ReConnect China

Welcome to the ReConnect China podcast, where we explore the dynamic relationship between the European Union and China. In this episode of the ReConnect podcast University of Tartü researcher Elo Süld interviews Ties Dams. Ties Dams is a political theorist, writer and Research Fellow at the Clingendael Institute, working on a book-project about Europe and the geopolitics of narrative. Aside from his research, he is a member of the EEAS expert group on Foreign Information Manipulation and Interference. With Ties, Elo speaks about what the power of narrative is, why it matters to geopolitics, and why the highest echelons of Chinese politics have made gaining global narrative power a top priority. 

ReConnect China - Generating independent knowledge for a resilient future with China for Europe and its citizens. Find out more about the project here: www.reconnect-china.ugent.be/

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Transcript of the episode 2

ReConnect China Podcast, episode 2:

[Suld] Welcome to the ReConnect China podcast. I am Elo Suld from the University of Tartu Asia Centre, and my guest today is Ties Dams, a political theorist, writer and research fellow at the Clingendael Institute and Leiden University.

In Dutch, he published a best-selling monograph on Xi Jinping in 2018. Nowadays, he is working on a book project about Europe and the geopolitics of narrative. Aside from his research, he is a member of the European External Action Service, in an expert group on foreign information manipulation and interference.

[Greetings]

These words, ‘the power of narrative’, sound diffused and very academic. What relevance does your topic of research have in relations of current Sino-European relations?

[Dams] I think you're completely right that it sounds very conceptual. But it was Josep Borrell, the High Representative for Foreign Affairs, who, in the beginning of the COVID pandemic, said there is a battle of narratives going on. And that was being acted out in Europe, too, in a real sense. We had Chinese facemask diplomacy. We had wolf-warrior diplomats. And really, since then, we've had extremes, ups and downs, in the way China has been trying to reach European audiences, sometimes bullying or being coercive, sometimes being very charming and inviting. And I think since then, in Sino-European relations, and broader speaking, in great power politics, this ability to tell your story has been very urgent. It's being acted out very concretely.

And I think it raises a number of questions for European policymakers. How do we react to these, for instance, to these Chinese diplomats? But also, how do we protect our information sphere, our public debate from disinformation, from self-censorship, and from these new influences, and this new geopolitisation of public debate?

And I think there, the very philosophic word narrative becomes actually just a very practical question of how do we manage to speak to each other in free societies when the geopolitical pressure from outside is mounting?

[Suld] Yes, but as you say, this narrative word is a very kind of fuzzy word. But what does it mean exactly, the conception of this word?

[Dams] Yeah, that's actually, of course, as everything in academia, a matter of great debate. But perhaps even not enough debate. So especially in the field of international relations, or the study of diplomacy in geopolitics, a narrative is certainly a buzzword. It's a hype. People use it a lot.

But they use it rather synonymously or roughly to rhetoric, language, discourse, things diplomats and leaders say. Whereas in literary theory and philosophy, there are shelves filled with far more precise and insightful definitions of what a narrative is, and what it does to human life.

And why I say that is, I tend to follow the French philosopher Paul Ricoeur, who happened to be, by the way, the one-time mentor to a then young philosophy student, Emmanuel Macron, in saying that a narrative is the way through making stories that people make sense of time.

We live through time, but it's very hard to really grasp it. And we people need to feel that we're connected to the history and have a sense of where we're going. And narrative is the way through stories, through emplotment, to making plots, that we can sense that we belong to each other, that we've come from a shared past and we're headed to a shared future.

And so narrative is not just something we do to the experience of time, but the way we shape communities. And I think in the end, the way we shape political communities.

And so that's my take on narrative. It's still very broad because we do it in many different ways, not just in written form. We tell stories with all kinds of things, with technologies, with policies, and indeed with speeches. But it's a way to form a community and to set that community in time, to know where we've been and to know where we're going.

[Suld] We are talking here about China. How is Chinese geopolitical strategy concerned with narrative power? And in what way is it different from the Chinese strategic conception of narrative power from Western or American or European concept?

[Dams] One of the reasons I came to this topic is because in my study of China, I found that indeed the Chinese state and the Communist Party is incredibly preoccupied with, at least what I call narrative power.

And one sign of that is that Xi Jinping has appointed to the number four seat on his Politburo Standing Committee, so the highest governing body of China, Wang Huning, who is basically a philosopher, political theorist, speechwriter, who's been designing the grand narratives of China's power for almost three decades now. It's not just a philosophical matter for Chinese intellectuals. It's something of very urgent political and geopolitical strategy making at the highest levels of Chinese politics.

But indeed, I think the strategic conception differs from, for instance, the American or European conceptions of the importance of narratives and power. And that is that China really seems to be reasoning from a standpoint of being the underdog.

If you look at the way Chinese policy approaches the importance of, for instance, building its global media presence, it's not just to send out to the world a favorable image of China. It's to break the perceived Western hegemony on language, discourse, and narrative in the world. It's about breaking free from what it sees as mostly US narratives dominating the way we see multilateral cooperation, the way we see global politics, the way we see diplomacy, and freeing up some space for the Chinese story.

It's coming from an underdog position. It's coming from a real proposition of power. So it recognizes the real power that comes from these norms and stories that shape the way we've formed global politics. And it has a real mission of gaining some space for the unique Chinese story, or what is perceived to be the unique Chinese story in that arena.

It's coming from a completely different perspective. And that's why it's so interesting and also so confrontational. It really confronts, I think, some of the European stances on this kind of geopolitical influence, where we've been able to take for granted that I come from the Netherlands, that, for instance, the norms and the language in multilevel governance have really been suited to our perspective on the world as well.

And so where we've taken the power of narrative for granted and have failed to act it out, I think, in the last years, China has been grasping it as a matter of great strategic importance and a big obstacle, a big fight still to win.

[Suld] You are talking also about Europeans and revue geopolitique. How is this geopolitical kind of maturation, let's say, also kind of awakeness, shaped by China and Chinese narratives?

[Dams] That's very interesting. And I think that's what Josep Borrell pointed us to. And in the midst of this crisis that had very real sort of material impact on health, trade links and so forth, he pointed towards the immaterial, to the power of stories and shaping these events. And he pointed to the return of great power politics. So, these big blocks of power trying to influence each other. And Europe, once again, becoming more of an arena than really a player in that sphere.

And it's interesting that sort of the return of great power politics and of hard material competition between these power corps is simultaneous to this return of the power of narrative, I would say. And it comes at the same time as, I think, a third development. And that is this Europe, and particularly the European Union, that is reinventing itself as a geopolitical actor. And I do call it the revue geopolitique. That's a term I borrowed from my Dutch fellow political theorist, Luuk van Middelaar, who's written a book about this.

And it's really a new step, I think, in the evolution of the EU, where we see the European Commission, geopolitics being factored into trade policy, to subsidies, to investment screening and so forth. We see the language of also the European Council President being far more focused on Europe needing to have an equal voice on the world stage of competition with these other great powers.

And so we have this sort of reimagination of European cooperation as something that can protect European citizens from the excesses of geopolitical rivalry between China and the US. And I think this influences the sort of debate on narrative power in the sense that what great powers typically have is a leader that uniformly represents the story of its power and of its civilization on the world stage.

And this is, of course, exactly what we don't have, and perhaps don't want to have in Europe. We're a confederacy of many member states where we have shared responsibilities. Some things the European Commission does, other things the heads of state are still in charge of. But no one is really in a position to speak with one voice on behalf of Europe as a whole.

And so, we're challenged by the singular leadership of Xi Jinping. But also, I think, in the same way by a succession of American presidents, let's see who will be there to follow Biden, to reinvent spokesmanship on the world stage in a European way where we can shape these negotiations between the leaders and shape the global public debate on issues without having to resort to what we don't have. And that is a model of singular leadership.

And so I think China really challenges us to think about that question, about the political answer to China's rise. And I think there's a second question that China raises, and that's, how do you protect an open society and especially the free flow of information and open debate in an open society such as European societies are, in a time where it becomes of growing importance to rival power blocs that are not democratic and not open to influence that free space? And especially, how do you protect that free space of debate without sacrificing its openness?

And, you know, the wave of disinformation coming from Russia has already raised that question. But if we look a little bit into the future and think about the potential of China-backed platforms in amplifying that kind of disinformation, well, we really have a serious sort of strategic and I think moral question to ask.

[Suld] My last question will be more practical. You are also a member of the European External Action Service, an expert group on foreign information manipulation and interference. So, you are not just concerned with the narrative power in the theoretical sense, but also with the implications for strategy and policy. Now it's important also to say, what is your key message to the policymakers working on related topics?

[Dams] I think, boiled down in the simplest way, it might be, this is not just about regulation. It's a political challenge.

China's rise, quite simply, presents a different worldview and lends power to a different trajectory for the world than what Europe has grown used to and what Europe benefits from. We can think of smart and just regulatory frameworks to keep disinformation at bay. We can engage in a repartee with Chinese wolf-warrior diplomats.  But really, the most fundamental challenge China poses is not about China, and it's not about defending Europe.

It's about telling a renewed story of Europe to third audiences in the world about why Europe is an important and favorable and attractive cooperation partner. And that's not a story that we can fix by a regulatory framework or by legislation or by policy instruments. That's really something that we should engage on the political level.

And I think the expertise built up in the area of foreign information manipulation and interference is of great value to that. And that information and that view on this arena of narrative power, which is very difficult to grasp, I think, if you're not a diplomat working in the thick of it, should feed into these bigger political questions that need to be discussed in Europe.

So, yeah, my key message is: think beyond regulation. Think politically and think geopolitically when it comes to narrative power.

[Suld] Thank you, Ties Dams, for such an interesting talk.

Welcome to the ReConnect China podcast, where we explore the dynamic relationship between the European Union and China. In this first episode, we’ll be discussing the first policy brief from ReConnect China, titled ‘Remonstrating,’ or the Art of Forging Relations, by Bart Dessein and Jasper Roctus from Ghent University. This brief explores the importance of building strong relationships between Europe and China, and how this can be achieved through dialogue and mutual understanding. So sit back, relax, and join us as we delve into this fascinating topic.

The episode is hosted by Zhao Huanyu, the scientific project manager of the ReConnect China project.

You can find the policy brief here: www.reconnect-china.ugent.be/2023/05/29…er-roctus/

ReConnect China - Generating independent knowledge for a resilient future with China for Europe and its citizens. Find out more about the project here: www.reconnect-china.ugent.be/

>> Listen to the episode

Transcript of the episode 1

ReConnect China Podcast, episode 1:

‘How to work towards a resilient future with China?’

[Zhao] Welcome to this first ReConnect China podcast. My name is Zhao Huanyu. I'm the scientific project manager and researcher of the ReConnect China project at Ghent University in Belgium.

ReConnect China is a project funded by the European Commission in a framework of Horizon Europe. The project aims to work towards a resilient future with China for the EU and its citizens through a raising awareness on China among the general public and European youth in particular.

