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EU leaders to discuss stronger shield against Chinese influence

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"China has risen to become an economic and geopolitical competitor, and a systemic competitor,"Cecilia Malmstrom said before EU leaders met for talks on both Brexit and EU relations with China, the world's second largest economy.

[BRUSSELS] The European Union will weigh a more defensive strategy on China on Thursday, signalling a possible end to the unfettered access Chinese business has enjoyed in Europe but which Beijing has failed to reciprocate.

Caught between a new US-Chinese rivalry for economic and military power, EU leaders will try to find an elusive middle path during a summit dinner in Brussels, the first time they have discussed at the highest level how to deal with Beijing.

But despite the common stance Brussels wants to foster, Italy - where eurosceptics share power - prepared to receive Chinese President Xi Jinping for a visit during which he was expected to sign major bilateral trade deals with Rome.

European Trade Commissioner Cecilia Malmstrom told an AmCham conference on transatlantic relations on Thursday that the international economic order had changed.

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"China has risen to become an economic and geopolitical competitor, and a systemic competitor," she said before EU leaders met for talks on both Brexit and EU relations with China, the world's second largest economy.

With China's Xi starting a tour of France and Italy, EU leaders - who have often been divided over China - wanted to present a united front ahead of an EU-China summit on April 9.

According to a draft April summit statement seen by Reuters, the EU is seeking to set deadlines for China to make good on trade and investment pledges that have been repeatedly pushed back.

That was the message delivered to State Councillor Wang Yi by EU foreign ministers on Monday. It marked a shift toward what EU diplomats say is a more "assertive and competitive mindset".

"In the past, it has been extremely difficult for the EU to formulate a clear strategy on China, and past policy documents have not been strategically coherent," said Duncan Freeman at the EU-China Research Centre at the College of Europe. "There is now a clear effort to do that."

US President Donald Trump's campaign to warn against Huawei telecommunications equipment in next-generation wireless networks has also accelerated EU discussions about its position.

Ms Malmstrom said Europe very often agreed with the United States on what global problems were, but not always on the cure - including US tariffs on EU imports and Washington's trade war with Beijing.

"It is tempting to try to lock out China, to decouple rather than to discipline. That might work in the short term. But the long term requires a deeper fix, systemic reforms built to last," she said, urging transatlantic cooperation on the issue.

The deepest tensions lie around China's slowness to open up its economy, a surge of Chinese takeovers in critical sectors in the EU and an impression that Beijing has not stood up for free trade.

With over a billion euros a day in bilateral trade, the EU is China's top trading partner, while China is second only to the United States as a market for European goods and services.

Chinese trade restrictions are more severe than EU barriers in almost every economic sector, according to research firm Rhodium Group and the Mercator Institute for China Studies.

Unlike the United States, which has a naval fleet based in Japan to wield influence over the region, the EU lacks military power to confront China, so its approach is technical.

But any new EU policies could be complicated to implement, as individual EU capitals continue to court Chinese investment.

Italy plans to join China's multi-billion-dollar Belt and Road infrastructure project, while free traders Ireland, Sweden and the Netherlands are wary of any restrictions on commerce.

Germany's views will be important as Berlin has at times pressed for a tougher answer to unfair competition from Chinese rivals but also championed a closer relationship with Beijing.

"Their position needs to stabilise. At the moment it changes on almost every day of the week," the senior envoy said.

REUTERS