Question: How can European organizations with a deep presence in both the West and China navigate the increasingly complex geopolitical landscape?

Alastair Campbell

How many Europeans are aware that Confucius became an unlikely patron saint of the European enlightenment, or that China was praised by the foremost thinkers of the age as a utopian society that had attained an advanced moral tradition without recourse to dogma or faith. Leibniz and Voltaire both turned to the teachings of Confucius to advance their cosmopolitan and humanistic ideals, and even proposed inviting the Chinese to send their own missionaries to the West to teach Europeans the art of practical politics. However, the European obsession with scientific research and military technology took precedence over their vision of a pluralistic harmonious coexistence of nations. The resulting rise of European imperialism and the strenuous efforts of the Catholic Church to thwart such disruptive concepts soon put paid to any serious cultural exchange. This led directly to the century of humiliation: China’s understandable sensitivities to that devastating intervention continue to undermine attempts by Europe’s new masters to craft a policy which both satisfies the economic imperatives of European companies and advances the liberal democratic values promoted by this unelected bureaucracy.

Whereas a bipartisan US is entitled to proclaim its core value system a superior alternative to Chinese governance, the EU has no basis amongst its members for any similar ideological claims and has no consensus amongst its members on how to deal with a country it designates a strategic competitor. EU companies and funds, like their US counterparts, exist for the benefit of stakeholders and have no interest in reducing profitable involvement in the world’s fastest growing market. They cannot openly defy the edicts and sanctions of the EU, nor can they ignore the growing popular anti-Chinese sentiment in many member nations. What they can and should be doing is actively sponsoring and lobbying to create educational programs to generate a new level of knowledge and understanding of China: not a return to the naïve and idealistic vison of the Enlightenment but to a deeper and broader appreciation of China’s unique governance and culture. Without such knowledge, ill-prepared Europeans will simply not be equipped to engage and negotiate with a formidable power and trade adversary, one which at the government level is equipped with greater management and administrative experience than the typical European official, and at the commercial level deploys negotiation skills honed on a very different whetstone of values and objectives.

Sven Behrendt

The competitive relationship between Europe, the U.S. and China, the three central poles of the evolving multipolar system, is the central reference point informing the geopolitical risk profile of any European company with commercial ties to China. It is therefore essential for European corporate geostrategy to develop a clear perspective on the geopolitical calculi of each player in the U.S. – China – Europe nexus and address the consequences of conducting business with and in China. The U.S. is clearly seeking to keep China, its increasingly potent competitor for global leadership, in check, while enlisting Europe as an important ally. For China, the U.S. will continue to represent a hegemon whose global reach is to be reined in while it seeks to pull Europe into its sphere of influence, eroding transatlantic relations. Europe’s interests will constantly oscillate between balancing its long-standing political ties across the Atlantic and its ambition to participate in Asian growth – while at the same time preserving the “strategic autonomy” it now aspires to. Whilst European companies are relatively well positioned when engaging with China, U.S. and Chinese competitors will constantly struggle to advance commercial opportunities in each other’s territory, now they are defined as systemic competitors. Europe’s muted geopolitical ambitions and its internal fragmentation impose less restraints on the European business community. Political weakness transforms into a commercial asset.

Nevertheless, three geopolitical factors relating back to the dynamics of the nexus may hinder the commercial ambitions of European companies dealing with and in China. First, the U.S. will step in when it sees Euro-Chinese commercial ties tilt the Sino-American balance of power in China’s favor, especially in the technology field. Second, Europe will tighten the reins (or at least it should) when it believes that Sino-European economic engagement will compromise its long-term competitiveness and strategic autonomy. Third, the ambitions of European companies will face increasingly important limitations when they are confronted with Chinese geostrategic aspirations based on entirely different principles: a regulatory environment that conflicts with European principles, in particular standards of ESG (Environment, Social, Governance) adherence and CSR (Corporate Social Responsibility) commitments, which diverge from the expectations of a company’s stakeholders. All three factors will therefore present a raft of new challenges for any European business engaging with China.

Sven Behrendt is Managing Director at GeoEconomica, a firm providing geopolitical risk research and advisory services.

Lanxin Xiang

China has actively promoted a multipolar system, and views Europe as an important pole in a more multipolar world. Relations with the EU have recently suffered a setback in the wake of the tit-for-tat sanctions and shelving of the EU-China Comprehensive Agreement on Investment. But these are by and large transient problems that will be overcome. The fundamentals have not changed. Three pillars will continue to sustain a stable China-EU relationship: geopolitical ambitions, economic stakes, and an unsustainable transatlantic China policy adopted by the US and its allies. There is no geopolitical rivalry, either territorial or maritime, between China and the EU. But they share a common desire to become lead poles in the international system. Hence the EU has publicly announced its ambition to establish a “third way” with China, and the current leader of the European commission, Ursula von der Leyen, has proclaimed a “geopolitical commission” with strategic autonomy.