In this podcast, I have a talk with Bart Dessein and Jasper Roctus. Both are affiliated to Ghent University's research group, East Asian Culture in Perspective, Identity, Historical Consciousness, Modernity. Both of them are also affiliated to the Egmont Royal Institute for International Relations in Brussels.

[Greetings]

[Zhao] The title of your jointly published first policy brief in a framework of ReConnect China is “’Remonstrating’, or the Art of Forging Relations”. What do you mean by remonstrating and why the reference you make to the Baihutong, the discussion in the White Tiger Hall, which is the record of political discussion that was held in the beginning of the Common Era?

[Dessein] The Baihutong is a philosophical political discussion or the record of such a discussion which was held in the beginning of the Common Era. And the protagonists of this discussion were advisors to the emperor. And we can say that, if we look at the political institutions of contemporary China, if you look at the Politburo, if you look at the Standing Committee, that also there you have kind of a similar situation in which politicians are having some discussion, some advisors with the top leadership. And in that sense, we have chosen to give this a seam line.

[Zhao] And in the policy brief, you allude to a difference in China's relations with the EU as political body on one hand and with individual member states of the EU on the other hand. Do such different approaches indeed exist?

[Roctus] Yes, indeed, they do. And you could even expand this to China's different positions towards different institutions of the European Union, be it between the Commission, the Council, the Parliaments, or indeed its member states.

Over the past decades, China has struggled significantly in balancing its pledge to support further integration of the Union while simultaneously maintaining warmer relations with some member states than others. An example of this is the 16 + 1, which then became 17 + 1, and I think is nowadays 14 + 1 after the withdrawal of the Baltic States, which has led to many accusations that China is playing divide and rule between the EU's member states.

Of course, the same goes for some BRI-related projects in the EU's periphery. A factor worth mentioning in this regard is the general misunderstandings in China on the bottom up, the member states being the bottom in this case, approach of policy initiatives in Brussels, while many Chinese, be it academic or politicians, expect the Union to behave in the same top-down approach that they are familiar with in China.

Great confusion especially exists on the one-China policy, which, while every member state and the EU as a whole adhere to this nominally, practically different approaches exist. We, of course, all know about the situation with Lithuania and the Taiwan office. If we observe the last several years, we can see that generally China supports any actor, be it inside the Union or inside the member states, that advocates for a strategical autonomous foreign policy or policy in Brussels, read, of course, in this case, policy independence from the United States.

That's why in April we saw how Emmanuel Macron, the president of France, who recently allegedly blocked NATO expansion towards East Asia, was warmly welcomed in China, while Ursula von der Leyen, as the leader of the European Commission, was snubbed during the joint visit to China.

It should, of course, in this regard, be mentioned that Ursula von der Leyen and many EU officials do not have a direct or an equal counterpart, unlike the head of states and of member states, which is a factor that further complicates matters.

In conclusion, I would say that different approaches by China do not exist per se, but it's more like a more pragmatically differing treatment of those in the EU that support a policy line beneficial to the country.

[Zhao] And what about China's relations with the regions of the world?

[Dessein] Well, as Mr. Roctus just mentioned, there is a great amount of pragmatical attitude in China's foreign policies. I would say that since the end of the bipolar world order and the end of the Cold War, that we have seen in the world growing regionalization, which has to do with geoeconomics and also with geopolitics, which are constantly changing.

And in this sense, European Union is a very important one, and but it's not the only partner of China, but China is also really diversifying in a very pragmatic way its foreign policies towards other parts of the world.

If you look for instance, for energy, we see that China is intensifying its relations with the African continent, also with South America. We also see that since the collapse of the Soviet Union, and that China has also, first as a kind of a security system, but gradually developing into an economic collaboration project has at the end of the 20th century, 1996, created the Shanghai Cooperation Organization, of which Iran also became a full member last week.

So, you really see that, and this has everything to do with pragmaticism and with the dependencies we have on different issues in world politics or different dependencies, and that's how EU is one partner, but one among many partners for China.

[Zhao] And in your analysis in a policy brief, you refer to the 20th Party Congress of the Chinese Communist Party of October 2022. You perceive an uneasy relationship between ideology and economy in contemporary China. You speak about ideology tilting towards economic realism. Can you explain this?

[Roctus] Let's not forget that in October of last year, China was still living in a different world, in a different reality than it is now. Zero COVID back then still seemed there to stay, and ideology and personal loyalty clearly took precedence over the economy.

In Xi's speech in October 2022, terms like security, appeared much more frequent than terms like reform for the economy in general, for example. Speeches were given during the Party Congress where the signification of Marxism was hailed as the success of the rise of China, while the economic reforms since 1978 were not really mentioned.

We also saw this reflected in state media at the time, which really uplays ideological themes, also related to ideology and security, while little or no negative attention was given to teams like the private markets and small businesses. This line was further solidified by the actions of the new Politburo, so-called All-Xi Politburo, consisting of all Xi Jinping loyalists, who opted to visit to Yan'an, a city in inland China, with some great revolutionary relevance for the party, as it was the main base from where the CCP conducted its insurgency against the nationalists and fought against the Japanese.

But the city holds little economic relevance. It stands, for example, in contrast with Xi's predecessors who opted to visit the economically important coastline. During his stay in the city, Xi even praised Mao Zedong's controversial rectification movements, which was even criticized by some other predecessors, which had taken place in Yan'an and had crackdowns on internal ideological dissent.

During this time, ideological stood above economy. That much was clear.

Everything then changed in November of last year with the so-called White Paper revolution by Xi Jinping, and then the subsequent U-turn by the CCP's leadership on zero COVID. Considering popular dissidence in the last week of November, while this started over an incident that was not related to the economy, the leadership seemed to realize that in one way or another, it was losing popular support over its relative neglect of the economy, and zero COVID was not sustainable.

The shift towards economic openness was also accompanied by a shift in state media rhetoric. And by February 2023, China was clearly living in a different economic reality than four months prior.

[Zhao] And how does this translate in the 14th People's Congress of March 2023?

[Dessein] The inkling of a focus tilting towards economic realism has been maintained and even been enhanced in the leading up to, and as a result of the 14th People's Congress we had in March 2023.

We see that the constitution of the Central Committee of the Chinese Communist Party already shows this kind of an inkling and that something was to gradually change. For instance, of the members of the Central Committee, 114 have enjoyed a science-based education, while 121, almost 50-50, but a little bit more, have in their education a more business-oriented background.

This already was presaging that gradually changes were to come.

And leading up to the 14th People's Congress, as my colleague said, security was very prominent, but gradually we saw also an enhancement of references to economic reality, basically since October 2022, and then peaking in January 2023.

And this was indeed affirmed if you look at the executive power, which is the result of the 14th People's Congress, we see that the premier, Li Qiang, has some economic background. Also, the second and the third vice premiers have in their education and in their activities as party members shown to be having a considerable sway in the financial and the economic fields. Also, the vice president, Han Zheng, is to be associated with the development of the East Coast of China, which is a process that started basically under the presidency of Jiang Zemin. You can also remember here that it was Li Qiang, the current prime minister, who lifted the very severe zero COVID measures.

So, in response also partly to the white paper or the white sheet of paper revolution already mentioned.

[Zhao] Does this search for balance between ideology and economy in China's international relations reflect the country's current domestic situation?

[Dessein] Yes, this economic pragmatism or the sense of economic reality is really given in by the domestic situation. Already a few days after he was officially appointed the new prime minister, Li Qiang pointed out three urgent tasks to be done by the executive power.

That is restoring trust among private companies in the government, attracting foreign direct investment, and, very importantly, avoiding the middle-income trap, which is a very important issue for China at this moment.

And China has to climb up in the production ladder. It is no more possible to be the cheapest producer of cheap labor consumer goods. So, there is a necessity of technology. Despite the whole rhetoric about the dual circulation, China still is in very much need of technology. And for that, I can refer to my diversification of foreign policy already mentioned. For technology, of course, Europe is important, but for energy and for raw materials, it will, for instance, be South America or African countries.

So, the technology thing is something I think that is very important. If you look also at the very global issues we are facing, climate change and so on, this all will require technological expertise. And for this it would also be very conducive for China to overcome the middle-income trap.

[Roctus] Another issue that is worth mentioning is China's slowly snowballing demographic crisis. While China is at this moment still enjoying so-called demographic diffidence, which means that's a relatively small proportion of the population is either under or above working age. Although in absolute numbers, working age population has already peaked around 2016. A crisis is really on the horizon.

The generation of the baby boom that took place after the Great Leap Forward during the 1960s is going to retire over the next decades, which will eventually lead to a doubling of China's so-called dependency ratio by 2050. Nowadays, there are roughly 35% of the population is economically dependent on the working population. This will grow to 70% by 2050.

Under the decreasing fertility rates of the last few years, we know that these people that are retiring are not going to be replaced one-to-one, even if birth rates rebound slightly. Mass immigration, as we know in the West, is no solution for the country's falling birth rates either, as the government is cautious with any move that could further increase ethnic tensions.

So economically speaking, as my colleague also said just now, it will be crucial for the country's industry to become less labor-intensive. Whether it will succeed into this will basically decide, whether ‘China will grow rich before it grows old or it will grow old before it grows rich’.

[Zhao] Do you have some concluding observations or remarks?

[Roctus] Well, I think an important theme to remember for the EU is now even more now, so that's economic realism, as we just explained, has once again taken center stage in China, is that we have to be, that Brussels has to be aware of the fact that the EU has a lot of leverage over China.

Too often, we are too focused on the opposite, namely that China would have a lot of leverage over us, but the other way goes as well. While China can, for example, do in some ways without the US or is already doing without the US, it cannot bear to also lose the US in export markets, and as my colleague just explained, also as a hub for technology.

So, more self-confidence with regard to China is therefore warranted in Brussels.

[Dessein] I agree with what my colleague just mentioned, and I think knowing this reality, that when talking about China, we very often start off from a negative attitude, not from a neutral one, and I would say that adopting a neutral, objective attitude will show us possibilities, for indeed principled pragmatism to deal with China as we deal with any other country.

We need knowledge about China, and based on that knowledge, to work together for the future of mankind. It is important that we keep on dialoguing, that we keep open the communication lines for all of us.

[Zhao] Thank you for your insightful reflections on EU-China relations, and for your suggestions on how to work towards a resilient future for the EU and its citizens with China.

(Outi Luova & Philipp Brugner & Gábor Szüdi)

[Intro] You are listening to the ReConnect China podcast, a European research consortium analyzing the European-Chinese relations of the future.

[Luova] Welcome to the ReConnect China podcast. I'm Outi Luova from the Centre for East Asian Studies at the University of Turku, Finland. Today I'm joined by two researchers from the Centre for Social Innovation in Austria to talk about their recent ReConnect China report on EU-China cooperation on science, technology, innovation.

Today's two guests are Philipp Brugner, who is a Slavicist and political scientist by training, and Gábor Szüdi, who is an economist by training. They both work in the Units for Research Policy and Societal Development at the Centre for Social Innovation, and they have several years of experience in working in EU-funded international research projects with a particular focus on the topics of science diplomacy with non-like-minded states, research integrity, and trust in science.

