Mikołaj Woźniak, Konrad Falkowski
New Prime Minister of France and the future trip to China
On January 6, the news spread that the new French Prime Minister Francois Bayrou would be traveling to China at some unspecified time in the future. This is the second announced visit by the French Prime Minister to Beijing in the past few months. The fundamental difference in this case is the prime minister himself – last November, President Emmanuel Macron announced that Michel Barnier would go to China, but the turmoil on the French political scene led to the fall of his government and Barnier’s replacement by the above-mentioned Bayrou.
The purpose of the trip, unlike the head of the French government, has not changed and it will be – which should come as no surprise – an attempt to resolve or at least come close to ending the ongoing trade conflict over Chinese tariffs on brandy imports from Europe. The tariffs imposed by Beijing are linked to EU tariffs on Chinese electric vehicles – China has opted for retaliation, among others, in this industry. And the tariffs on the alcohol industry are actually hitting French interests to a large extent, especially those of French cognac producers, who fear huge losses. They describe themselves as “hostages” of the dispute between the European Union and China.
In turn, at the end of December 2024, the Chinese extended the anti-dumping investigation against brandy from the EU, which we wrote about in the December Review. The Chinese Ministry of Commerce decided to extend the investigation period in this case until April 5, 2025. Is this a wink to Paris, saying that both sides are able to reach an agreement? It is very possible and can be interpreted as Beijing opening the door to negotiations, which is inviting French representatives at this time. The first of them was Emmanuel Bonn in December, the next is to be Bayrou, and at the very end is President Marcon. Suspecting in this case that both visits will take place by April 5 or around that date seems quite correct.
On the sidelines, it is worth adding that a week later, on January 14, Bayrou made his first appearance in the French parliament as prime minister, and in addition to the key issues for France, he also raised the topic of China. Namely, he accused the People’s Republic of China of striving for global economic domination by flooding markets with Chinese exports. In his opinion, this is a strategy that has been planned by Beijing for a decade: “This month, China’s trade surplus has just passed the milestone of — get this — [almost] a trillion dollars … This is a strategy that has been planned for 10 years, whose aim, consequence and purpose is purely and simply to replace our industry”. Perhaps this is an attempt to show the Chinese that the French will negotiate hard. Or at least they will try.
Lithuania’s Prime Minister on China
The newly incumbent Prime Minister of Lithuania Gintautas Paluckas, in an interview for LRT RADIO, stated that renewing relations with the People’s Republic of China will not be an easy task, especially when the European Union itself is on an increasingly collision course with China. In his opinion, Lithuanian-Chinese relations depend not only on the Lithuanian administration, but also on how the EU views China: “Today, our relations with China are defined by the European Union’s common strategy. The EU relations with China are also changing for basic reasons – both because of China’s support for Russia in the war with Ukraine and because of very serious economic frictions, which mean that Europe will definitely defend its market against state-subsidised goods and services coming from China”. Moreover, Paluckas compared the prospects for Lithuania’s relations with China to “a bumpy road.” Although such a statement could just as well be used in relation to EU-PRC relations.
In the previous edition of the Review we also quoted the words of the Lithuanian Prime Minister, who suggested that the Lithuanian government under his leadership would try to reach an agreement and break the impasse in bilateral relations that has been ongoing since 2021, emphasizing at the same time that he could not imagine a situation in which Lithuania would have to beg for anything or humiliate itself. Despite this roughness and awareness that it would not be easy, the hunch suggests that this year we will hear more than once about relations between Vilnius and Beijing.
China informs about the growth in trade with EU in 2024
The General Administration of Customs of the People’s Republic of China boasted on January 13 about China’s trade results for the entire last year. As it was described by the Chinese media, both imports and exports of the PRC increased by 5% in 2024 year-on-year. Thus, the trade value reached approximately 43.85 trillion yuan (5.98 trillion US dollars), setting a new record.
