China’s behavior during the Covid-19 crisis has reminded European decision makers and wider publics of their deep interdependence with China and of the vulnerabilities that result from this exposure. Beijing’s questionable handling of the crisis at home and its forceful diplomatic offensive abroad, aimed at shaping narratives and engineering loyalty, increased skepticism about the trustworthiness and ambitions of its leaders. The uncertainty caused by the global pandemic will reinforce nationalistic politics not only in the US but also in China, fueling a vicious cycle of distrust, closure and scapegoating, and putting the US-China relationship on a dangerous path.
Going forward, European decision makers can no longer afford to grant China’s party state leaders the benefit of the doubt about eventual convergence with liberal political and economic norms or benign intentions. Nor can they hope to be a bystander or even a beneficiary in the unfolding US-China conflict. European China policy rethinking needs to be grounded in a realistic assessment of China’s current trajectory: leaders in Beijing are pursuing a “China first” mission that can be summarized as making China's rise inevitable, resistance futile and collaboration profitable. More specifically, Beijing’s global “China first” trajectory is likely to be characterized by four features.
First, China is doubling down on strengthening party and state capacity. President Xi Jinping has overseen a massive concentration of power in the CCP top leadership, focusing heavily on the renewal of party cadre loyalty and aggressive punishment under the guise of an anti-corruption campaign. During the summer of 2020, internal politics hardened further, with a purge in the security apparatus and a “political-legal rectification” campaign to support Xi’s grip on power.
With ideological conformity as a primary goal, Beijing has also dramatically expanded control over the internet, media and civil society and is introducing state-of-the-art surveillance technology. As a result, the system is geared more than ever to suppressing dissenting voices and to disseminating the CCP’s populist narrative of a renewed China that is returning to its former greatness. However, with the centralization of power, the CCP has also become more prone to displaying mistakes, weaknesses, and vulnerability. Failures of control, such as CCP document leaks over detention camps in Xinjiang, or Beijing’s initially indecisive response in 2019 to public unrest in Hong Kong have hinted at persistent defects in China’s political system. Insecurities and power struggles among Chinese governing elites have created a domestic and global outlook defined by paranoia, which lends itself to a permanent mindset of friend-foe distinction.
Second, China is increasingly confident about approaching global affairs based on just such a clear friend-foe distinction, which often puts it at odds with the interests and actions of OECD countries. CCP elites have come to identify “global governance” as an area of persistent struggle in their desire to carve out a more visible and fitting role for China. As with domestic governance, China rejects the liberal norms underpinning existing global rules and multilateralism. These include the universality of human rights and some of the building blocks of international law. China is also establishing elements of a “parallel order”, bolstering bilateralism at the expense of multilateralism. Where Western powers pursue a multi-stakeholder approach, China promotes state-centric norms. Beijing has only partially modified its approach when faced with pressure, largely shrugging off criticism for non-compliance with WTO principles or of the Belt & Road Initiative’s (BRI) questionable approach to financial, environmental and social sustainability. Instead, Beijing is contemplating options for transforming BRI countries into a China-centered club of less advanced economies, providing an alternative to stringent WTO rules and OECD association.
Third, economic policy making in China will continue to put a high premium on strategically managing China’s global economic interdependencies. The economic outfall of the Covid-19 pandemic has put China’s economy and companies under considerable pressure. In response to external and internal pressure, Xi is promoting a new theory of “dual circulation” meant to propel China’s development and competitiveness, protect China from outside shocks, and support his techno-nationalist visions. As a result, China is likely to see elements of “war time style economic policy”, offering little room for urgently needed structural reforms and meaningful opening to foreign competition.
Rather, China’s economic policy will continue in its neo-mercantilist fashion, focusing on crisis management, central party leadership and control, upgrading of the state sector, doubling-down on autonomous innovation and continued attempts to localize high-tech value chains. US-China economic competition will only accelerate China’s existing drive for technological self-sufficiency and bolstering the autonomy of its indigenous innovation capacity, while the uneven distribution of credit, over-investment in government-priority sectors, the ubiquitous nature of non-tariff barriers, and discriminatory standardization policies will continue to present formidable challenges for European companies.
Fourth, and very visible during this crisis, leaders in Beijing are defining China’s global role as a peer competitor to the US. Other relationships are seen first and foremost through that prism as well. From a Chinese perspective, competition and conflict with the US will play out in all relevant geographic and functional arenas, including in Europe. Accordingly, a stable but indecisive Europe would be a convenient economic partner and helpful counterbalance to the US, while a strong and self-interest driven Europe that acts in a way that is aligned with like-minded partners would not be in China’s interest.
European China policy needs to be grounded in a sober recognition of China’s frequent and sustained non-convergence with principles, values and best practices that underpin the European project and liberal-democratic market economies in the OECD world. Leaders in Beijing are no longer content with just preventing such principles and values from taking root in China; they are also seeking to push back on these internationally. Europe will therefore have to accept what CCP leaders have long concluded internally: Europe’s system of economic and political governance is in competition with China’s strategic priorities and political preferences.