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e-ISSN: 1647-7251
VOL13 N2, TD1
Thematic dossier
Perspectives on China’s international presence
December 2022
55
THE INSTITUTIONAL CHALLENGES FOR THE EUROPEAN UNION IN THE FACE
OF THE NEW CHINESE INVESTMENT WAVE
JORGE TAVARES DA SILVA
jmts@ua.pt
Visiting assistant professor at the University of Aveiro, Department of Social, Political and
Territorial Sciences (Portugal) and at the Faculty of Letters, University of Coimbra. He holds a
Ph.D. in International Relations in the specific field of International Politics and Conflict
Resolution. He is a Researcher at GOVCOPP - Research Unit on Governance, Competitiveness and
Public Policy. He is a founding member of the Observatory of China (Portugal) and the Center for
Studies and Research on Security and Defence of Trás-os-Montes and Alto Douro. Member of the
European Association for Chinese Studies and the Association of Chinese Political Studies and the
Portuguese Institute of Sinology; member of the Editorial Board of the Tempo Exterior, Spain and
Rotas a Oriente Revista de Estudos Sino-Portugueses. He is author of multiple articles and
chapters of books in international journals, particularly on political, economic and social issues
facing contemporary China. He is coauthor of the book Role and Impact of Tourism in
Peacebuilding and Conflict Transformation (IGI Global, 2020); Luso-Chinese Relations, from the
16th century to the contemporary context [in Portuguese] (IIM, 2020) and Xi Xinping The Rise
of China’s New Helmsman: the Man, Politics and the World [in Portuguese] (Sílabas & Desafios,
2021).
RUI P. PEREIRA
Rui.Pereira@dgae.gov.pt
He holds a MA in European Studies from the Portuguese Catholic University and Postgraduate
Degrees in Modern China (ISCSP/UTL) and International Economic Relations (ISEG/UTL). He has
a degree in International Relations from Lusíada University of Lisbon and completed FORGEP -
Training in Public Management for Intermediate Leaders in the Public Service (National Institute
of Administration) and the National Defense Auditors Course (National Defense Institute). He is
currently the Head of the International Relations Division at the Directorate-General for Economic
Activities - Ministry of Economy (Portugal). He is the Focal Point of the Forum for Economic and
Trade Cooperation between China and the Portuguese-Speaking Countries (Macau Forum). He is
a Founding Member of the Observatory of China - Association for Multidisciplinary Investigation
of Chinese Studies in Portugal. Most recent publications: Pereira, R. (2022), “The Middle Kingdom
in the Middle Atlantic: China in the Small Portuguese Island States”, co-authored with Duarte,
Paulo A. and Tavares da Silva, J., in China, Guinea-Bissau, Mozambique and São Tomé and
Príncipe From sporadic bilateral exchanges to a comprehensive multilateral platform, City
University of Macau; Pereira, R. (2020), "China e África: Uma Parceria de Cooperação Estratégica
ou Uma (Progressiva) Relação de Dependência? A Problemática da Dívida Africana”, Revista
Relações Internacionais, No. 65, Instituto Português de Relações Internacionais; Pereira, R.
(2020), “China and the Portuguese Atlantic: The BRI´s last puzzle piece”, co-authored with
Tavares da Silva, J., in The Belt and Road Initiative - International Perspectives on an Old
Archetype of a New Development Model (Leandro, F., Duarte, P. - eds), Palgrave Macmillan,
Singapore.
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e-ISSN: 1647-7251
VOL13 N2, TD1
Thematic dossier Perspectives on China’s international presence - December 2022, pp. 54-76
The institutional challenges for the European Union in the face of the new Chinese investment wave
Jorge Tavares da Silva; Rui P. Pereira
56
Abstract
By analysing the historical picture between China and the European Union, focusing on their
trade and economic relations, and discussing the consequences of Chinese trade and
investment in Europe, this paper aims to analyse the consequences of Chinese investment in
Europe, how it is challenging the European unity, its institutional structure and its foreign
policy towards China.
