The Ukraine War's Impact on Sino-European Relations

Sino-European relations are reaching a tipping point writes Philippe Le Corre.

Published on May 17, 2022 

Written by Philippe Le Corre, Research Fellow with the Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School

Since Russia launched its unjustified attack on Ukraine on February 24, 2022, initiating a war on European soil, NATO, the European Union, and individual European countries have reassessed the security situation multiple times. Already, the war has had a devastating effect on EU-Russia relations at all levels, and the situation in Northeastern Europe will remain strained for a long time. Additionally, questions are emerging regarding the impact of the war on the future of Sino-European relations. Despite Beijing’s so-called “neutrality,” on February 4, Presidents Vladimir Putin and Xi Jinping signed a joint communiqué declaring a “friendship without limits” between their two states.

Two months later, on April 1, President Xi held another summit — this time with European Commission President Ursula von der Leyen and European Council President Charles Michel. For the first time in several years, the Chinese leadership faced a stern European side, unwilling to address topics other than the war in Ukraine. Under such circumstances, “there cannot be business as usual,” von der Leyen said. Although China’s ability to influence Putin is limited, the EU still argued that China has unique channels with Russia.

The Chinese side, however, has a very different view. President Xi has called on Europe to have an “autonomous” view of China (presumably autonomous from the United States), and Beijing insists that the solution to the conflict is to accommodate the “reasonable security concerns of all parties concerned.” Still, China has not, by and large, tried to circumvent Western economic sanctions toward Russia — although it is quietly encouraging a coalition of nations who do not want to take sides on Ukraine.

Beijing certainly does not welcome instability and economic turmoil, but China’s image has already dropped significantly in Europe. Since 2020, COVID-19 and the way some Chinese diplomats engaged in propaganda over “mask diplomacy” (through social media and embassy websites) have left scars. Furthermore, Beijing’s willingness to embrace and magnify EU divisions in the early stages of the pandemic has led to a backlash both in European public opinion and governmental elites, who have become irritated by China’s aggressive discourse. This explains the relative hardening of Brussels’ position vis-à-vis Chinese investments, state subsidies, and “coercive economic measures” on a member-state like Lithuania, which was sanctioned by China last year for opening a new Taiwan office. The EU has reacted by launching a case before WTO, calling such actions “discriminatory.”

On a macro-economic level, Chinese foreign direct investments (FDI) have dropped significantly according to a recent MERICS/Rhodium Group report. Although Chinese FDI in Europe increased 33% to $11.1 billion (from $8.3 billion in 2020), 2021 was the second-lowest year (above only 2020) for China’s investment in Europe since 2013. In trade, China was the third-largest partner for EU exports of goods (10.2%) in 2021 and the largest partner for EU imports of goods (22.4%). Following the sanctions on Lithuania, the war in Ukraine, and lockdowns in China, the 2022 picture appears uncertain.

Indeed, projects around the Belt and Road Initiative (BRI) have been disrupted in Eurasia and Europe due to the war in Ukraine. Freight trains from China crossing into Central Asia have been prevented from reaching Ukraine, a country described in January by Xinhua News Agency as having “broad prospects for BRI cooperation with China.”

Ukraine-related projects are now at standstill, and even projects between China and Russia may be in jeopardy due to Western economic sanctions against Moscow. As for projects in Central and Eastern Europe (CEE), a sub-region long coveted by China, CEE countries are now largely focused on the Ukrainian situation, welcoming refugees and sending assistance to their neighbor. CEE governments are now less likely to conclude agreements with China, which is seen as an apologist for Russian actions. In addition, the 16+1 format, initiated by China 10 years ago as a mechanism to interact with the region through infrastructure projects in the energy and transport sectors, is currently being challenged in its very existence. The majority of CEE states have had relatively low trade with China and run a trade deficit worth $75 billion. The five non-EU countries — Serbia, Albania, Macedonia, Montenegro, and Bosnia and Herzegovina — have warmly welcomed China-funded projects worth about $6.3 billion in sectors such as highways, energy stations, and railways in the Western Balkans.

But as pointed out in a recent Observer Research Foundation report, none of the infrastructure projects announced for the remaining 11 countries, who are EU members, went beyond paper and political declarations. Projects signed as early as 2013 have not even begun, with the Belgrade-Budapest railway being the only exception. Last year, six CEE leaders out of the 16 members chose to send their foreign ministers to the 16+1 meeting rather than attend themselves. While Lithuania has fully withdrawn, Estonia, Latvia, Romania, Bulgaria, Slovenia, and the Czech Republic are also questioning the format’s usefulness.

For now, the future of the BRI remains uncertain. China may now refocus on the BRI's Central Asia-West Asia corridor, moving more Chinese exports across Central Asian countries, Iran, and Turkey, but those logistics are challenging as they involve transport via the Caspian Sea. The cheapest and easiest way is still the maritime route, all the way from Chinese ports to the Mediterranean Sea, but sea lanes have also been affected by serious delays. 

Overall, Sino-European relations are reaching a tipping point. Following the pandemic and acrimonious exchanges over human rights in Xinjiang and Hong Kong, as well as economic and trade issues (Europeans are still complaining about market access for their companies in China), there is a risk that the Ukraine war and Beijing’s stance might deeply affect the long-term relationship. But with US-China relations at an all-time low, it would be surprising if China did not want to try to improve its relationship in particular with Berlin and Paris, offering these two capitals a window of opportunity once the Ukraine situation becomes less tense.