US-China relations + German debates on China

In this issue of the MERICS Europe China 360°, we cover the following topics: 

• Navigating balloons and export controls in a time of hot peace
• German dependency, diversification and decoupling debates on China
• Short takes

Navigating balloons and export controls in a time of hot peace

By Francesca Ghiretti

Despite the new episodes of tensions involving an alleged spy balloon from China flying over US air space, both countries will likely try to stabilize their relationship in 2023. The trip to Beijing of US State Secretary Blinken may have been postponed in response to the incident, but the episode has not fatally wounded the desire from both sides to find a better way to coexist. As expressed by President Biden’s address to the US Congress, his Presidency “remains committed to work with China” but that does not mean that the US will not “act to protect” itself.

The balloon incident was only the latest episode that shook strained US-China relations by interrupting attempts to communicate and engage. Washington’s adoption of semiconductor export controls targeting China was another flash point highlighting the complicated nature of the relationship. While a potential spy balloon required a prompt response from the US, China needed a few months to respond to US export controls by introducing its own export controls on photovoltaic technology. Whether intentional or not, China’s response occurs just as the US appears to have garnered Dutch and Japanese support for new export controls.

Despite the increased tensions in US-China relations, actors around the world are seeking to stabilize relations with China, and China is trying to do the same. Australia is one of the countries seeking to patch up the relationship with China despite persistent differences. A 90-minute meeting between Australia’s Trade Minister Don Farrell and his Chinese counterpart Wang Wentao apparently yielded little tangible progress. But still, it is an important step towards improving strained relations. Farrell even received an invite to visit Beijing “in the near future”, which he duly accepted.

What about the EU – US – China triangle?

The European Union is undergoing its own process of stabilization regarding its relationship with China.  French President Emmanuel Macron is expected to visit Beijing this year and has asked Ursula von der Leyen to join the trip, once again turning a France–China into an EU–China meeting. However, the EU cannot escape the pitfalls of US–China competition.

The recent debate on export controls is the obvious example that comes to mind, just look at how the EU proposed its own green industrial strategy, the Green Deal Industrial Plan (GDIP), in response to the US’s Inflation Reduction Act (IRA). The IRA seeks to incentivize production at home so as to decrease dependence on China, but it appears to  equally disincentivize production in partner countries, such as those in Europe. On one hand, it has been reiterated that the EU wishes to be a close ally of the US and coordinate with Washington on a broad set of issues, including China. On the other, the EU wishes to adopt its own approach to China.