China’s real endgame in the trade war runs through Europe

Some call it political warfare, using a nonmilitary toolbox of overt and covert means to exert its influence on political and economic elites, academia and public opinion. With these efforts, it weakens Western unity (and US attraction) and improves its image as an alternative to liberal democracy, the report concluded.

Growing Sino-US tensions have brought Europe new export chances in China but at the same time China has shifted considerable export and foreign investment efforts to Europe to replace lost American markets. In the first six months of this year, newly announced Chinese mergers and acquisitions into Europe were nine-fold the North America number at $20 billion compared to $2.5 billion and completed investments were six times higher at $12 billion compare to $2 billion.

At the same time, a new Trump-Xi trade deal could shake Europe as well, as China’s state driven economy could decide overnight to replace European products with US goods for political purposes.

The potential for an escalated Beijing-US struggle has left European experts scratching their heads over how they would choose sides or navigate the perils, particularly in the case where some countries and industries have much more at stake in China.

Some European officials speak of the need for “strategic autonomy” in the face of US sanctions extraterritorial reach on Iran and Secretary of State Mike Pompeo’s speech in Brussels this week where he questioned multilateralism and the European Union. At the same time, they worry more about what some call China’s “political warfare” of gathering economic, financial and thus also diplomatic influence.

The European Union hasn’t yet applied anything as restrictive on foreign investment as the US Committee on Foreign Investment in the United States (CFIUS), an interagency committee that reviews the impact of foreign investments on US national security. However, the EU this month passed a bill creating an unprecedented, if non-binding, screening scheme aimed at predatory Chinese investments.

Germans this week increased their focus on questions regarding a company called KUKA Robotics, which has become the poster child for the perils of high tech sales to the Chinese. With its industrial robotics production, KUKA was one of the nation’s greatest innovators for the 21^st century economy until it was taken over by the Chinese company Midea in 2016.

Just last month, Midea was reversing previous assurances that it would not remove KUKA’s highly respected and long-time CEO, underscoring China’s ultimate control over cutting-edge robotics technology.

Despite facing new scrutiny, China is undeterred in its European strategy, taking advantage of European divisions, America’s trade strains with Europe and the urgent investment needs of particularly Southern and Eastern European countries.