China and EU are each other’s largest trading partners. In December 2020, they announced an investment deal, the Comprehensive Agreement on Investment (CAI), that was first proposed in 2013. Come May 2021, the European Parliament froze ratification of the CAI to the dismay of its architects and corporate beneficiaries. From the Chinese point of view CAI is more important as a geopolitical deal. China made unprecedented concessions in order to snub the new Biden Administration. Even though that was achieved, freezing CAI is just as well, as it gives the domestic economy more time to prepare to absorb CAI’s shock effect. Even so, Europeans do not have reason to be too optimistic. Trumpism is still a strong force in American politics, and Biden may not enjoy a sure victory in the coming midterm elections, not to mention the next presidential election. So, gridlock in Washington will remain a brutal reality for years to come and the recent hype of a “democratic alliance” of transatlantic solidarity between NATO allies to ensure a “free and open Indo-Pacific” is unlikely to last long. Beijing is nonchalant towards European participation and the decision to send warships to the Indo-Pacific. History shows that whenever former colonial powers face domestic chaos, they invoke their traditional “East of Suez” scripts to enact a typical low farce on the high seas. In a military sense, these have no deterrence value against China at all.

Lanxin Xiang is Professor of International History and Politics, Graduate Institute of International and Development Studies, Geneva, Switzerland

Laurent Schiaparelli

European companies generally enjoy a positive image in China. Now, the geo-political and economic landscape of the Chinese market they have accessed over the past 40 years has changed dramatically, with three possible outcomes. For companies which focus on business and business only and are not pushing an agenda that aims to change the political or societal nature of China, there is no unsurmountable barrier in doing business domestically. China grants access to its market to European companies in most sectors, including those deemed strategic in the West. Nokia’s Nuage Networks has been China Mobile Cloud’s strategic partner for its public cloud deployment since 2015. Companies from France, Sweden, Italy and Russia are suppliers of essential parts of Chang’e 6, China’s next lunar module to be launched in 2024. Conversely, China would welcome some reciprocity in these areas, instead of which the West actively blocks Chinese technology corporations such as Huawei and ZTE on spurious security grounds. The second outcome concerns companies whose CEOs place virtue-signaling over the core business. They will be in for a rough ride. Scandinavian companies enjoyed immensely favorable treatment in China until some of them suddenly “grew a conscience” and lost business through limited understanding, and over-simplification of local geo-political issues. In these instances, backlash comes hard, as H&M has painfully experienced recently, both in China and later in Vietnam. The Chinese government does not need to get involved: the boycott of these brands comes from the people.

The third outcome comes about when a government mismanages its relationship with China, and companies from that country become collateral damage. The recent incongruous muscle-flexing of France, participating in a South China Sea joint military exercise with Japan, Australia and the US, essentially a hostile move against China, does not bode well for French companies in China. European governments put their corporations at risk when they antagonize China on issues that reflect deep cultural or political differences. The only sensible course for European corporations is to steer clear of the geo-political and virtue-signaling minefields, although they might be dragged into the crossfire by their own government’s agenda. But they should realize that they are dealing with a pragmatic Chinese administration that operates on a case-by-case basis, welcomes investment in most sectors, and does not let ideologies get in the way of business.

The contributor is the pen name of a former European diplomat who served in Greater China and currently consults for Western companies in the region and for Chinese corporations in Europe

Mario Del Pero

European organizations operating in both the West and China have a vital, although complicated, role to play today. It is complicated because of the rising tensions between the U.S. and China, and – more broadly – the crisis and contestation of a process of global integration long centered on Sino-American interdependence. No matter who is at the helm in Washington, the United States aims now at decoupling its economy from that of China, reducing Beijing’s role in transnational supply chains. The Biden administration is pressuring European allies, presumably conditioning any new negotiation on trade on Europe’s willingness to follow the U.S. along the same path. But the role of European organizations – commercial, industrial and financial, is pivotal, because there is nothing more dangerous than a violent derailment of globalization and the emergence of regional and antagonistic interdependencies, with a renewed Euro-American bloc mobilized against China.

The diagnosis is relatively simple. The policy prescription much less so. In a nutshell, European organizations should try to act at three different levels, each one highlighting their role as potential “bridges” in this troubling divide. The first level is ideological. It is up to them to reassert the importance and validity of the processes of global integration, while addressing some of their pitfalls, particularly for those segments of the population that were insufficiently protected from the transformational effects of globalization and technological change. In order to be credible, this ideological counter-offensive cannot afford to be shy in highlighting China’s responsibilities in the current predicament of globalization, beginning of course with its repression of political dissent and violation of human rights. The second level is cultural. Here the task, and the challenge, is to reaffirm a cosmopolitan ethos, one of the fundamental byproducts of globalization that educational and cultural exchanges have fostered and intensified, but that is now clearly under assault. No matter what the problems and flaws of globalization, it is fundamental to stress how the response cannot and shall not be a nationalist or selectively interdependent retrenchment. The third and last level is political. Here European market participants should strive to work, and manage disputes, through the structures and rules of global governance, beginning with the WTO. They might be insufficient and even anachronistic, but they are the ones we have and must work with.

Mario Del Pero is Professor of International History at Sciences Po, Paris, France