They are also part of the European Research and Innovation Knowledge Network on China 2.0 that supports the European Commission and EU member states with background analysis about science cooperation with China. Together, they lead ReConnect China's analysis on science, technology, and innovation cooperation between the EU and China, and they oversee the project's impact strategy. Welcome, Philipp and Gábor.

[Brugner & Szüdi] Hello from our side. Nice to be here with you.

[Luova] I would like to start by asking, why did you choose the fields of artificial intelligence, big data, and machine learning in particular for the report?

[Szüdi] Thank you for the question. So, yes, we chose these topics exactly because we thought that these are very topical issues. We promised at the beginning in our grant agreement that we will do something with big data, and we had a preliminary meeting with all the partners. What do they think, what could be the most interesting scientific fields to study here in terms of the scientific, technological, and innovation cooperation between China and the European Union member states. And after we had the discussion, we decided that we should put it to the framework of the frontier technologies, our studies. So, we came to these big areas of big data, artificial intelligence, and machine learning, which we think are totally relevant right now. And here we could make very nice and broad analysis to a bibliometric study and a co-patent study, taking more than 200 keywords into consideration. We could analyse 10,000 publications and patents between the last 10 years. So, our analytical framework started in 2011 and ended in 2022.

[Luova] That's a huge data. Based on your report, what are the most important patents of current EU-China cooperation in STI field?

[Szüdi] So yeah, it's a huge data. You can see it was a long report. To summarize it, the most interesting and important part for us was very huge intensification of the collaboration between the European countries and China. And here I have to say that it's not just the 27 EU member states, but we also included the United Kingdom, Norway, and Switzerland into the framework because these are big players towards China. And I have to say that we saw that in the last few years, the number of co-publications between these European countries and China took over the number of co-publications between the US and China. So, there are now more co-publications between China and Europe than between China and the United States, which we think is quite interesting. Of course, we should follow this trend, that if it goes and I think it can be traced back to the more restrictive stance of the United States in terms of trade and other measures. Maybe this will have a profound effect on the scientific cooperation.

Otherwise, what we saw that the UK is still the largest player. 44, 45 percent of all the publications, almost half of it comes from the United Kingdom. Afterwards, I think there are no surprises there, there is Germany, France, Italy, and the Netherlands. And we saw some players from Eastern Europe, for example, Poland has intensified its cooperation very much in the last ten years with China, but the cooperation is still very diverse in terms of scientific fields and also in terms of institutions. We cannot say that only one or two institutions are currently cooperating with Chinese institutions, but there are different, I would say, clusters in different topics like health, engineering, artificial intelligence, and machine learning that are cooperating with Chinese actors.

[Luova] Thank you, Gábor, that was really interesting. If we take a closer look at the scientific fields and economic sectors, which are most represented there and what does that actually tell us about the cooperation?

[Szüdi] Well, we made broad categories of scientific fields and we went a little bit deeper. I think what can be really interesting is that applied sciences, almost two-thirds, so 65 percent of the cooperation between China and Europe, followed by natural sciences, health sciences, and all these. So applied sciences, natural health sciences are almost 95 percent of the cooperation, which means that, for example, social sciences are less than 5 percent.

We took from this that the Chinese partners are really interested in scientific cooperations from the applied perspective, so they are looking for really applied values. And here the two most important subfields, I would say, one is the image processing and the other one is telecommunication ones. Image processing and telecommunications are the two biggest fields within applied sciences, counting almost one-third of all cooperation.

[Brugner] What Gábor said is also alluding to some corporations that we see, for instance, when we look at the patents. As we said, we have also done the patent analysis, and just to add on this picture on telecommunications, the same representation we see by Chinese companies and European companies involved and also very strong players like Huawei are indeed leading that field of telecommunications, or Nokia. So it is not only a cooperation that takes place on the research side but also on the side of companies and private entities.

[Luova] Clearly, there are many fields in which cooperation is very attractive with China. Cn you mention any specific fields in which cooperation is particularly exciting, for example, in frontier technologies?

[Brugner] Yes, I think also this is what our report really indicates. China is rapidly speeding up in science, technology and innovation in general. We have not only worked with the data for the report, so the co-publications and the patents, but of course, also, as a desk researcher, as a background to the report, we looked a lot into current documents published by the Chinese authorities and also other sources that study China's innovation system. And we have an opening of China's science system since now four and a half decades with some great reforms in the 70s under Deng Xiaoping. And this is a rapid development that could be observed. And in that time, China took example of a clearly indicator driven system like the UK one, that indicators and metrics play a very great role in how China defines its prosperousness and success in being innovative, innovation leader country or scientifically leading country.

In 2022, China overtook any other country in scientific publications for the first time with about more than 400,000 publications of scientific papers. And China makes progress in the worldwide top most cited publications. It's two factors that give a good impression of what China is currently pursuing. China is also pledging to contribute to global mitigation of climate change, to outer space exploration, to biotechnology or to environmental sciences and the challenges related to that more in general. We read that from official documents from China, we read that from Chinese political leaders. And in China, I think it's quite safe to say if political leaders announce priorities, that will be also translated into certain policies. And that gives on the one side a clear feel for and potential that China is open for cooperation, whereas there is growing concerns in this cooperation too. But I think we have to take both things into account at the same time.

[Luova] Yeah, exactly. There are more and more also challenges coming ahead in cooperation with China. And based on your research and your own experience, what are currently the biggest challenges when working with China?

[Brugner] Maybe I start first, Gábor can also add to that. In the report, we exclusively deal with the European environment. So as Gábor already alluded to, the US current approach is very strict and limits a lot of cooperation with China. Whereas our impression is that in the EU there is still the ambition and the attempt to strike the right balance when it comes to cooperating with China. As I already tried to explain, we think there are opportunities given China's brainpower, given China's tremendous output of scientific publications in relevant fields, but the challenges are at the moment dominating a lot of discourses. And you can read about that. China is misusing scientific research and data that they acquire through cooperation with the European partners in terms of dual use. That means civilian technology that is used for military purposes. And this is obviously not to the taste of the European partners. The topic of dual use has really dominated the discourse a lot over the past years.

But also other aspects like ethics in science, the values in science, the practices of how to do research are different in China and the EU. For instance, there's a tendency in the EU to stop and stall the cooperation with the so-called Seven Sons Universities. This is one of the most discussed examples. Seven Sons of Defence, actually, they are seven military technology-oriented universities under the state. The EU has cooperated with them on a very flexible, limitless basis. But now, given these rhetorics and these discussions on research misuse and also dual use, the EU is trying and I think also national countries are trying to reassess this cooperation with the Seven Sons of National Defence, which are only one example of how China also is regarding research cooperation in view of pursuing national interests, strategic interests.

And here we have to make clear that our research cooperation is not, shouldn't be a policy, a policy supporting objectives, but it should be free and independent of politics. And then with China, there's certainly potent discussion needed how to do that in the future.

[Luova] Yeah, that's a long list of points. Do you have anything to add, Gábor?

[Szüdi] Yeah, I forgot what should be highlighted. But I said at the beginning that the most important scientific and STI cooperation areas are all related to some applied value. But this is like image processing or telecommunications where we can all use our fantasies and what kind of analytical use there can be for example, image processing. But the thing is that almost everything, even basic research can be turned to military use if somebody wants to have it like this. So then this dual use challenge, this dual use sphere is, I think, what is penetrating nowadays the discourse about the cooperation with China. So I think this is the biggest challenge. The European Union wants to find a way how to cooperate with China in the most important fields, because like Philipp said, China is a scientific powerhouse, and how not to cut off the cooperation threads like the US. I think that's in itself a very big challenge for the future, that how do we find these ways to go forward in the cooperation.

[Brugner] And maybe one more addition to that. In Horizon Europe, so the EU's framework program for research innovation, we have a principle that is called “do no significant harm”. Any research that is funded on the Horizon must comply to this principle that no harm is done to the environment. And it's such type of principles that the EU cherishes and also puts forward as clear messages to its international partners. They bring us into these uneasy situations with in particular China, but not only China. We focus on China, but there's several other countries where we probably could also translate these same questions to in how the EU should do cooperation in the future. We think it needs more clear-cut standards and procedures on how to administrate and also go along these cooperation questions in order to not conflict our own interests.

[Luova] Those are difficult questions and I wonder if we are going to have a nice set of guidelines in the future.

Philipp, I would like to ask you one more question about what you just said and maybe a clarification because I'm not aware of how EU defines environment in the statement that we need to pay attention to environments in our research cooperation with other countries and in research in general.

[Brugner] So this question, it wasn't particularly part of the report, but I will try to answer it. The “do no significant harm” principle from the Horizon Programme really concerns the green transition, so I would say, this is an issue that relates to the natural environment. Maybe we need in the EU in the future also these types of principles that could encompass all areas of cooperation with China. The green transition is currently very much highlighted by the EU. I think this is why this principle is now in place with the Horizon Programme and it is one layer that could relate to what we said earlier, the EU-China cooperation on fighting climate change. China has also enshrined these principles by its current strategies, the large strategies that speak about carbon peak in China before 2030 and carbon neutrality by 2060, for instance, or we see that by massive investments in the clean energy sector in China, where China is dominating the clean energy technology sector, also in terms of being a net exporter to the EU. We rely currently on these clean technology energies while also pursuing our own green transition. This is a fact that we have to take into account. And given that role of China, I think the cooperation should be pursued.

But we should more talk about these principles that we have and to which extent we could convince China as a partner to live up to the same principles. So that we find common ground to formulate joint principles on certain research areas such as environmental sciences and natural sciences. That is clearly a recommendation also in the policy brief, that the other areas like AI that have a lot of dual use risk should also be guided by principles. And Gábor researched on that in his policy brief a bit more in detail. We see here also, I think, conflicting legislation. There's AI principles in the EU, but then there's also AI principles currently sketched and modelled by China. And we are not sure how much overlap is there on the AI principles between these two players.

[Luova] So more studies to be done. If we still continue with the green tech topic, because that's very important and currently a bit in shadow because of other global concerns. If you think of shared ambitions, such as combating climate change or establishing energy security or exploring the outer space, how would you estimate the role of China and its scientific technological capacities?

[Brugner] As I said already, I think that answer could be cut quite short. China, given its brainpower, its R&D funding that is massively ramping up, its clear targets that it follows in policy areas, China will necessarily, I think, bring forward innovations that are interesting to not only Europe, but global mankind as such in order to tackle these societal challenges as they are climate change or how human mankind uses the outer space. These are questions that are important for the future of our planet.

We should not follow the US example of restricting our cooperation too much, but on the other hand, try, as we said at the beginning, to strike a right balance between being very aware of the risks and also of the practices that are driving Chinese researchers offering the cooperation. And awareness also means being more informed. So we have to study the Chinese research system, how it works, and also the practices behind. We have to offer basically capacity building and information to any researchers in Europe that are confronted with cooperation requests from China, in order to give them the spaces to take informed decisions. Of course, this has to be added up by professional services in the universities or in the research institutions that read Chinese language, can interpret Chinese legal texts, and so on and so forth. But in a combination, also, we think it needs a bottom-up approach to train researchers more widely. This is, by the way, also one of the overall goals of ReConnect China, to raise this awareness on China in the society and in specific target groups.