The above increase also concerned – paradoxically – trade between China and the European Union. Paradoxically, because the last year was an expression of numerous frictions and tensions between Brussels and Beijing, and as it turns out, the state of trade between these parties experienced a modest increase. However, referring directly to the figures, exports from China to the EU amounted to 3675.1 billion yuan, or about 489 billion euros, while imports from the EU to China reached 1916.4 billion yuan, or about 255 billion euros. Thus, Chinese exports to the EU market have increased by 4.3% since 2023, and imports from the EU have decreased by 3.3%. The total result of trade oscillates around 5591.5 billion yuan, or about 744 billion euros. The Global Times suggests that the increase in exports reflects “strong European demand for Chinese goods.” The second suggestion is that this situation means “a recovery in Chinese trade with the Europe in 2024 following a challenging 2023.” Trade data shows that since 2022, EU-China trade has been declining dramatically, reaching €514.14 billion in imports from China and €223.5 billion in exports to China in the infamous 2023. Germany remains one of the leading EU member states that trade the most with China. Chinese exports to Germany have increased by 7.8%, while imports from Germany have fallen by 9.7%. In addition, the club of EU countries with an increase in the value of trade with the Chinese includes France (2%), Spain (4.5%), and Hungary (12.9%).
Even if the increase in trade between the EU and the People’s Republic of China last year of 1.6% is insignificant, it disrupts the reliability and sense of the derisking policy, that is, the “child” of President Von der Leyen, because she was the one who announced its implementation in 2023. And in fact, 2023 itself showed the effectiveness of the above concept. The question should then be asked: is the increase reported by the Chinese a work accident or perhaps the beginning of the end of derisking? Both theses should be appropriately distanced, and the final answer will only come in 2026.
Discrimination of European medical goods on the Chinese market
On 14 January, the European Commission published a report that is the result of an investigation under the International Procurement Instrument into the measures and practices of the People’s Republic of China in the public procurement market for medical devices. The investigation was initiated on 24 April 2024. It was launched in response to the measures and practices used in the Chinese public procurement market for medical equipment, which – according to the EC – “discriminate unfairly against European companies and products”.
The European side claims that the report contains “clear evidence” that the Chinese are “limiting the access of EU medical devices producers to its government contracts in an unfair and discriminatory way”. As for the report itself, it states that Beijing has implemented “a prohibition of imported medical devices and several other forms of direct and indirect discrimination”, which has led to serious restrictions and difficulties in accessing the Chinese market. The report notes that ” the measures and practices favouring the procurement of domestic medical devices and those restricting the procurement of imported medical devices, referred to in the Notice of Initiation, are two interlinked elements of a ‘Buy China’ policy implemented by the GOC, which sets a generally applicable preference for the procurement of domestic medical devices to the detriment of imported ones”. In addition, a procedure described as “Centralised volume-based procurement” was distinguished. It is based on “the acquisition of very large quantities of products subject to strong competition at national or provincial level to obtain lower prices”. The Commission found that during the investigation, China conducted public procurement procedures in the above-mentioned mode, which led to a significant price decrease. In such a situation, competition between European companies and Chinese manufacturers of medical products, often subsidized by the state, was highly difficult.
The European Commission is committed to maintaining a “constructive dialogue” with the Chinese side, which (perhaps) will allow for a resolution of the existing dispute. However, the Commission has not yet been provided with a satisfactory solution to this issue. The report states directly: “The PRC has not proposed any specific corrective action to remedy this serious and recurrent impairment of access”. Therefore, the adoption of measures under the International Procurement Instrument is being considered. And this may involve limiting or excluding Chinese bidders from public tenders in the European Union.
Phone call between Antonio Costa and Xi Jinping
On 14 January, António Costa, the President of the European Council in office from 1 December 2024, held a telephone conversation with the President of the People’s Republic of China, Xi Jinping. It was the first conversation at this level between the authorities of the EU and China this year.
Costa boasted about this event via the X portal, describing the discussed conversation as “constructive”. The interlocutors also reportedly agreed that “the EU and China working together to tackle global challenges would be a positive signal for peace, stability, and prosperity”. He also highlighted two fundamental issues for the EU in his post: firstly, that Russia’s war in Ukraine is a threat to world peace, and secondly, that trade between the EU and China is very important, but relations between the two sides “need to be balanced and based on a level-playing field.” This time, the event will take place in Brussels, but there is no information about the date at the moment. The last such summit took place in December 2023.