Keywords
Sino-European relations; Chinese investment in Europe; European unity; European Union
Foreign Policy; Belt and Road Initiative
Resumo
Ao analisar o quadro histórico entre a China e a União Europeia, centrando-se nas suas
relações comerciais e económicas, e discutindo as consequências do comércio e investimento
chineses na Europa, este artigo pretende analisar as consequências do investimento chinês
na Europa, como está a desafiar a unidade europeia, a sua estrutura institucional e a sua
política externa em relação à China.
Palavras-chave
Relações sino-europeias; investimento chinês na Europa; unidade europeia; política externa
da União Europeia; Nova Rota da Seda
How to cite this article
Silva, Jorge Tavares da; Pereira, Rui P (2022). The institutional challenges for the European
Union in the face of the new chinese investment wave. Janus.net, e-journal of international
relations. VOL13 N2, TD1 - Thematic dossier Perspectives on China's International Presence:
Strategies, Processes and Challenges”, December 2022. Consulted [online] on date of the last
view, https://doi.org/10.26619/1647-7251.DT22.4
Article received on June 30, 2022 and accepted on May 5, 2022
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
VOL13 N2, TD1
Thematic dossier Perspectives on China’s international presence - December 2022, pp. 54-76
The institutional challenges for the European Union in the face of the new Chinese investment wave
Jorge Tavares da Silva; Rui P. Pereira
57
THE INSTITUTIONAL CHALLENGES FOR THE EUROPEAN UNION IN
THE FACE OF THE NEW CHINESE INVESTMENT WAVE
JORGE TAVARES DA SILVA
RUI P. PEREIRA
Introduction
The European Union (EU), in the previous figure of the European Economic Community
(EEC), and the People´s Republic of China (PRC) established their first diplomatic
relations in 1975 still under the leadership of Mao Zedong. After 1978, onwards China´s
opening up and reforms policy, started a new framework of economic cooperation with
Europe that gradually evolved to a comprehensive political partnership in multiple
domains. In 1985, both parts signed their first agreement on trade and economic
cooperation. This document was based on customs and tariffs issues having to do with
markets access (Corre and Sepulchre, 2016: 11). The bilateral relations took great
significance after the 1990s and both parts are presently two of the biggest trading
partners in the world. In 2008, the sovereign debt crisis in Europe transformed the
continent in a favourite destination for Chinese investors.
Facing intense China´s economic offensive in Europe particularly investment - some
European governments have begun to express concern. However, there is an ambivalent
stance in different moments. We find moments of assertive rhetoric and others of
reservation in relation to China. This seem to reveal a clear lack of clear-eyed strategy,
more defined by the spur of the moment. The EU ambivalence is entrenched in principles
such as values and interests that affect the way to follow its external relations,
(Christiansen et al. 2019: 29) and it expresses that the processes of Europeanization in
the field of foreign policy has not been successful. This process refers to the political and
policy changes caused by the membership in the EU (Wong, 2011: 150).
This paper aims to analyse the consequences of Chinese investment in Europe, how it is
challenging the European unity, its institutional structure and foreign policy towards
China. First, we analyse the historical picture between China and the European Union,
the great moments of cooperation and their antagonisms. Then, we focus on trade and
economic relations, presenting the main bilateral statistics on those domains. Finally, we
discuss the consequences of Chinese trade and investment in Europe, including pressure
on formal arrangements and administrative European routines.
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e-ISSN: 1647-7251
VOL13 N2, TD1
Thematic dossier Perspectives on China’s international presence - December 2022, pp. 54-76
The institutional challenges for the European Union in the face of the new Chinese investment wave
Jorge Tavares da Silva; Rui P. Pereira
58
I. EU-China relations: general background
The bilateral relations between the EEC, the previous version of the EU, and China have
developed fast since diplomatic ties were established in 1975. Engagement has become
more intensive since the signature of the Agreement on Trade and Economic Cooperation
between the EEC and the People's Republic of China in 1985. Annual EU-China summits
were launched in 1998 and haven since taken place on an annual basis.
The creation of the EU-China Comprehensive Strategic Partnership in 2003 has deepened
and broadened cooperation in a wide range of areas, and the EU and China have become
highly interdependent as a result. They have also launched two senior-level forums to
promote wider and deeper cooperation. The High-Level Economic and Trade Dialogue,
initiated in 2008, focused on areas such as trade, investment, intellectual property rights
and market access, and the High-Level Strategic Dialogue in 2010, which addresses
issues ranging from climate change and nuclear proliferation to regional security.