[Luova] Yeah, during the discussion, you both have mentioned many risks and needs that we are facing in China cooperation. So based on your very comprehensive report, it's like 130 pages long, if you summarize, what would be the most important policy recommendations you would address to policymakers, both on national level and also at the European level?

[Szüdi] It's a tricky question, because of all the intertwined related issues that Philip has now been describing. I would say the most important would be from a European perspective, but also from a national perspective, to be able to define what are those areas that we find, so to say, risky, unnecessarily risky, moderately risky, or not risky at all. And in these terms, we should not only go into restrictions, like in the case of the United States, but develop criteria. A clear set of criteria on how to define such scientific fears which we feel that are too risky, and apply a mixed set of policy answers, policy measures that can mitigate risks. I'm not just talking about restrictions here, but also regulations, which should be, as also mentioned by Philip, in line with the regulation on artificial intelligence coming from China. So here we should see that what regulative measures we can bring forth, and also give advices. I think that we, a little bit, underestimate the power of not just these regulations, but also information given to scientists. And this is true for the European Commission and the European side, but also for nation states.

[Brugner] A good example for that is what we see in Germany happening at the moment. We found in our research, and we are partially also connected to these people, that the German Ministry for Science now has a new funding scheme that is called, in German, Regio China, so it's Region China, let's say. And what they are doing, they're giving funding specifically to institutions in geographical proximity to fund networks, exchange, knowledge transfer, with the desired output to define their own first guidelines of how to deal with China in research cooperation in the future. Germany is too large to define one approach of how to do research cooperation with China. They came to the conclusion that the institutions that are close to each other, geographically speaking, they know a lot. They are also working on a trusted basis. And if those people are asked, how did you inform yourself about the Chinese partner that has approached you, be it for a joint publication, or for a research cooperation, a real project, they usually ask in-house, or they ask institutions nearby that they are familiar with, the people they are familiar with on a personal level or on an institutional level. So that is also the idea of this Regio China funding scheme.

And we think this is a good example of how also other larger EU countries could tackle this question. Whereas in other smaller countries, like for Austria, the trend is rather in going into a national-wide strategy. There's further discussions of also how to do that on a national level. And for the larger countries, regional strategies could make sense. The EU strategy is of course always a syllabus, kind of a summary, a picture of what happens on the national levels. We think the EU should give guidelines that could apply to all, but also give this certain type of flexibility and leeway that countries define their own approaches.

[Luova] Philip and Gábor, thank you so much for these really interesting insights about science cooperation between Europe and China. I'm sure that our listeners are going to enjoy it.

[Szüdi] Thank you for having us.

[Brugner] Thank you, Outi. It was very nice to talk about that topic and to try to summarize our report in a short time.

[Luova] The report can be downloaded from the ReConnect webpage. The comprehensive report with 130 pages, and then there are also the two shorter policy briefs that have been mentioned during this discussion. You can find more information about ReConnect China publications on our webpage, and you can also follow us on Twitter and Linkedin.

I'm Outi Luova. Thank you for listening to the ReConnect China podcast.

[Outro] You've been listening to the ReConnect podcast.

[Esteban] Welcome to the ReConnect China podcast. I'm Mario Esteban, senior analyst at the Elcano Royal Institute and professor at the Autonomous University of Madrid. I'm happy to introduce a good friend, Aurelio Insisa, a senior fellow at the Istituto Affari Internazionali in Rome and Jean Monnet Fellow at the Robert Schuman Center of European University Institute. Aurelio's research focuses on China's foreign policy with a particular focus on strategic communications and their connections with economic security and state driven connectivity initiatives.

On this topic, we have just published a policy brief in the framework of the Horizon Europe project, ReConnect China. The title of this policy brief is 'Geopolitical Narratives Are Counterproductive: The EU's Global Gateway Faces the Belt and Road Initiative'. And today we are going to discuss about this policy brief. Hi, Aurelio, how are you?

[Insisa] Hi, Mario. Thank you very much for having me here, I am good.

[Esteban] My pleasure. To start with, Aurelio, could you share a bit about how we came up with the idea about writing this report?

[Insisa] Yes, sure. So, I would say that there are two main sources of inspirations behind it. The first one was a co-authored academic article that I wrote together with Dr. Giulio Pugliese, of Oxford University and was published on the Pacific Review in 2020. The title is ‘The Free and Open Indo-Pacific Versus the Belt and Road: Spheres of Influence and Sino-Japanese Relations’. And this article was very concisely focused on the how infrastructure competition between China on one side and a network of like-minded countries such as Japan, of course, the United States, Australia, and India - through a logic of division of labor – is the dynamics of this infrastructure competition that flashed out in the Southeast Asia and in South Asia with a focus on Sri Lanka. Researching these issues from the perspective of Sino-Japanese relations showed us how there was indeed geopolitical logic hidden beneath the lines of what at the first sight seemed as an infrastructure competition. And this made me think about how geopolitics informs and shapes the current infrastructure plans that have been emerging in international politics since the mid to late 2010.

The second source of inspiration is a bit broader, and its generally a long-standing interest that I have, as a researcher, for certain strands of geopolitics that have been present, especially in continental Europe since - I would say - the end of the Cold War, especially since the 1990s, and especially in Italy and France. Maybe I don't want to go into much detail, but just to clarify, it's been now almost three decades in which a certain strand of popular classical geopolitics has become the main framework to which epistemic communities, and also that inform the public in Italy, understands international affairs to the point that geopolitics even seems to be simply equal to international politics. And this is mostly because of the success, at least in Italy, of political magazine called the ‘Limes’ that stands for ‘borders’ in Latin. And in France, for the famous magazine, name.

So, it was interest on one side, the academic research on the Sino-Japanese relations in the Indo-Pacific and on the other side the knowledge that in my own country, in Italy, but also say in other parts of continental Europe, classical geopolitics fed to the public actually become something that really shapes the way in which politicians and the public understand international politics.

[Esteban] You just mentioned how this geopolitical framing has influenced very strongly the debates in international relations on foreign policy. Could you explain how does connectivity and connectivity initiatives fit into this current geopolitical landscape?

[Insisa] Yes, sure. I would say it's important to understand that this connection may not appear immediate to the extent that when we start talking about connectivity in the realm of international politics, more in detail, especially between the early and the mid-2010, it was something that was immediately driven by what has been defined in scholarship as the infrastructure gap. So, for example, a little bit later in 2018, the G20 initiative had figured out a 15 trillion American dollar gap in between the needed amount of investment in infrastructures and the one present. And this was something very long-standing. I mean, this was a more recent estimation, but in fact it's been known for a long time that both developing economies and developed economies need infrastructure. And this is where we have a first drive for creating new connectivity plans. Of course, infrastructures, new infrastructures help connect countries better, and improve trade and connections of goods and people. But at the same time, especially at the beginning of the launch of the Belt and Road Initiative in 2013, and then with its enlargement by the mid-2010, we start to see how it was impossible in the realm of international politics to separate these connectivity plans, in particular the Belt and Road Initiative, with a geopolitical understanding of international politics.

And here it's maybe better to actually clarify what I mean with a geopolitical understanding. Geopolitics could ultimately be understood as the study of international politics through a spatial viewpoint, so to connect, to understand how geography influences international politics. And from that perspective, this kind of perspective, I would say, provides a strong particular relevance to the control of geographical choke points, think about the Malacca Strait or specific geographic features. And of course, because of the structure of the geography of global trade flows, improving infrastructure in these areas immediately had a geopolitical overtone.

So, this is a very important point. I would say that it is of immediate importance to understand that, at least, I'd say this is my view as a researcher, and I believe it's also yours, Mario, that there are domestic drivers, both within the countries who are on the receiving end of these infrastructure plans, and on the side of China, for very complex reasons that have to do with the Chinese domestic economy, for connectivity plans. But once these connectivity plans are in motion, then it becomes much harder to separate infrastructures and connectivity with international politics. And this is where geopolitical understanding of international politics immediately come to mind and become relevant.

[Esteban] You mentioned this contrast of narratives, you know, these differences on how the BRI, the Belt and Road Initiative, is presented and perceived by different actors. I mean, sometimes we have even talked about this kind of a battle of narratives, right? So, could you elaborate a little bit about these main differences in the way the EU and China project and communicate their own connectivity initiatives and how they look to each other?

[Insisa] Yes, and this is one of the key points of the policy brief, the fact that you could see a clear difference between the way in which China talks about the BRI and the way in which the von der Leyen Commission has discussed the European Union Global Gateway project. It is quite clear that the Xi Jinping administration throughout the years has maintained a very, I would say, quite tight control of the information about the BRI from Chinese channels of dissemination. And a key point was to stress that the BRI should not be understood as a strategy. So, in the Chinese external propaganda, and I'm here using the term without any moralistic approach, simply as because external propaganda is the overall system of communication of Chinese political communication, you don't see any narrative of the BRI as a sort of geopolitical master plan. You don't even see the word BRI next to the word strategy, because strategy already implies this kind of approach. And it is the stress for initiative, for a vision. At the same time, as you all know, the BRI remained quite big throughout its first 10 years of existence. And the Chinese government has been quite skilled in actually exploiting this vagueness, because being vague, then it's easier to adjust to eventual developments.

So, this is the Chinese approach. Now, it's important to stress that if you look at detail on the Chinese academic debate, especially within the strategic community in China, on the Belt and Road Initiative, then we start to see that there are scholars within the PLA academic ecosystem, scholars who work within PLA universities or close to it, and also scholars of international relations in China, who discuss the BRI as a geopolitical strategy. But discussion in itself does not automatically imply a direct connection with the implementation of the BRI, because the BRI is such a huge, enormous program with so many other programs within it. Indeed, Tim Summers rightly defined it as an omnibus program. And so, because of the vastness of the BRI, we shouldn't imply a direct connection between the debate in the strategic community in China on one side, and the actual implementation of it.

So, this is for the Chinese side. When it comes instead to the European Union, as we mentioned earlier, the situation is quite different. Now, first of all, I would say, we need to remember the key starting point, that already in 2019, when coming to power, Ursula von der Leyen declared that the commission would be a geopolitical commission. That was two years before the announcement of the Global Gateway Initiative. So, already since the start you see that the European Union wants to talk the language of geopolitics, use the lexicon of geopolitics.

Then specifically when it comes to the Global Gateway, the statements were quite clear. In November 2023, the president of the European Commission, Ursula von der Leyen, noted the Global Gateway as evidence of an example of the EU being more geopolitical, presenting the project not just as a platform to create more resilience by change, but to make use of our massive economic assets in a much more strategic way, in a world where geopolitics and geoeconomics cannot be seen as separate anymore. So, I would say there is quite a stark difference. We emphasize strategy and geopolitics somehow in our communication about our connectivity plans, in contrast to what China does.