The Chinese side decided to speak more broadly about the Costa-Xi telephone conversation. Leaving aside the courtesy introduction and references to multipolarism in the contemporary international order, the leader of the People’s Republic of China emphasized that in the relations between Beijing and Brussels “there is no clash of fundamental interests or geopolitical conflicts”, and on the contrary – “both sides are partners that can contribute to each other’s success”. According to Xi, in the current dynamic world, China and the EU “should adhere to the original aspirations of establishing diplomatic relations, strengthen strategic communication, enhance strategic mutual trust, and uphold the positioning of partnership”. The President of the PRC also referred to the need for mutual trust, because economic and trade cooperation between China and the EU “is mutually complementary and beneficial”. He also noted that ” have already formed a strong economic symbiotic relationship”, which can be understood as a bond that is difficult to break, and the breaking of which may bring costly consequences. The Chinese Ministry of Foreign Affairs’ statement also states that Costa, for his part, assured that the EU is ready to engage in dialogue and consultations with China to resolve economic and trade disputes. Additionally, both sides should cooperate with each other, not compete. Regarding the war in Ukraine, or more precisely, the “Ukraine issue,” as the Russian attack was called, Xi was supposed to elaborate on China’s position on “promoting peace talks” to his interlocutor.
Cui Hongjian, a professor at Beijing Foreign Studies University, told the Chinese Global Times that “although there are frictions in the economic and trade fields, both sides still share a basic consensus that communication and dialogue are effective ways to resolve differences.” He added that “With joint efforts, it is believed that China and Europe can find reasonable solutions that enhance the common interests of both sides”. On the other side of the media, namely POLITICO, the release of information about the planned EU-China summit before Donald Trump’s inauguration as US President was a deliberate move. According to Camille Gus, it was a signal to Washington that the EU “wants to keep its options open toward Beijing”.
Von der Leyen on China in Davos
During the annual World Economic Forum conference, which took place between 20 and 24 January, the President of the European Commission, Ursula von der Leyen, made her speech. She touched on many issues that concern both the European and global economies. She stated, for example, that the world is facing a “sea-change in global affairs”, and that the same world is in a “race against time” in the context of challenges such as climate change and the development of artificial intelligence technology. However, what is most interesting from the perspective of the Review, are the words concerning the People’s Republic of China.
The President raised the issue of China several times in her speech. For example, she stated that Europe is underestimated in terms of its “capacity to invent and create”, considering the EU’s share of global patent applications to be on a par with the United States and China. However, the most significant part of her speech in this context was when she mentioned the concept of the “China shock”, and the opinion that after more than 20 years we are witnessing the second edition of this phenomenon. The first “China shock” was caused by China’s accession to the WTO in 2001, the second – as Von der Leyen notes – is “because of state-sponsored over-capacity”. And that is why the EU has taken steps such as tariffs on Chinese electric cars. But the EU is not alone in this action, and Von der Leyen cites that “defensive trade measures are being adopted across the world, including in the Global South, as a response to Chinese market distortions”. However, it should be noted that EU officials have repeatedly emphasized their willingness to engage in dialogue with the Chinese, and above all, “constructive” dialogue. According to Von der Leyen, the jubilee year in EU-China relations in 2025 may be “an opportunity to engage and deepen our relationship with China, and where possible, even to expand our trade and investment ties.” At the very end of this part, she emphasized that the European Union must build relations with the People’s Republic of China on the basis of fairness and reciprocity, because in this way it will be possible to speak of balanced relations with the Middle Kingdom.
The Chinese side commented on the speech of the head of the European Commission via the Global Times. According to Chinese expert Zhao Junjie from the Chinese Academy of Social Sciences, Von der Leyen presents contradictory views on the PRC, which is supposed to reflect “the EU’s dilemma in its policy toward China.” Elaborating on this idea, he notes that on the one hand the EU follows the US strategy of containing China, and on the other hand the EU ” “also takes its own interests into account, as it acknowledges that engaging in fierce competition with China has caused significant harm to the EU itself”. Another cited expert, Feng Zhongping from the Chinese Academy of Social Sciences, stated that the European Union should rethink its approach to economic cooperation with China, considering the new circumstances “and not attribute normal business competition between China and the EU to other factors”. Moreover, in his opinion, “if the EU can reach a consensus with China on this matter, there will be greater space for cooperation given the complementary advantages of both sides”.