Since 2013, the 2003 Strategic Partnership has been broadened and deepened, in line
with the EU-China 2020 Strategic Agenda for Cooperation. This has led to a high degree
of institutionalization of EU-China ties
1
, with an ever-growing number of dialogue formats
that cover political, economic and people-to-people relations, but whose results vary
significantly (Grieger, 2019).
This Strategic Agenda for Cooperation, which was considered the highest-level joint
document guiding the EU-China Comprehensive Strategic Partnership, has the following
sections:
I. Peace and Security: the EU and China commit to enhancing dialogue and
coordination at bilateral, regional and global levels, to meet regional and global
challenges together, and work to make the international order and system more just
and equitable;
II. Prosperity: both sides commit to enhance further their trade and investment
relationship towards 2020 in a spirit of mutual benefit, by promoting open,
transparent markets and a level playing field. Particular importance will be paid to
improving opportunities for Small and Medium Sized Enterprises (SMEs);
III. Sustainable Development: the EU and China commit to strengthen bilateral
cooperation in the areas of science, technology and innovation, space and
aerospace, energy, urbanisation, climate change and environmental protection,
oceans and social progress, among others;
IV. People-to-People Exchanges: both sides commit to expand contacts between
peoples in order to enhance common understanding and to foster cross-fertilisation
between societies in the areas of culture, education and youth.
1
It was implemented through the annual Summit and three pillars directly underpinning the Summit (the
annual High Level Strategic Dialogue, the annual High Level Economic and Trade Dialogue, and the bi-
annual People-to-People Dialogue), as well as through the regular meetings of counterparts.
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e-ISSN: 1647-7251
VOL13 N2, TD1
Thematic dossier Perspectives on China’s international presence - December 2022, pp. 54-76
The institutional challenges for the European Union in the face of the new Chinese investment wave
Jorge Tavares da Silva; Rui P. Pereira
59
Nonetheless, the European Commission considered that the EU needed its own strategy,
one that puts its own interests at the forefront in the new relationship with China
(European Commission, 2016). Accordingly, and further to a previous Communication on
China launched in October 2006, a Joint Communication to the European Parliament and
the Council has been released in June 2016, proposing “elements for a new EU strategy
on China”. The main proposals for this new EU strategy are as follows:
Seize new openings to strengthen its relations with China;
Engage China in its reform process in practical ways, which result in mutual benefits
for bilateral relations in economic, trade and investment, social, environmental and
other areas;
Promote reciprocity, a level playing field and fair competition across all areas of
cooperation;
Push for the timely completion of negotiations on a Comprehensive Agreement on
Investment and an ambitious approach to opening up new market opportunities;
Drive forward infrastructure, trading, digital and people-to-people connectivity
between Europe and China based on an open rules platform with benefits for all the
countries along the proposed routes;
Promote global public goods, sustainable development and international security, in
line with the respective UN and G20 responsibilities;
Promote respect for the rule of law and human rights within China and internationally;
Maximize EU cohesion and effectiveness in its dealings with China (“whole-of-EU”
approach).
More recently, the European Commission and the High Representative of the Union for
Foreign Affairs and Security Policy prepared a Joint Communication to the European
Parliament, the European Council and the Council, entitled EU-China, a Strategic
Outlook”, which was made public on 12 March 2019.
Although acknowledging that the 2016 Strategy on China remains the cornerstone of EU
engagement, it is argued that there is a need to “ensure that relations with this strategic
partner are set on a fair, balanced and mutually beneficial course” (European
Commission, 2019).
Under this background, there is a growing appreciation in Europe that the balance of
challenges and opportunities presented by China has shifted. In the last decade, China’s
economic power and political influence have grown with unprecedented scale and speed,
reflecting its ambitions to become a relevant global power: a China that would “stand
more firmly and powerfully among the nations around the world” (Xi Jinping, 2012).
