shinjung. Beijing retaliates, immediately, putting its relations with Western nations on course for a further so China is prepared to live some sanctions on EU officials in a bid to work towards a dayton.
The EU and China often find themselves at odds on a number of geopolitical and economic issues, but lately they can agree on one thing, the need to counter President Donald Trump's terra.
EU nations buy and large do want to de risk from the US market because they see it as unpredictable.
Alan Crawford is a senior editor at Bloomberg. He's been covering international relations from Berlin for nearly two decades, and he says by distancing itself from the US. The EU is putting itself in a position to recalibrate its relationship with China, its second largest trading partner.
There are different voices in Europe advocating different paths as regards relations with China, and there is an official skepticism, if you like. The official line from the European Commission Chief or Shulaf underline is to d risk as regards China, but that is not quite reflected in some of the individual EU member states, the governments and the government leaders.
Alan says, you don't have to look too hard to see signs that European country are warming up to China. The presidents of Spain and France have publicly endorsed deeper ties, and companies like Chinese EV manufacturer BYD have expanded operations into the region.
Byd its main European plant is under construction at the moment in Hungary. Slovakia is also attracting EV and battery technology.
These developments haven't gone unnoticed by the US. Earlier this year, Treasury Secretary Scott Bessant warned the continent against pivoting to China.
A minister, the Economic Minister in Spain, made some comments this morning, Oh well, maybe we should align ourselves more with China.
That would be cutting your own throat, Alan says. With geopolitical tensions rising and Trump's tariffs taking their toll, the EU is at a crossroads.
Does it pursue strategic autonomy, as it's called, or does it try and align more closely with China, or indeed, does it just look past Trump's tariffs and overall aggression and continue its transatlantic ties.
This is the Big Take Asia from Bloomberg News. I'm Wanha. Every week we take you inside some of the world's biggest and most powerful economies and the markets, tycoons, and businesses that drive this ever shifting region. Today on the show, how Trump's trade war is changing the EU's approach to Chinese investment. Relations between the EU and China have fluctuated
over the past half century. From nineteen seventy five to twenty ten, trade between the two grew steadily as China initiated reforms, signed economic cooperation agreements, and joined the World Trade Organization. In two thousand and nine, Chinese investments in Europe rose to three billion dollars. By twenty sixteen, it had reached forty billion dollars. Here's Bloomberg Senior editor Alan Crawford.
There were some really big, notable Chinese investments. The figures vary somewhat, but they reached a peak around twenty sixteen, and it was tens of billions of dollars. One example back then was ken China's takeover of the Swiss agrochemical company Syngenta, and that was valued at forty three billion dollars, So it gives you an indication of the kind of volumes we're talking about.
And Bradley Allen, where were these investments going in Europe back then?
In twenty fifteen sixteen, It was really in the big economies of France, Germany, Italy and the UK. China was investing in a real mixed bag of companies and assets. They were buying things like football clubs. They bought into Milan, a famous club in Italy. They bought travel companies. But then there started to be more investments in infrastructure, so in rail lines specifically, we saw ports. The famous one is Costco bought into Perea's port, which is the harbor
for Athens and key to all of the Mediterranean shipping. Subsequently, China brought into other ports in the Mediterranean and in the Adriatic, So it looked very suspiciously as if Chinese companies, some of them were state backing, were deliberately buying up infrastructure.
So when Chinese companies were picking up things like football clubs and travel companies, no problem. But when they started investing infrastructure, that really raised the alarm bells for a lot of European governments.
Yes, it took up while for the concerns to be shared. Germany and France had concerns before Italy did, and this was communicated interestingly by a business group in Germany. They were among the first to issue a landmark which was critical of some of the investments and urging the government to be very cautious. And this was subsequently taken up at EU level and it became a new law in term that granted rights for investment screening.
While China's infrastructure investments raised flags, there have been points of contention politically between the EU and China too.
The pandemic was really an inflection point. There was a lot of criticism in Europe of China's mask diplomacy. If you remember that China produces a lot of the medical equipment which the world suddenly found themselves without, and China
was criticized for favoring its allies in terms of these supplies. Subsequently, there were criticisms directed by European politicians at Beijing over the treatment of minorities in Shinjang, and that actually culminated in trading of sanctions between EU lawmakers and China.
What was the impact of this increased scrutiny, How did that affect Chinese investments in Europe?
After that, it's been very clear that if you just look at a graph, is on a clear downward trajectory. There was a recent report by Merricks that studies China based in Berlin, where I am here, and it found that there were seven consecutive years of declines in terms of overall Chinese investment in Europe, but twenty twenty four Chinese investments ticked up for the first time. It's important to make the point that this is still just a very small uptick, and it's still at a low level
compared to back in the heyday, the Golden era. But given the global environment we're talking about, it still seems significant to point out this change after seven consecutive years of decline.
According to the report, last year's rebound of Chinese investments into Europe total ten billion euros or about twelve billion dollars.
One of the interesting developments of recent years is that the investment profile has changed. It's starting to shift from taking stakes in companies or in particular projects or infrastructure. Then it's shifting now to more green field investments, which
means they're building new factories. And it's reflective of the fact that China has moved up the value chain that now China has its own world leading technologies, notably of course, in electric vehicles and EV technology, clean tech, and European governments buy and large are very keen to have those.