Friedrich Merz on investing in China
Friedrich Merz (CDU/CSU), the likely winner of the parliamentary elections in Germany scheduled for February 23 and the future chancellor of the Federal Republic of Germany, spoke on January 23 in a not necessarily flattering way about China and investing in that country. Namely, he warned German companies that investing in China involves “great risk” and that those who take such a risk should not expect help from Germany under his leadership. During his speech in Berlin, he also expressed his “heartfelt request” to German business: “Limit the risk you take in order to avoid endangering your own company if it triggers an immediate write-off.” Regarding China itself, it is worth quoting another sentence from Merz. He declared that China is part of a new axis of evil that is emerging, or more precisely, an “axis of autocracies” that aims to revise the liberal international order: “We are facing nothing more and nothing less than a revanchist, anti-liberal axis of states that is openly seeking to compete with liberal democracies.”
Analyzing the above statements of the potential German Chancellor, one may be tempted to say that he will focus on a tougher policy towards China, unlike Scholz, and will also resist (or at least try to) the lobbying pressure of German business, especially automotive. Thus, it seems that the President of the European Commission will find an ally in Merz in implementing the policy of reducing risk towards China. If things take such a turn, it is very possible that the effectiveness of derisking will receive a breath of fresh air, and China will experience further difficulties in expanding into the European market. However, the words of politicians should never be taken for granted, because the future may bring many variables that will be able to turn current strategies even by 180 degrees.
The biggest Chinese carmakers sue the European Commission
The “Big Three” of the Chinese automotive industry, namely BYD, Geely and SAIC, have filed legal proceedings against the European Commission and the tariffs imposed on Chinese electric cars. The companies have initiated proceedings in the Supreme Court in Luxembourg. Not many details have been made public, but the main concerns about the EU tariffs relate to the perception of some of the funds as subsidies, the way in which the subsidies were calculated and the claiming that they were harmful to the European market. Furthermore, the China Chamber of Commerce for Import and Export of Machinery and Electronic Products has filed its complaint, as reported by the Chinese Chamber of Commerce to the EU. Tesla and BMW have also joined the ranks of the Chinese “Big Three”. It can be expected that SAIC, which was subject to the highest tariffs, at 35.3%, will be the most militant.
The European Union seems to be confident in its arguments regarding the imposed tariffs and will defend itself in court against the counterarguments of its opponents. This is confirmed by the words of Olof Gill, spokesman for the European Commission, who stated: “We take note, and will be ready to defend [the duties] in court”. Commissioner Maroš Šefčovič, responsible for trade and economic security at the EC, also spoke in a similar tone a few days later. During his speech at the European Parliament, he was predicting that the cases filed would only deepen the conflict, because they could destroy Chinese attempts to agree on minimal price undertakings for the import of electric vehicles. Additionally, he threw at the complainants: “You shouldn’t take somebody to court before you want to negotiate. So let’s see how this will evolve”. And indeed, at this point, all that remains is to wait and see in which direction this case will go.
EU suspends WTO dispute with China again
In 2022, the European Union filed a complaint with the WTO regarding trade restrictions imposed by China on Lithuania after the country opened a Taiwanese representative office in Vilnius. China, which considers Taiwan part of its territory, introduced trade restrictions against Lithuania, which prompted the EU to take legal action.
In January this year, the suspension period for the case ended and the EU had to decide what to do next in the above matter. The case was initially suspended for a year, but in the second half of January this year, the EU decided to continue it. However, at that time there was a possibility that the proceedings would be suspended again in the near future in order to collect additional evidence. The decision to resume the WTO case may be related to pressure from the United States, which encouraged the EU to continue the proceedings against China.
Nevertheless, on January 27, 2024, the EU once again suspended the WTO dispute with China for technical reasons. The European Commission spokesperson explained the situation as follows: “This is a procedural step taken for technical reasons related to the need to assess certain elements arising from the preparation of written submissions.” The European Commission is to monitor whether Chinese sanctions continue to affect Lithuania. In addition, the Commission assured the Lithuanian side that “the EU remains determined to challenge any coercive measures from third countries” and that “the EU will decide on next steps based on its monitoring of the situation, together with Lithuania.”
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