Apart from the need to continue to cooperate and negotiate with China, for the first time
in these policy strategy papers, China is characterized as “an economic competitor in the
pursuit of technological leadership, and a systemic rival promoting alternative models of
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e-ISSN: 1647-7251
VOL13 N2, TD1
Thematic dossier Perspectives on China’s international presence - December 2022, pp. 54-76
The institutional challenges for the European Union in the face of the new Chinese investment wave
Jorge Tavares da Silva; Rui P. Pereira
60
governance” (EU-China: A Strategic Outlook, 2019: 5), requiring a flexible and pragmatic
whole-of-EU approach.
The EU’s response to these challenges should be based on three objectives:
Based on clearly defined interests and objectives, the EU should deepen its
engagement with China to promote common interests at global level;
The EU should robustly seek more balanced and reciprocal conditions governing the
economic relationship;
In order to maintain its prosperity, values and social model over the long term, there
are areas where the EU itself needs to adapt to changing economic realities and
strengthen its own domestic policies and industrial base.
To fulfil these objectives, were identified ten (10) concrete actions. First, to strengthen
the EU’s cooperation with China to meet common responsibilities across all three pillars
of the United Nations, Human Rights, Peace and Security, and Development. Second, in
order to fight climate change more effectively, the EU calls on China to peak its emissions
before 2030, in line with the goals of the Paris Agreement. Third, the EU will deepen
engagement with China on peace and security, building on the positive cooperation on
the Joint Comprehensive Plan of Action for Iran. Fourth, to preserve its interest in
stability, sustainable economic development and good governance in partner countries,
the EU will apply more robustly the existing bilateral agreements and financial
instruments, and work with China to follow the same principles through the
implementation of the EU Strategy on Connecting Europe and Asia. Fifth, in order to
achieve a more balanced and reciprocal economic relationship, the EU calls on China to
deliver on existing joint EU-China commitments. Sixth, to promote reciprocity and open
procurement opportunities in China, the European Parliament and the Council should
adopt the International Procurement Instrument before the end of 2019. Seventh, to
ensure that not only price but also high levels of labour and environmental standards are
taken into account, Eighth, to fully address the distortive effects of foreign state
ownership and state financing in the internal market, the Commission will identify before
the end of 2019 how to fill existing gaps in EU law. Ninth, to safeguard against potential
serious security implications for critical digital infrastructure, a common EU approach to
the security of 5G networks is needed. Tenth, to detect and raise awareness of security
risks posed by foreign investment in critical assets, technologies and infrastructure.
This paper was striking for at least two main reasons. First, it was the speed and the
unusual way by which it came about. Even more striking was its bluntness, which is rare
in official EU documents (Brattberg et al, 2020). Although three years have already
passed, the EU considers that it remains valid (EEAS, 2022).
In a direct response, the Chinese minister of foreign affairs, Wang Yi delivered a speech
in Brussels in December 2019, where he attacked virtually all the new elements of the
European approach, having stated that “we are partners, not rivals”, and called on the
EU and Beijing to draw up an “ambitious blueprint” for cooperation (Barkin, 2020). He
added that Europe and China had to “get mutual perceptions right”. Failure to do so
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e-ISSN: 1647-7251
VOL13 N2, TD1
Thematic dossier Perspectives on China’s international presence - December 2022, pp. 54-76
The institutional challenges for the European Union in the face of the new Chinese investment wave
Jorge Tavares da Silva; Rui P. Pereira
61
would risk “unnecessary disruptions” to the relationship. This message was clear: if
Europe wants smooth relations, it should stop criticizing China.
If bilateral relations were not in a good phase in 2019, they went even worse over the
past two years, with a worldwide pandemic of unprecedented repercussions and, more
recently, a geopolitical turmoil with the Russian invasion of Ukraine.
Consequently, EU-China relations have deteriorated, notably related to a growing number
of political and economic irritants, including China’s counter measures to EU sanctions on
human rights, Chinese economic coercion and trade measures against the single market,
and China’s ambiguous positioning on the war in Ukraine (EEAS, 2022).
Josep Borell, the High Representative of the European Union for Foreign Affairs and
Security Policy, has described the current status of the relationship in a clear and realistic
way, following the last EU/China Summit, held in April 2022 (HR/VP Blog, 2022):
“When it comes to EU-China relations, probably the most important thing for
us is to keep doing our ‘homework’ and strengthen internal EU resilience. In
recent years, we have taken significant steps on the defensive side of the
ledger (investment screening, 5G toolbox, anti-subsidies, new procurement
instrument) (…) We should always keep the door open to engage with China.
