The EU’s relationship with China over the past 40 years or so has been largely an effort in pretence. The consequence of China’s concerted and coordinated efforts to suck up all relevant technologies and to—as much as possible—supplant the previous engineering kings of the world, while using WTO to expand as much as possible exports to Europe and sophisticated divide-and-rule tactics to derail objections and opposition, has been a huge trade surplus for many years. European business has to a large extent forsaken long-term interests for short-term profits, and the compromising has not been restricted to business. It’s a sad story, and with just a modicum of foresight and unity, it could have been largely offset. But it started with the German auto manufacturers all agreeing to 49-51 minority stakes in their China businesses, with the System being the controlling partner, and the pattern has been mostly retained unchanged since then.
There have been moments of reflection and doubt. Midea’s takeover of the German robotics company Kuka caused a storm of debate, but in the end, Merkel let it go through. And now China’s EV cars are storming the gates, and the German and French auto industries are shaking in their boots. There is an answer to the cars, which is the IoT factor—any Chinese cars sold must have semi-conductors and software which are produced in the EU or specifically approved for use, otherwise backdoors are to be assumed. Probably too late. But there are signs on the EU side of some regret and renewed consideration of the long-term.
Just this week, the EU fined Temu $232 MN for the sale of illegal products, and an investigation into JD.com’s $2.6 BN bid for Germany’s Ceconomy has been launched. We’ll see. It’s not the end of the story. Achieving unanimity amongst the fractious members of the EU is desperately difficult, and Europeans we have raised this with have without exception shaken their heads and said: “no chance.” But miracles do sometimes happen. There was a difficult meeting in Beijing two weeks ago in which EU officials became quite adamant, while Chinese officials responded by accusing Europe of being protectionist. Ah, reciprocity would be such a wonderful thing. Any concerted move in that direction would be invigorating. Europe is still a huge market and has significant advantages. There is still a chance it can avoid the fate of being little more than a cute tourist destination.
Have a great weekend.