And then of course there's Trump's tariffs after the break the new China EU approach. Last year was an important year for Chinese investments in Europe. It was the first time that Chinese companies up their spending there after seven years of declines. Alan Crawford and a team of Bloomberg reporters dug into these figures and found there was a shift in the nature of these investments as well as where the money was going.
Broadly speaking, a very notable development has been this shift from Western Europe to Central and Eastern Europe byd Its main European plant is under construction at the moment in Hungary. Slovakia is also attracting EV and battery technology. I think what's interesting about these two countries is that they're both run by leaders who are very close to China politically.
They're both somewhat problematic in terms of the European mainstream, and by that I mean that they have ties to Moscow and they are proud of their those relationships with Shi Jinping.
And it sounds like the governments are also responding differently this time around, right like some of these investments are actually being very much welcomed.
That's exactly true. These are actually plants that bring jobs and technology and arguably prestige to the nations that have these. It's essentially a race for the technology at the moment, which is a change of course. Rather than China trying to get hold of Western technology, this is European countries that are very keen to have Chinese advanced EV plants in their countries.
But it's not just prestige and shared political interests that are pushing European nations closer to China. Trump's terrorists have played a significant role.
The US is already threatening the EU with thirty percent tariffs. It's not exactly designed to win friends and influence in Europe. It can only turn Europe away from the US. There are different voices in Europe advocating different paths as regards relations with China. There is an official skepticism, if you like. The official line from the European Commission Chief or Shulaf underline is to d risk as regards China.
Europe is fully committed to result oriented engagement with China and this Commission is leading the way when it comes to d risking not decoupling.
But that is not quite reflected in some of the individual EU member states. We recently had the Spanish Prime Minister Pedro Sanchez. He was in Beijing meeting with Xi Jinping, and he was talking very much about opening up more to China and his emphasis was on much more in terms of investment, much closer relations. But other leaders are somewhat more weary and are hedging their relations, notably the government, which is the biggest economy in Europe's the number three
economy worldwide. It tends to set the tone in Europe and the EU as a whole.
What are some of the concerns the reservations that specific countries have about the warming ties to China and the investments.
The single biggest issue that is shared by the vast majority of EU nations, the governments, and the EU itself in Brussels is China's close relationship with Russia. European governments leaders individually, the German Chancellor, the French President, and EU officials have been making the case to Shi Jinping to exert influence on Vladimir Putine to stop the war in Ukraine. The argument is that China could exert pressure on North
Korea not to supply Russia with artillery and with troops. Actually, but that doesn't seem to have had any influence either, which to take us back to the upcoming EU China summit, that will undoubtedly be a sticking point in any development towards closer relations.
I'm wondering, then, where does this leave us now? Are we seeing a pivot to China from the EU side. Is there a strong sense that EU countries want to do risk or do you leverage from the US market?
These are two separate but connected issues. Yes, EU nations Buy and Large do want to de risk from the US market because they see it as unpredictable. At the very least, the Transatlantic relationship is arguably in more trouble than it has been for decades. At the same time, I don't think that yet translates to a pivot towards China, for the reasons of China's support for Russia during the
Ukraine War. But also there is a skepticism, an inherent wariness which has developed over the past decade, which means that Buy and Large as a whole Europe isn't quite ready to fall into bed with China, if you like. I think that there's a recognition that Europe needs to find its own path between the two giants of Beijing and Washington.
Now, US Treasury Secretary Scott Bessnont had warned European governments against aligning more with China. At the same time the US seems to be cozying up to China itself.
Of course, things change on a day to day basis. A few weeks ago where we're talking about threats of one hundred and forty five percent tariffs on China. Now we've seen that the US is allowing Nvidia to sell some of its AI chips to China, which is a complete reversal of the Biden administration's policy and indeed the Trump administration's policy of a few weeks ago. And we're
talking about a potential she Trump summit. Trump seems to be willing to do some kind of broader deal with China, and by its very nature, I think that would carve out Europe and leave Europe further adrift, which kind of gives more ammunition to the calls in Europe for more autonomy here on the continent.
Back to the EU China summit later this week. What outcomes do we expect from the talks? You know, what could be the biggest signals that things are warming up between the EU and China or are there things to watch in terms of flags red flags? Possibly?
I think it will be very easy for the both sides to agree on the need for free trade and to call out protectionism. They are highly unlikely to name the US or Donald Trump, but they will, presumably, I would imagine, put out a robust statement in terms of global values, multilateralism against unilateralism going it alone. So reading between the lines is clear that they don't like the approach of the Trump administration slapping tariffs and unilaterally pulling
out of the Paris Climate Accord and so on. I think that they will agree on climate issues. One of the biggest potential sticking point is over this China support for Russia. China is still withholding rare earth experts to Europe. I guess the issue really for me is whether these blow up and come out into the open, or whether they manage to keep them behind closed doors and maintain a unified stance on those points they can agree on.
This is The Big Take Asia from Bloomberg News. I'm wanha To get more from The Big Take and unlimited access to all of Bloomberg dot Com, subscribe today at Bloomberg dot com slash podcast Offer. If you like the episode, make sure to subscribe and review The Big Tick Asia wherever you listen to podcasts. It really helps people find the show. Thanks for listening, See you next time.