On January 30, two days after being elected president of the Czech Republic, Petr Pavel had a phone call with Taiwan's President Tsai Ing-wen, becoming the first elected European head of state to do so. In a subsequent interview with the Financial Times, Pavel said China is "not a friendly country" to Western democracies, adding that Taiwan was more beneficial for his country's economy than China and quipping, "We will not behave as an ostrich to hide this reality.” Beijing, naturally, reacted with fury, with the foreign ministry saying that Pavel had "hurt the feelings of the Chinese people."
The diplomatic incident underscored how Beijing's decade-long wooing of Central and Eastern European countries, seeking a window to the European Union to gain a foothold into the world's third-largest economy, is rapidly closing. China stopped all imports from Lithuania in 2021 after Taiwan's government opened a de facto embassy in the capital Vilnius, and Lithuania said it would reciprocate in Taipei. With the exceptions of Hungary and Serbia, many Central and East European countries have adopted a harsher line toward Beijing. The war in Ukraine has accelerated this process with Beijing forming a "no limits" partnership with Moscow, which has in turn led many European countries to see the United States as their chief security guarantor.
Prioritizing Geopolitics over Trade
Elsewhere across the continent, public attitudes toward Beijing have hardened. According to recent polling commissioned by the US-funded International Republican Institute and conducted by Ipsos in 13 European countries, 34 percent of respondents said their views on China had worsened. 66 percent of those who feel that way cited Beijing’s partnership with Russia as the biggest factor. According to historical data from the Pew Research Center, more respondents in several European countries have had unfavorable opinions of China: for example, 33 percent of Germans had an unfavorable view in 2006, which rose to 74 percent in 2022. According to the “Transatlantic public opinion on China” poll published by the Central European Institute of Asia Studies (CEIAS) in December 2022, China was the fourth most negatively viewed country by Germans, only higher than North Korea, Russia, and Iran. A majority of Germans agreed that preventing Chinese geopolitical expansion and advancing human rights in China were more of a priority than promoting trade and investment.
German relations toward China have been slower to change than in Central and Eastern Europe. In 2016, China became Germany's largest trading partner, superseding the United States. Former Chancellor Angela Merkel visited China 12 times during her 16-year tenure. German luxury cars found buyers among China's newly wealthy; this relationship was so crucial to German automakers that in 2018 Mercedes-Benz felt compelled to apologize to Chinese consumers for quoting the Dalai Lama on its Instagram account. In 2022, China was still Germany's largest trading partner, reaching record levels. In November, Chancellor Olaf Scholz flew to Beijing to meet with Chinese President Xi Jinping, with the leaders of Germany’s top companies in tow, and against French President Emmanuel Macron's suggestion of making a joint Franco-German trip.
Weathering the Storm
Still, in recent weeks, the German government along with other Western European countries have adopted a much tougher line on China, linking arms with the United States, which has urged Europe to reduce its economic links with Beijing. On March 8, the Dutch government announced it would impose new export controls on machinery needed to produce the most advanced microchips. The announcement was particularly crucial because the Netherlands is home to the corporation ASML, the largest supplier to the semiconductor industry. With the announcement, China no longer has access to manufacturers of the machines that “print microchips, which are only made in the Netherlands, the US, and Japan, which have already blocked sales. Scholz' government is preparing steps to force mobile phone networks to take equipment made by China’s Huawei and ZTE out of their infrastructure; an estimated 59 percent of Germany's 5G infrastructure relies on Chinese technology.
Despite the links between Berlin and Beijing, there are indications that Germany could weather a break in trade relations as well as it has managed without Russian gas, which is to say, much better than expected. According to the Kiel Institute for the World Economy , decoupling the EU from China would permanently reduce German economic output by just 1 percent. However, the pain would not be felt equally. Germany is dependent on China for key inputs in electric cars, batteries, semiconductors, and computers: it imports two-thirds of its rare earth metals from China. Sanctions on China if it invades Taiwan could lead to shortages of certain electronics, as key inputs would be exhausted.
The US Inflation Reduction Act, which was passed by teh US Congress in August 2022, is an attempt to deal with the supply chain issue. It provides tax breaks for companies seeking to make electric car batteries in the United States. This law initially caused consternation in European capitals as Macron and others saw the subsidies as a blow to the principle of fair competition. However, Washington and Brussels are seeking to resolve their differences. Reuters reported that the US government and the EU have started talks over how to make European rare earth metals eligible for US subsidies with a narrowly focused trade pact.
Whenever and if China invades Taiwan is anybody's guess. CIA Director Bill Burns said recently that President Xi had told his military to be “ready by 2027” to invade, adding that doesn't mean that he's made a decision. Burns added that Russia's abysmal performance in its war against Ukraine has given Xi doubts. Whatever the outcome, Europe will have to be ready for an economic war potentially of a much greater magnitude than the energy shutoffs with Russia.
Luke Johnson is a freelance reporter living in Berlin, frequently writing about Eastern Europe.