[Esteban] The von der Leyen Commission has decided to frame the Global Gateway in geopolitical terms, because obviously there must be a reason for that, right? Why do they prefer to put the emphasis on that particular point? What do you think?

[Insisa] This is a very complex answer. I think there is plenty of research that should be done in the future on this. We still don't have all the pieces of the puzzle, I would say. From the outside, I think we need to remember that, I would say, that the Global Gateway initiative is the result of FOMO, that is a common term now, right? It's fear of missing out. This is a world in which connectivity plans are expanding everywhere. The European Union felt that it was necessary to launch its own connectivity plan. And because of it, it also needed a narrative, a way in which it could explain this plan to the domestic audience. And because of this need for a narrative that comes from this fear of missing out, and on the explosion of connectivity plans, I think that this was the reason behind this emphasis on geopolitics.

And yeah, I would go back to what I mentioned earlier, when I mentioned the situation in Italy and the popularity of a certain point of popular -, I would say popular geopolitics is actually something different in academic literature, so, I would say like pop geopolitics. I want to go back to the point that I mentioned earlier about Italy. In 2011, I didn't put that in the policy brief, because of course, the scope of the brief is a bit different. But to give more context, in 2011, Italian political scientist Brighi Petito wrote in the specific case of Italy and of that magazine that I mentioned earlier, Limes, wrote that geopolitics provide at a very low intellectual cost, a loose but politically relevant link between theory and practice for Italian diplomats and policymakers.

And I think that this is also in many ways the case in the European Union. Geopolitics, the language of geopolitics, a simplified version of classical geopolitics, whatever you want to call it, provides a veneer of depth to these plans. It provides also a language, as was mentioned in the brief, it provides a vague sense of strategic outlook on international politics. And I think that these issues are very important, these perspectives had a very important impact on the choices made by the von der Leyen Commission in the dissemination of information on the Global Gateway.

[Esteban] And besides this difference in the approach, I mean, in terms of emphasizing or under-emphasizing geopolitics related with these connectivity initiatives, I think it's also important to underline that the Global Gateway has been presented to some extent also in opposition to the Belt and Road initiative. Do you think that these differences in the way that the EU and China has presented their own connectivity initiatives, the fact that from the perspective of the EU, sometimes the Global Gateway has been presented like in competition to some extent as a reaction to the Belt and Road Initiative, this could have some kind of effect also on EU-China relations?

[Insisa] I would say that this is actually a real risk in the sense that the more we stress that the Global Gateway Initiative is implicitly an alternative to the BRI because the EU could provide better standards, better governance, is informed by better values, the more we risk to emphasize competition and even antagonism with China.

If we keep in mind that the relations between Brussels and Beijing have been particularly complex, especially since the debacle of the CAI between the two sides, sanctions against European members of Parliament, and then, of course, the war in Ukraine and more recent concerns within the European Union, especially for the rise of exports in Chinese electric vehicles and the potential impact for the high-end sector of the European industrial base. So, it risks to further antagonize China. And the point is not that it is wrong per se to antagonize China. We risk to antagonize China without actually having something real to present, something real to provide, considering the major economic limitations that have been shown with the Global Gateway at this stage. It's quite clear at this moment that the project, especially compared to the BRI, even after it's been scaled down during the pandemic, it's clear that the Global Gateway Initiative is still quite underfunded. So, it's not clear to what extent it's useful to antagonize China with this kind of language in this scenario.

[Esteban] You mentioned that China could be antagonized because of this kind of narrative. And we also know or suspect that EU allies and other countries that share similar geopolitical alignments with the EU could have a more positive appreciation of this kind of geopolitical framework. But what about other countries? I mean, what about the so-called Global South? What about the countries in Africa, Latin America, Asia? How do they feel about this geopolitical framing?

[Insisa] Yeah, that's one of the major problems of this kind of framing. So, of course, now there's been a debate about to what extent it's useful to use the term Global South in itself. There's been a reflection on it. But to simplify, of course, as you mentioned, we're talking about countries in Central and South America, countries of the so-called MENA region, Sub-Saharan Africa, and countries of Southeast Asia and other countries in the Asia-Pacific.

And, of course, we have plenty of evidence that these countries, for how different they are, they generally refuse to be imposed a choice between the two camps. And indeed, in our brief, we mentioned, for example, the correction from the current president of the Philippines, Marcos, Bongbong Marcos. And it's quite interesting because the Philippines are actually now in a particularly tense situation with China and the South China Sea. And this notwithstanding, Marcos had no problems in actually stating that the Philippines doesn't want a choice when it comes especially to economic development between the West, whatever you want to define it, and China on the other side.

And so, there is an immediate issue, as we mentioned, as I tried to explain it, that countries in the Global South do not want to choose between the two sides. They don't want to be put in front of this choice. But there is, I would say, also especially when we think about epistemic communities and certain portions, sections of the public in these countries, there is also the problem of speaking the language of geopolitics. This is something we could have mentioned earlier. The fact that geopolitics, unfortunately, has roots in the imperialist politics of Europe and the United States between the late 19th century and early 20th century. And it is something that intellectuals, sectors of the public are aware of it. So, we actually risked the service to our own strategic communication when we start to talk in explicit geopolitical terms. Geopolitics implies, especially to the eyes of Global South publics, the idea that they are ultimately pawns in a great power game. Nobody wants to be that, of course.

[Esteban] So taking all of this into account, Aurelio, I think that one last question arises. What could be done to improve the external projection of the Global Gateway?

[Insisa] Well, there are a few recommendations that we try to advance in our policy paper. First, to avoid a reactive and competitive geopolitical framing of the Global Gateway. And so, this is very much about implementing a tight information operation, being very sure in the way in which we communicate about the Global Gateway Initiative and stop using this sort of geopolitical framings.

A second point would be to emphasize a proactive and positive agenda in the narratives of the Global Gateway, putting the focus on cooperation with partners along the Global South, and especially emphasizing, as China does, with this Global Development Initiative, the sustainable development goals of the United Nations.

And finally, also, we should try to increase ownership and the sense of ownership among partners from the Global South. The Global Gateway shouldn't just simply be understood as something the European Union does, but as something that the European Union implements, builds and grows together with its partners in the Global South.

These are all very, I would say, possible realistic recommendations, because ultimately it has to do with changing our approach in the information domain, first and foremost.

[Esteban] Thank you so much, Aurelio. It's been a pleasure to record this podcast with you. I'm Mario Esteban, senior analyst at the Elcano Royal Institute, and we have discussed ‘Geopolitical Narratives Are Counterproductive: The EU Global Gateway Faces the Belt and Road Initiative’, a policy brief published by ReConnect China. You can find more information about ReConnect China publications on our webpage, and you can also follow us on Twitter and LinkedIn. Thank you for listening to the ReConnect China podcast.

[Matthyssen] Welcome to this Reconnect China podcast on EU-China relations after the 2024 European elections. My name is Mieke Matthyssen and I am a researcher at the Ghent University's research group, East Asian Culture in Perspective, Identity, Historical Consciousness, Modernity.

Today I have two guests, Bart Dessein and Jasper Roctus, both affiliated to the just-mentioned research group of Ghent University, as well as to the Egmont Royal Institute for International Relations in Brussels. Let me start by asking how the composition of the European Parliament looks like after the 2024 elections.

[Roctus] We have seen both change and continuity after the European elections, with moderate gains, but maybe gains that fell short of expectations by the right or the far-right. The von der Leyen-led European People's Party has somewhat held its own, ending up with roughly the same amount of seats, while the losses have to be found among the progressive alliance of socialists and Democrats, and especially Renew Europe and the Greens. Still, the traditional centre coalition is expected to continue, it still has a majority and can already be seen through the traditional division of jobs between the big three. Portugal's Antonio Costa will lead the European Council as president. This has already been decided that he will do this from December onwards, while Estonia's Kaya Kallas will become the highest representative on foreign affairs for the European Union. This, just like von der Leyen's likely re-election will still have to be confirmed by the European Parliament, however.

Also, as of the moment of recording this podcast, a new far-right group is being formed, led by Viktor Orban, Patriots for Europe, which is essentially the successor to the Identity and Democracy group, with the addition of a few non-inscrits, Orban himself and ECR factions. This is, again, as of the moment of recording this, surged to the third place in the next European Parliament. So we can also expect in this regard some shifts, some rifts, I should say, between this new group and the ECR, the traditional right-wing group ECR, which, for example, on Taiwan and Russia stands closer to the center than this group, and this will also likely hold certain foreign policy implications.

[Matthyssen] And how does all this relate to China, then?

[Dessein] Well, to understand how this relates to China, I think we have to take a broader look and also look at how China is positioning itself on the global scene, and how that also relates to the growing importance of the Global South, as it is called, in comparison to the traditional Global North.

We see, for instance, that the economic power of the Global South, and a very major factor, of course, in that is China, and also China's trade relations with Africa, that the power or the importance of the Global South has really changed dramatically. Figures depend a little bit on how we precisely define the Global South within the developing countries or the countries in development. But we can say that, roughly speaking, the Global South is now accounting for something like 20 to 25% of the global economic value. And from economic power increasingly comes also political power, political influence. And in that sense, we see that, indeed, China is also establishing new institutes, new platforms of global governance. Most important ones, most well-known ones, for instance, being the Shanghai Cooperation Organization, starting with five countries in 1996. It has gradually expanded with the addition of Uzbekistan in 2001, the addition of Pakistan in 2017, Iran in 2023.

Very recently, last year, China also has expanded the concept of BRICS to BRICS+, adding to the traditional BRICS, Brazil, Russia, India, China and South Africa, now adding also Iran, Egypt, Ethiopia, the United Emirates. So these are all constructions, platforms, that have developed their own dynamics, and in the multipolar world in which we all live in, of course, this also means that this changes the global balance and that Europe is, well, one of the global players, but has no longer this position that, let's say, it used to have before the rise of China.

We can also see in this respect that China is deploying a three-tier structure in its international relations. You have structures that are global, the most famous one being the Belt and Road Initiative. And on the level and below that, you have the just mentioned regional platforms, such as the Shanghai Cooperation Organization or the BRICS+. And then on the third level, you have state to state relations. And we see that China is using these platforms, these channels differently according to the specific domain. And a direct equivalent in China as the European Union does not exist. So that also further complicates, let's say, the way the European Union can use instruments in dealing with China. And we see, for instance, when it is European Union that has a European trade policy, but no industrial policy. And these are things that, of course, also translate into the way the possibilities of member states and the European Union to engage in dialogue and in its relations with China.

[Matthyssen] We have also witnessed how in the recent period, the EU's positioning vis-à-vis Taiwan has developed. Can you expand a little on that too?