Despite all the well-known difficulties, it is important that we recognise that
we have a shared interest in managing this relationship in a responsible
manner.”
II. Trade and economic relations: the context of the EU debt crisis and
the Chinese investment upsurge
Since China joined the World Trade Organization in December 2001, the EU’s goods
exports to China have grown on average more than 10 percent a year, and service
exports by over 15 percent. This has resulted in ample benefits for EU producers and
consumers but, as imports from China have also grown rapidly, it has also caused some
degree of disruption in EU labour and product markets.
Currently, China is the EU’s second largest export market, behind the US, and is the EU’s
biggest source of imports. Bilateral trade, on average, amounts to €1.9 billion a day.
China’s exports to the EU have grown even more rapidly and the EU is now China’s largest
trading partner and the second largest export market for Chinese goods. In 2021, the EU
exported goods worth approximately 223 billion euros to China, around 20 billion euros
more than in the previous year (Statista, 2022).
Since 2002, the EU’s trade deficit with China has been growing consecutively and it
registered € 249 billion in 2021, equivalent to more than 1 percent of the EU’s GDP. The
widening of the bilateral trade deficit reflects a base effect: it has happened despite the
EU’s exports to China growing more rapidly than China’s exports to the EU. The EU’s
main imports from China are industrial and consumer goods, machinery and equipment,
and footwear and clothing, and the EU’s main exports to China are machinery and
equipment, motor vehicles, aircraft, and chemicals. Additionally, the EU-China trade in
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e-ISSN: 1647-7251
VOL13 N2, TD1
Thematic dossier Perspectives on China’s international presence - December 2022, pp. 54-76
The institutional challenges for the European Union in the face of the new Chinese investment wave
Jorge Tavares da Silva; Rui P. Pereira
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services amounts to more than 10% of total trade in goods, and the EU's exports of
services make up 19% of EU's total exports of goods (Statista, 2022). In 2020, the EU
exported €47 billion of services to China, while China exported €31 billion to the EU
(EEAS, 2022).
Certainly, Foreign Direct Investment (FDI) flows between the EU and China are closely
related to trade, as FDI results in the development of marketing networks, provides
financial and transport services and leads to production with a view to selling in global
markets. FDI flows can also substitute for trade, for example when investors establish
facilities to produce and sell in the same market. Furthermore, the purchase by investors
of controlling interests in competitors or suppliers, including raw materials, often fosters
global or regional value chains that ten to stimulate trade (Dadush et al, 2019).
The European Union (EU) became one of the most relevant destination for Chinese
outbound investment. Among the things that Chinese investors seek in Europe are:
Technology, to include established high-tech assets, emerging technologies and know-
how;
Access to the European market, for Chinese goods and services;
Access to third markets through European corporate networks, especially in Latin
America and Africa;
Brand names to improve the marketability of Chinese products, both abroad and for
the Chinese market;
Integrated regional and global value chains in production, knowledge and transport;
A stable legal, regulatory and political environment, particularly in a context of global
disruption and political uncertainty;
Political/diplomatic influence in a region that in aggregate terms remains the second
largest economy after the US.
After the economic crisis of 2008-2009, a new wave of Chinese Foreign Direct Investment
(FDI) entered in Europe. There have been a number of attractive assets, from financial
entities to infrastructure and companies in economic difficulty (Brown, 2019: 165). In
fact, in 2014 and 2015, the EU, estimated to be the largest market for Chinese
acquisitions, in terms of value (Hellström, 2016: 13). Philippe Corre (2018), called this
wave of investment as an offensive”, revealing some associated concerns in the
European countries.
Since 2010, the Chinese investment received in Europe had been questioned
(Christiansen, 2019: 98). There are some concerns with the so-called dual-use
technologies in advanced fields, such as artificial intelligence, robotics and so forth
(Freudenstein, 2019: 84). Germany is already blocking certain sectors to China
investment considered strategically relevant such as defence, telecommunications,
and energy. This happens when foreign investment involves at least a 10% share. In the
past 10 years, China has invested at least $318 billion in European assets (Bloomberg,
2018). Nevertheless, a decrease of 17% occurred in 2017 over the previous year (in
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