[Roctus] Historically, and now I'll have to generalize for the sake of maintaining brevity, the European Parliament has been much more assertive on Taiwan than the European Commission and the Council as well, which have been, generally speaking, put business interests with China first. Until the early 2000s, European Commission de facto stood by China's One China principle. However, this already started to shift somewhat in the early 2000s as it became apparent that the Taiwan issue was not going to solve itself. Taiwan democratized and it turned out with an identity shift that it was asserting its sovereignty and autonomy from China. And this was visible in the warning shift in some EU documents. We did not speak any more following or abiding by the China's One China principle with having our own one China policy and often with the “One China.” Also, this was reflected in increasing disagreements over Taiwan's international space where the EU was sometimes a bit more supportive towards Taiwan joining certain international organizations, while China said that Taiwan could not join any international organizations requiring sovereignty or statehood. But overall, until the ascendancy of Xi Jinping, the EU largely took a passive stance towards Taiwan and still supported China on its red lines, for example, Chen Shui-bian proposed an independence referendum in 2008.

However, a lot has changed since the ascendancy of Xi Jinping to the position of paramount leader of the PRC, especially after the election of Tsai Ing-wen in 2016, after which cordial cross-trade relations ended. This all was very reflected after the ascendancy of the EU's principal pragmatism in mid-2016, shortly after the election of Tsai Ing-wen, and most prominently in its elements for a new EU strategy on China, which mentioned, and this was very novel at the time, the shared values between the EU and Taiwan underpinning their systems of governance, and Brussels' task to promote practical solutions regarding Taiwan's participation in international framework, wherever this was consistent with the EU's One China policy, again this term, and the EU's policy objectives. This was then again confirmed by the now-famous EU-China Strategic Outlook of 2019, which also added that China should be seen simultaneously as a partner, a competitor, and a systemic rival. And yes, after the corona, we have seen a further warming of EU-Taiwan relations, while with China not even a single joint statement or agenda has been agreed on recently.

This idea of Taiwan as a possible alternative even to the PRC further matured in 2021, when negotiations over the extremely hard-fought comprehensive agreement on investment with China stalled in face of a series of punitive tit-for-tat sanctions over Xinjiang. And later that year, the European Parliament, of which several members were hit by said sanctions, started to advocate for alternatives in its relations with Beijing, and calls were made to defend Taiwan's liberal democracy through establishing a bilateral investment agreement and allow it to engage more freely on the international stage.

This shift was also reflected by many high-level visits to Taiwan, while during the 2010s, only a handful of visits to Taiwan by high-level delegations, be it from member states or the parliament, took place. Already 14, as of 2023, have taken place, which is already almost threefold in three years compared to the whole 2010s.

Many member states, such as the Netherlands and Germany, are reevaluating their own One China policies making moves, for example, like renaming their offices in Taiwan to reflect more assertive policies, for example, by dropping the cultural and investment parts of these nominations. Or for example, the Dutch frigate, which recently sailed through the Taiwan Strait, these are all things that would have been impossible to imagine a decade ago. However, it should be said that this is not entirely wholly reproduced by every member state, as some nations, like Hungary, Romania, Cyprus, have stuck by following the PRC's lead on Taiwan, and wholly endorse its One China principle, and do not, or barely, maintain any ties at all with Taipei.

So, as for the future, a somewhat harder line towards China was visible in the EPP's manifesto for the June elections, with, for example, the notable addition of the notion that the EU needs a long-term strategy towards China and Taiwan. This raises the question whether perhaps the successor document to EU-China strategic outlook might or might not have a more prominent Taiwan component. I already mentioned the next high representative of the EU, who hails from the Renew Group, and also the Renew Group has already stated that it wants to achieve a BIA with Taiwan, so this can also perhaps lead to some frictions with China. And even, for example, the ECR stresses the need to elevate relations with Taiwan, like while it can be expected to fight the next commission on many teams, Taiwan will unlikely be one of them. So yeah, all these overtures towards Taiwan could provoke China's ire, of course, and lead to more adversarial relations. So whether Beijing likes to hear it or not, politics and economics can probably no longer be separated for the EU in the same manner as, for example, in the early 2000s or the 1990s.

[Matthyssen] Well, it appears that the EU is faced with a host of challenges. I understand that the introductory paragraph to your most recent policy brief for Egmont, entitled Figures on the Billiard Table: EU-China relations in the Wake of the 2024 European Elections, refers to this. Can you elaborate on that a bit more?

[Dessein] Yeah, well, the Figures on the Billiard Table was inspired by a very famous novel by a very famous German author, Heinrich Böll, and the novel is called Billiard um halb zehn, so playing billiards at half past nine, which is a historical novel. It depicts the history of a family with its experiences in the past and how past experiences, of course, impregnate the present. And in that sense, of course, as already alluded to, we have member states in the European Union, each with their own pasts, their own experiences, and the way they look at China and conceive relations with China is, of course, also determined by their proper historical experiences.

And so this complicates, let's say, EU-China relations in two ways. First is the differences that exist within the European Union itself. And the second is that, as I already explained, the global scene on which the European Union is but one of the powerhouses, let's say, is also constantly changing. So we are indeed, I would say, or the European Union will need some very skilled billiard players to, you know, to make the relations with China function. And this, of course, I would say, I think European Union has very important assets there. If you look at the history of the European Union, starting, let's say, with after the Benelux already existed, growing into the European Community of Coal and Steel and the European Committee, and then into what we now have: the European Union, I think we have within the European structure very skilled diplomats and very seasoned policymakers. And we will, I guess, need them in the coming times.

So Brussels will indeed be faced, I would say, with the need to develop robust independent policies to navigate in the increasingly complex multipolar world in which we are living, taking into account, as I already said in the beginning of this podcast, that the relative weight of Europe is less important, let's say, in the world as it is, as it used to be, because of course, of the growing power of the Global South.

And we then, in this respect, of course, do not only have to mention China, but also India is, for instance, a factor in the current world that is becoming increasingly important. And in that sense, I would say the previous commissioner, von der Leyen, called her first commission a strategic commission. I think this will be even more true now. And there are indeed some instruments that have been put in place in the previous commission, but that will need further development. Things like the Global Gateway is a policy instrument that needs, well, a good strategy and to really implement it vis-à-vis the rest of the world to enhance the position also of the European Union in global affairs.

And I could in this respect also refer to the now upcoming, long awaited third plenum of the Central Committee. It's due this month. The third plenum being the economic plenum in which we may expect that there will be a focus on the so-called new protective forces, kind of the new catch word that we find in Chinese policy documents. So it will be important to see what is the content, what is the outcome of this plenum. We do also see that there is a willingness in China to strengthen the relations with European Union.

We can refer in this respect, for instance, to the visa policy, which is changed that now, especially for business people, 15 days of visa-free travel in China is possible. So these are signs, let's say, of an awareness also from the Chinese side that fostering economic relations with Europe is wanted. China is on the demanding side also for that. So we do know, as Mr. Roctus just said, that politics and economics most likely will not be inseparable, contrary to what was maybe the case decade ago. But still, I think it is important. There are some, or there may be possibilities for enhancing our EU relations with China, but in a more complex global context than this used to be, and so we will need, indeed, very skilled diplomats and policymakers to make this happening. And this, for instance, will definitely be the case. China is also on the demanding side to revisit, let's say, the comprehensive agreement on investment, which was, in principle, agreed on, but because of issues of human rights was frozen. China is on the demanding side to renegotiate or to reopen the discussion on this.

Again, it shows how norms and interests are increasingly, I would say, interrelated. Global Gateway is stating that it is meant to enhance relations with like-minded partners. So, this will be one of the issues, of course, and the balance of interests and norms. Knowing that, for instance, Chinese policy has been characterized as a no-strings-attached win-win. European Union, as a normative force, has the normative aspect, which is very important, of course, but all these things, once again, will complicate how we can move forward in EU relations with China, which I would say, both for European Union and for China, I mean, we are the second and the first trading partners of each other. These are very important relations and it is very important, therefore, also, that we look for ways to get ahead with these relations and to renegotiate where possible and to maintain the positive relations we are having.

But I am convinced that Mr. Roctus has some more details on the comprehensive agreement on investment and also the bilateral investment agreement with Taiwan.

[Roctus] Yes, as Professor Dessein already mentioned, this comprehensive agreement on investment has been extremely hard fought. It has been important between negotiations for almost the entire 2010s and then it was signed in December 2020, at least the agreement in principle. China really was pushing them to sign this agreement in principle because it was hoping that it would still be able to get it through the parliament, or at least get it to the parliament before Joe Biden would take up the American presidency.

Well, in the end it has all fallen apart as has already been said on reasons not directly related to that and the retaliatory sanctions of the Chinese authorities against European individuals and entities that have been involved in the accusations of human rights violations in Xinjiang. And after this, the agreement has been in the freezer. There have been some voices in China even stating that not even China is really looking to completely revive it because too many concessions have been done to make sure that the EU would sign it in 2020. So it seems that, if anything, it will have to be renegotiated. But for that to any renegotiation would be in form of a CAI 2.0 or something entirely new.

The first move will likely come from China if you look at the composition of the new European Parliament there are still many sanction forces present there. Until these forces are unsanctioned, nothing is likely to happen, so the calls from Beijing about simultaneously lifting the sanctions are unlikely to lead to anywhere, considering that as of the moment of recording this podcast, von der Leyen is most likely going to be reelected. In this regard China is not able to start with a clean slate, as well as the de-risking policies, for example are likely to persist.

As for the European Parliament's call for a BIA with Taiwan: goodwill from all sides will be necessary and I mean inside Europe and inside China. Because Beijing maintains a considerable amount of tools to block BIAs. Hypothetical implications, every EU-member state would need to approve it, and I already mentioned certain member states before that would be unlikely to support such a thing if Beijing approves of it. Just to give one example of it: Cyprus, facing its own Taiwan in the form of Northern Cyprus for example, so they’re unlikely to support anything in that regard, unless Beijing would somehow, well, be able to tolerate it.

The European Commission meanwhile has also not heeded entirely the calls of the European Parliament and stated that in light of sensitivities and arguing that the Taiwanese market is already sufficiently open, there's no need to start negotiations with Taiwan about a BIA. The Commission in this regard has somewhat contradicted itself on the necessity of a BIA by allowing some limited concessions towards the European Parliament by, for example, launching annual EU-Taiwan Trade and Investment Dialogues since 2021 and upgrading in 2022 the EU-Taiwan Trade and Investment Economic Dialogue from deputy ministerial or director general level to full ministerial director general level.

While goodwill from Beijing is, of course, unlikely to come as there is no window of opportunity after the recent Taiwan elections where Lai Ching-te was elected and is from what Beijing at least considers independent separative moves by the President that they describe as a very pro-Taiwanese independence element.

But still, the EU could, of course, keep standing by its own positions in this regard and maybe try to argue for some meaningful Taiwanese participation, of course, as observers in specialized organizations, like WHO, ICAO, or the UNFCCC. This could then, for example, these limited goals could maybe be seen as some kind of principle pragmatism as it stands by its principles while making sure to not offend the PRC too much.

Be it as it may, however, Taiwan for now will have to be considered within the EU’s One China policy, whatever it alludes and will be over the next five years. It is still a One China policy and Beijing will have to be taken in mind in any move towards Taiwan as well.

[Matthyssen] Okay. Thank you both for these very insightful reflections.

[Roctus] Thank you.

[Dessin] Yes, thank you.

[Hermann] Welcome to the ReConnect China podcast. My name is Hermann Aubié. I am a senior researcher at the Centre for East Asian Studies at the University of Turku in Finland. And today our guest is Victor De Decker, a research fellow in geoeconomics at Egmont Institute in Belgium. Welcome, Victor.

[Victor] Hi, Hermann. Glad to be here.

[Hermann] So, my first question for this podcast is, why is it that the EU has implemented tariffs against EVs made in China? And could you please, while you are at it, run us through the process and reasoning of the EU on this important decision?

[Victor] So, first and foremost, it's important to recognize the fact that around 14 million Europeans are actively working in the automotive sector, directly or indirectly. In 2022, the European Union has set the target to phase out combustion engine cars by 2035.

And what we've seen since the pandemic is that China is becoming increasingly dominant in the production of high-quality electric cars. And it's in a way crowding out other producers or producing EV producing countries. And recently, China has become also the largest car exporter in the world.

So, as the European Commission was seeing this dynamic setting, with taking these targets into account to phase out combustion engine cars by 2035, with the replacement of these internal combustion engine cars, being electric vehicle cars, being increasingly produced within China.

Over the past year, we already saw that one in four electric vehicles sold within China, sold within the European Union, are being imported from China. This is actually putting, to a certain extent, these 14 million jobs in harm's way. So, what the European Commission did was looking at this dynamic, and it found out that the Chinese car industry was strongly supported by government industrial policy during the rise of EV manufacturing sector. So, the European Commission, in October 2023, declared an investigation to see to what extent this dominance in electric vehicle production in China was due to subsidies. And the results of this investigation came out during, over the last summer of 2024. And it found out that indeed, the Chinese electric vehicle manufacturing industry, has been receiving a significant amount of subsidies.

So, in response to that, the European Commission proposed a series of, as they call it, countervailing duties. So, these are compensating tariffs to compensate for the comparative advantage that the Chinese cars, received in their production, to make European cars, electric vehicles, more competitive to these Chinese import EVs.

And in the 4th of October, member states had to vote on these tariffs, as trade is a competency of the European Commission itself. The member states had to form a coalition against this large amount of, of a majority against these tariffs, to stop the tariffs. And this coalition against the countervailing duties tariffs on Chinese electric vehicles did not materialize. Only 5 countries voted against, including Germany, but also Slovakia, Hungary. And 10 countries still voted in favor. 12 countries abstained from the vote.

So, as I already said, the tariffs are correlated to the amount that the producers received in state subsidies. So, private sector-owned Chinese car manufacturers, having deemed, received less subsidies, are also having a comparatively lower increased tariff than, for example, relative to Shanghai Automotive Industries Corporation, which is receiving the highest tariffs of around 46%.

And just to give, to give a comparison, the tariffs on imported cars within Europe up until now were at 10%. And the new tariffs will be probably valid from November 2024 onwards.

[Hermann] Okay, that's great. Thank you, Victor. That really gets us started on a solid ground to continue this discussion. You may have heard in the Mario Draghi report, there was this line saying that this target of phasing out combustion cars by 2035 in the EU was akin to climate policy without an industrial policy. What do you think about, you know, the current kind of consensus that has solidified at the EU level? Do you see the vote patterns that you just described as a sign of weakness or division? Or do you see some potential for more consistency across the EU with the Commission leading the way?

[Victor] Well, of the countries that voted against the tariffs, there were no real big surprises. Germany has always been a very staunch opponent to tariffs of any kind. Then there's also Slovakia, Hungary, which are, mainly Slovakia is really in fear of retaliatory tariffs coming from China on internal combustion engine cars, which are still being exported to China. Then there's also Malta, being a relatively small country, but it's really the fact that Germany is voting against this. That's the biggest deal of them all.

And what I would argue as well is that although there was a majority in the voting in favor of it, still 12 countries have abstained, showing kind of a lack of orientation or, how should I put it, it's clearly something that there is no widespread staunch agreement upon within the member states.

So, I think it's really important to think about what to do with this, because it also sets quite a strong precedent, putting tariffs on such a widely spread and important good in international trade, given that if you make the argument that the Chinese car industry has been receiving lots of state support, you can basically make this case for all other goods, because subsidies and industrial policy within China is so intertwined with this system.

So, it's really something that the EU needs to communicate more clearly about as to not only what's precedent this might set, but also what the long-term trade aim is for the EU in implementing these kind of tariffs.

[Hermann] And as I'm sure you're aware, there has been also this broader debate comparing the way industrial policy is being adopted by different member states in a makeshift fashion and contrast that negatively with China, where the state plays a more proactive role in leading industrial strategy over the mid-long term.

And so, isn't there here as well this kind of anxiety like there's been with microchips, where the Commission has adopted this agenda where they relax the state aid rules, especially for the benefits, of course, of the large member states like Germany, France, or Italy. And there you see the emergence of what they call the European project of common importance, but then the small member states are a bit reluctant or skeptical that they can benefit from this.

So, do you think there is also in that story about the EV tariffs from China a reflection of this kind of a fragmented process where you see that some member states, they have an industrial policy that kind of clashes with, let's say, the industrial preferences of smaller member states.

Do you think that the car industry should become also like microchips, some kind of a European industry that has this common importance label and the Commission should play a more active role in strategizing on this sector, considering what you said about how many people it employs and also the fact that it's the largest R&D contributor in Europe, what are your thoughts about this?

[Victor] It's definitely something that a common strategy would be helpful for, because right now, and I think this is also one of the reasons why certain countries abstain to vote on this, because overall there is a lack of investment in the European car manufacturing industry, especially when it comes to electric vehicle. But there is no clear way as to conceptualize some kind of industrial strategy at the European level.

And this is why these IPCEIs that you just mentioned are being invoked as a way to deal with this lack of competency, of lack of competency for the European Commission itself to impose an industrial strategy on the member states. And this also has to do with the lack of fiscal capacity that the European Commission in itself has.

I don't think necessarily that everything needs to be put at European Commission level per se when it comes to industrial policy, but there definitely needs to be more coordination in terms of the European production market, as well as the consumption markets. Because that's, for example, something that we're seeing a lot in the, what we can now call, in hindsight, the success story of the EV manufacturing industry in China is not necessarily only on the production end. It's about raising the consumption in lockstep with the production.

And this is, for example, where, in China, there was a major industrial policy to implement it in China was a so-called dual credit system, which has been run by the Ministry of Industry and Information Technology of China. And the core feature of this policy was that it forced car manufacturers, all car manufacturers, to sell a percentage of their overall fleet in electric vehicles. So the Chinese automakers could then earn credits as it sold EVs above this threshold that the government set.

So the government gave a very strong incentive to car manufacturers, mostly reliant on Chinese market, to invest heavily in battery technology and supply chain innovation and integration. But it also gave the Chinese consumer plenty of choice to decide between the EV that they wanted to buy. And these Chinese consumers was also assisted with a whole plethora of consumption subsidies and tax rebates, creating a very strong market, a very strong market for these Chinese produced electric vehicles, which allowed the production to work in lockstep with its consumption and within China.

So it's not necessarily the quantity of subsidies that made for a change in the Chinese switch towards electric vehicles, but it's largely reliant on the quality of this industrial policy and of  these subsidies, which allowed quite a harmonious working together.

[Hermann] So this is quite helpful actually to have a bit of a historical background. And could you tell us more about how did China become such a dominant EV exporter so quickly?

[Victor] So if we go back to the 1980s, during China's opening up, China is, really set its mind of becoming a major car producer. And we're still, of course, then talking about internal combustion engine cars, but it didn't have the technology domestically to provide for it. So it invited Western and Japanese companies to basically set up shop in China. And in return for being allowed to enter the Chinese market, these Western and Japanese companies had to set up their manufacturing plants, producing their cars for the Chinese market in China.

And in here, up until 2017, tariffs also played a relatively important role, because up until 2017, the tariffs for imported cars in China were still at 25 percent, relatively high, but still WTO compliant, providing a substantial barrier for other makers to export to China, and quite a strong incentive to produce their cars in China.

[Hermann] Can I just ask, you mentioned that this was WTO compliant, this 25 percent. So what do you think about the fact that the Chinese authorities right now are kind of warning Europe, or even threatening, I guess, that the tariffs are not going to be taken with an understanding of the need to protect the EU car industry from Chinese competition. And yet China itself used this tool to protect its own emerging car industry.

So logically, if Beijing was to play fair, they will express an understanding, right? But now, they are threatening to impose counter tariffs. They already did it, I believe, for the cognac produced in France. And there have been quite a few commentaries in the news saying that this is Beijing's way of singling out France for being one of the leading country in Europe to push for those tariffs.

So do you think there is some kind of hypocrisy there? Or some kind of unfair trade competition still going on, considering this historical background.

[Victor] To a certain extent, I would argue that from the point of view of Europe and the European Commission, it just wants to protect its industry and its interests as still quite a significant car manufacturing hub in the world. And China is basically doing the same thing. So I think hypocrisy is probably playing a role in it. And is playing a role in it from both sides, because it was the Europeans and the Americans pushing China to open up its market in the first place for European car manufacturers. So I think defending or protecting your industry is something of all times and from all market players or from all great powers, great trading powers in the world.

[Hermann] So, there is hypocrisy on both sides, but there is also some kind of irony in the sense that the incumbent players from OECD countries could have seen this coming and act accordingly, but apparently they didn't. And now they are acting like kind of in a defensive position instead of having had a preventive kind of strategy.

So do you think this also reflects the common narrative now that in OECD countries, there is this lack of long-term industrial strategy, partly because we have this whole financial system which is geared towards short-term profits and also maybe the fact that when you are an incumbent company like Volkswagen or the big three in the US. You basically don't feel as much an urgent need to catch up, right?

And it appears that when we look at the story of BYD, for example, the founder clearly had this kind of strategy to innovate and catch up and do all kinds of reverse engineering with East Asian competitors from Korea and Japan.

And then the battery element that China became dominant in really played a key factor, right, together with the electronics and all that. So do you see like some serious potential for the EU based on those tariffs to defend the EU's competitiveness? Do you see a potential to catch up with China, considering that there's so much to do to rebuild supply chains for batteries and EVs and electronics? Do you think the EU really can do that with those tariffs? Or do you think that it's going to be a very uncertain kind of effort?

[Victor] I think also one important thing that cannot be taken for granted is just the fact that the competition due to this quite strategic industrial policy happening in China, the competition between Chinese EV companies is really massive. Right now, there is around 137 Chinese EV companies active within the Chinese market. Basically, every single big electronic company is starting an EV company on the side right now. And there's certain studies that estimated that of this 137 EV companies, only around 20 or 19 will be profitable by 2030. So this is just to say that competition is playing a massive role in the success of an industrial policy. And if this would be replicated within the European Union, if we are being completely honest with ourselves, we need China. And we need Chinese competition.

I think this is also something where we should applaud the European Commission for, in implementing these tariffs, within the framework of the WTO. The tariffs apply for all electric vehicles being produced within China, within the borders of China. Because this Chinese electric vehicle production ecosystem has been receiving an over, one could say, the Chinese electric vehicle production ecosystem has been quite reliant on subsidies.

But what these tariffs do not do is block Chinese electric vehicle brands from entering the European market. If these cars are being produced in a different country, not within the borders of China, let's say of Vietnam or Thailand, these tariffs do not apply. If even better, if a Chinese car manufacturer starts a manufacturing plant within the borders of the European Union, within one of its member states, then of course these tariffs don't apply.

So, and I think this is also a dynamic we're seeing with other countries, especially in the global south, like, for example, Turkey, Brazil, Mexico and various others are also setting up tariffs on Chinese EVs, basically with the underlying reasoning that if we block the trade, we're inviting the investments from Chinese car manufacturers to set up shop and creating jobs locally. And I think this is also part of the strategy within the European Commission. And this will be necessary because when the Chinese EV manufacturers, they don't lead in terms of comparative advantage in being cheaper to produce in China, they're innovation leaders. You mentioned BYD is basically on par in innovation with Tesla or even beyond, some would say. So it's really a matter of instigating this competition. Not only within or between European car manufacturers, but between European and Chinese car manufacturers on a certain set of rules that everyone abides by.

[Hermann] Do you think that the next big frontier for car makers who compete currently with each other in this, you know, like most advanced EV technology will happen somewhere in the you know, emerging markets to capture, you know, the growth of future markets in the global south, because we can see that the Chinese market was, like you said, very attractive to OECD car makers when China was booming.

And China has been able to kind of divide and conquer them to build its own industry, which is to its credit. And it has innovated as well. And it's indeed important to acknowledge that. It's a humbling for Europe, and I think it's healthy indeed, like you said, to have this discerning approach and differentiation of risks and opportunities.

But what do you think about the potential for Europe to continue, you know, together with the East Asian competitors from Japan and Korea to capture, you know, this growing market for EVs in the global south, you know, with China? Because China seems to have a more comprehensive strategy at the EU level if we want to stand a chance to continue exporting a lot of EU-made cars. And maybe we might need also to do joint ventures in the global south, like the Chinese are doing right now, right?

So how do you see that playing out, let's say, in the next five, 10 years? Do you think that – what would be the next, like, critical step for the EU car industry after those tariffs?

[Victor] One important thing to keep in mind is that of all the electric vehicles being sold all over the world, one in two is being sold in China. And then there is about a third of the market share, which is the European Union. Then you have around a little bit less than 20 percent the United States. And then the rest of the world – not even talking about the global south, but basically all the other countries in the world – are just a marginal in the single digits.

So right now, the EV market is really based within these three centers – China, Europe, and the United States. There is a lot of growth potential in the global south, but we need to acknowledge first and foremost that this is really starting from a very low base. EVs are much more expensive not only to produce, but also to buy, to purchase. So that – and at the same time, EVs are reliant on a completely different charging infrastructure than ICE cars. And it will be – the main frontier will be decided on who will build this charging infrastructure within the global south, who will set the standards over there, because that's also not a given.

But we need to take into account right now China is not only a big EV exporter, but it's also the biggest ICE exporter. In effect, more than 70 percent of all its exports are still in ICEs, so in combustion engine cars. And this will probably be some would call like a vested interest for the Chinese car manufacturing industry to also have this massive inventories of Chinese-produced combustion engine cars to find a market for them. Up until now, they found the markets, especially in Russia. And because of the sanctions that the Western countries put in place, Western car manufacturers left the Russian market, and we see that Russia has become the biggest market for exported Chinese cars. Combustion engine cars, that is.

And after Russia, there's still the Middle Eastern countries playing an important role. These Middle Eastern countries, I don't see them in the coming five years completely switch to EVs, given that petrol is still relatively cheap over there. So I think ICEs will still play an important role within the global south for the foreseeable, let's say, five years. But what happens next in the coming 10 years, it probably makes sense for them to also move towards the EV space, but it will take time and it will require lots of investments, especially in the charging infrastructure.

[Hermann] So to go back to this Mario Draghi report on the future of European competitiveness, clearly the EU, from what you said, has an urgent need to move towards a green industrial plan. So the EU combines its climate policy with its industrial strategy. And in order to stand a chance to stay competitive, especially with China, there will need to be more coordination and cluster effect, I guess, at the EU level, but also this kind of strategy with the emerging markets, how to engage them to outcompete China in order to keep the car industry as important as it is currently for the EU's economy and research and development.

And so to wrap up, could you please tell us what do you think will happen with the counter or retaliatory tariffs that China has introduced targeting not just cognac, as we mentioned in France, but also meat and dairy? Do you think this is a kind of temporary distraction coming from Beijing, trying to kind of divide and conquer the member states? Or do you think that it's something that we should take seriously in this context? Or should we just try to see beyond those and look at the bigger picture and see how to strategically outcompete China? Not as a zero-sum game, obviously, like you said, but more like playing it smartly by maybe like Volkswagen has done in China, investing in the promising startups for EVs that really innovate and how to bring that innovation back to Europe, maybe and you know, expand it to the global market.

[Victor] So the retaliatory tariffs that are currently being floated by Beijing, if we're being honest about this, this is all focused on the countries that voted in favor of the of the EV tariffs. It's quite specifically focused, especially on France, especially with the cognac. Also towards Spain, although they abstained, they were one of the initial proponents of increased tariffs on Chinese EVs. On Spain, it's specifically when it comes to pork imports. Also, dairy imports are being put under scrutiny by Beijing. Mainly focusing on dairy imports from France, but also from Denmark, which is also a proponent of the tariffs.

If you look at the markets and the scope of the market of electric vehicles and the car industry, it completely dwarfs all the other industries that are being floated as retaliatory tariffs from China. So it's really kind of slap of the wrist kind of response from China. And it's still out in the open whether China will eventually start in responding by putting in retaliatory tariffs that are going at the same time at the countries in favor of the tariffs, as well as the countries that voted against the tariffs.

For example, an idea that has been floated in China has been putting retaliatory tariffs on, as EVs on luxury internal combustion engine cars mainly produced by Germany and Slovakia. So there's a big question over there, whether China will go that way. Because if it will, it will also put its relationships with the more China friendly countries in harm's way. So it remains to be seen.

Also, it needs to be underlined that that Europe is relatively strong in its consuming power vis-a-vis China. Europe is the biggest single car market for Chinese exported electric vehicles, accounting for around one third of all the EVs exported out of China. I also think China will be rather cautious in not putting too much of a hostile stance towards its European partners. For as we already mentioned, there's lots of room for further growth in the EV sector within the global south countries. But for the foreseeable future, European car consumers, will play a massive role as an export market for Chinese EVs. And the Chinese EV producers will probably want to keep this market quite locked in or quite close to them.

[Hermann] So maybe one last question as a follow up to this is the concern, of course, that in North America they have adopted these very high tariffs that de facto decouple North American car industry supply chain from the Chinese one. And as we see here in Europe, there seems to be a different kind of approach emerging here, which is a good sign, I guess, in terms of the EU's strategic autonomy. It shows that we don't have to do like the US on that sector in particular.

But then again, it raises the questions about, you know, whether in the future the EU can also keep accessing the  the North American markets, which is very important for the made in Europe -cars. And whether we will have to kind of, you know, come up with our own kind of bifurcation and keep cooperating with some Chinese companies that are good at EV innovation and at the same time build up this European supply chain in battery and electronics for cars and microchips as well. And there we can see that the US is already moving towards controlling the flow of data for cars with the self-driven cars and robot taxis. So this is moving really fast. And I think it's quite hard to follow for a non-specialist audience.

And do you think that the EU is, you know, trying to hedge its interests between those two sides? You know, within the context of this Sino-US rivalry, that seems to move towards not just a trade war with tit-for-tat tariffs, but also some kind of decoupling. And in Europe, we know that the consensus was more about managing risk than decoupling. And there are some people in the US who see the wisdom of that, about de-risking or management of risks. But do you think that with what's going on in this particular sector of EVs, it's going to be a tricky one to, you know, to enact?

[Victor] But first, it also needs to be mentioned that there were never really any significant amount of Chinese-made cars entering the American market in the first place. So what these 100 percent tariffs that the United States implemented on Chinese EVs, they, in practice, they just solidified the de-coupling that already took place. So it's not going to make any big change in the foreseeable future when it comes to trade flows, when it comes to trade flows within between China and the United States, which are increasingly getting worse.

On the other hand, it's you also see that the United States is implementing its own industrial policy with the Inflation Reduction Act. And within the framework of the Inflation Reduction Act, in order that there is these there are certain tax rebates and consumer subsidies for EVs. And in order to be eligible for these subsidies, a certain threshold of the value added needs to be created within the United States or a country with whom the United States. And on the other hand, there is also a threshold, a never increasing threshold of value added, basically phasing out China out of the supply chain of electric vehicles being sold on the American market.

So the decoupling between the United States and China when it comes to EVs has already solidified, has already settled. It's going to create very interesting dynamics when it comes to, let's say, cars that were being produced in Europe, for example, by Chinese car manufacturers, because they will not be able to go to the United States as the United States already implemented, not only these tariffs, but also the United States has blocked Chinese software to be used within electric vehicles. And this just closes the door for any future EV exports towards the United States from a Chinese brand.

Completely different from the European approach. I would say that the European approach is more sophisticated than the American one. But at the same time, it's creating certain problems on its own, basing the entire argument against Chinese EV dominance on subsidies. And at the same time, inviting Chinese EV manufacturers to set up a manufacturing plant in Europe. While at the same time, the European Commission is wielding this foreign subsidies regulation. And starting all sorts of investigations on investments and joint ventures of Chinese companies investing in Europe, based on the premise that the companies themselves that are investing in Europe have been receiving state subsidies from China.

So at the same time, the European Commission is blocking trades with China, based on Chinese subsidies. But it's also blocking, increasingly, investments on the basis of over-subsidization. So it's definitely something that I see that the European Commission also needs to sort out on itself. To have a more comprehensive strategy on all of this.

[Hermann] So clearly, the EVs are a different beast altogether than the combustion cars. In the sense that they are smartphone on wheels with this data security issue. That can basically put at risk the whole potential for China to export its EVs, because of the suspicion in Washington that there could be some data security issues involved. And so it appears that at the moment, the EU is trying to optimize its options. Both with China and at the same time, accommodate the concerns that are coming most prominently from Washington.

And there is still this unknown equation, I guess, with the Japanese and the Koreans who are leading the EV technology after China, I understood in batteries, especially. And if somehow the US was to manage to pressure its East Asian allies in the name of security to decouple from China. Then probably the whole calculus in Europe will be again modified, I imagine. But for now, this is where we stand. And I understand that there are many complex ramifications involved.

And I think this was really great. Thank you so much, Victor.

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