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By STUART LAU
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WELCOME TO CHINA WATCHER. This week was off to a busy start, with Stuart Lau in Brussels watching not only the storm whipped up by the German foreign minister’s reference to China’s “dictator,” but also the Mediterranean rendez-vous in Malta between the top U.S. and Chinese national security chiefs. But first, let’s begin with the EU’s latest moves on Chinese electric vehicles. Phelim Kine will be in our driver’s seat from Washington on Thursday.
Fresh from Moscow: The Chinese Communist Party’s top foreign policy official Wang Yi is in Russia for a four-day visit. He met yesterday with Sergey Lavrov, the Russian foreign minister, and delivered a pointed attack on Washington just hours after leaving Malta where he held talks with U.S. National Security Advisor Jake Sullivan: “The more violent the unilateral actions of hegemony and bloc confrontation become, the more important for us [China and Russia] to keep up with the times, show a sense of duty as great powers, and further fulfill our international obligations.” AP has more. In the meantime, Taiwan reported a record breaking number of Chinese military incursions — with 103 aircraft flying near the island within 24 hours by Monday.
EU’S E-CAR EDGINESS
STOP AND SEARCH: China wants to dominate the world’s e-car supply chains, and Europe doesn’t like the sound of it. The European Union, which was once touted as the biggest overseas market for the fast-developing Chinese e-cars, turned on the warning light last week, with European Commission President Ursula von der Leyen — lobbied heavily by the French government — vowing to launch an anti-subsidy investigation. As if the message would get lost, she announced the move at the high-profile annual State of the European Union speech, winning her a round of applause from European Parliament members, the majority of whom are much more critical of Beijing than their capitals are.
EU WARNING: Ahead of a meeting of all 27 EU leaders, the EU is warning the bloc risks getting exposed to dependency on Chinese cars like the painful experience with regard to Russian energy.
“The EU has a strong industry in the intermediate and assembly phases of the latter (where it holds more than 50% of the global market share), but it relies heavily on China when it comes to lithium-ion batteries and fuel cells that are, for the time being, crucial for the decarbonisation of mobility,” an internal report presented by the Spanish-held rotating presidency of the EU Council noted. “Without implementing strong measures, the European energy ecosystem could have a dependency on China by 2030 of a different nature, but with a similar severity, from the one it had on Russia before the invasion of Ukraine.” Gulp.
FRANCE TAKES ACTION: Most Asian exports are likely to be excluded from France’s new electric vehicle purchase subsidy scheme as of next year, as Paris looks to clamp down on EVs from China.
Paris is set to issue a decree Tuesday that spells out new new criteria for awarding the subsidy; the list of eligible vehicles will be published in mid-December, a French government official told reporters on Monday. The scheme pays up to €7,000 for lower-income people buying an EV and €5,000 for others.
Adieu: Buyers of some Asian-made cars might still get the cash, “but it will not be the majority of them according to modeling we have done,” the official said, adding: “If you produce vehicles [in a country] with a very carbon-intensive energy mix, you will have a hard time remaining eligible for the bonus.”
Buy European: French President Emmanuel Macron first announced the measure in May, something he said was needed to stop using “French taxpayers’ money” to subsidize car production outside the EU. Giorgio Leali has the full story.
AND LITHUANIA, OF COURSE: Welcoming von der Leyen’s move, Lithuanian Foreign Minister Gabrielius Landsbergis hit out at some European countries and actors. “For decades, a short-sighted approach allowed China to have an upper hand on our markets and industries. It is our European duty to prevent the Union from falling into a trap of any sort of dependency from any authocracy ever again.”
GERMANY IS IN A BIND: The crucial vote here lies in Berlin. While the colossal German car industry stands to lose out to Chinese competition, it also fears retaliation from the Chinese government, given China has become the irreplaceable market for most German car companies. Already, some German lobbyists are pushing hard against the idea, even going as far as dismissing Commission claims that subsidies exist in the Chinese e-car industry.
CHINA, FOR NOW, SPEAKS UP RATHER THAN ACTS: China accused the European Union of “naked protectionist behavior” on Thursday after von der Leyen launched her investigation. “China expresses its high concern and strong dissatisfaction” over the probe which “will have a negative impact on China-EU economic and trade relations,” the commerce ministry said in a statement. Nicolas Camut has more.
BARGAINING CHIP FOR EU? As China grows skeptical of the EU over this saga, the EU’s Trade Commissioner Valdis Dombrovskis has other plans. As he travels to China next week for the latest round of trade dialogue with China’s influential Vice-Premier He Lifeng, Brussels wants him to get more market access pledges from Beijing.
Good luck with that: “I’d be surprised if Chinese officials don’t fire back with the EV probe as soon as they hear ‘market access’,” an EU diplomat told China Watcher.
Rundown: The high-level trade dialogue, slated for September 25, will be structured around four main sessions, two diplomats and an official told POLITICO’s Camille Gijs and Barbara Moens: On macroeconomic issues; trade and investments; industry and supply chains; and financial cooperation.
EU DIGITAL CHIEF IN BEIJING
WARNING ON RUSSIAN PROPAGANDA: European Commission Vice-President Věra Jourová, newly appointed as the EU’s digital chief, is wrapping up a 24-hour visit to Beijing today. During her meeting with Vice-Premier Zhang Guoqing yesterday, Jourová brought up a topic Zhang was highly familiar with: Russia.
Speaking to Zhang just days after he met Russian President Vladimir Putin in Vladivostok, Jourová warned Beijing to tread carefully when it comes to parroting Moscow’s disinformation on its war against Ukraine.
Here’s what she said: “I have stated that we consider how China interacts with Russia’s war against Ukraine to be a determining factor for EU-China relations going forward. This includes of course aspects relating to cybersecurity, and disinformation,” Jourová said in a statement to POLITICO after the EU-China High-Level Digital Dialogue. She also said she told Zhang — the former head of Chinese state-owned defense contractor Norinco — that she counted on “China’s cooperation” to ensure “that no territory is used for malicious cyber activities.” Clothilde Goujard has the full story on POLITICO Pro.
Big Tech findings: Tech companies like Microsoft and Meta in the last two weeks have exposed Chinese government-linked operations to spread disinformation, including the largest known covert influence operation aimed at discrediting the West on social media.
EU GETS NEW ASIA POLICY CHIEF: As I reported on our sister publication Brussels Playbook yesterday, the EU will appoint Swedish diplomat Niclas Kvarnström as the next Asia-Pacific managing director of the European External Action Service, the EU’s diplomatic arm. A fluent Chinese speaker, Kvarnström was tapped to succeed retired Gunnar Wiegand as the EU is in a dire need of shoring up China expertise in Brussels, as relations with Beijing get trickier by the day, two EU diplomats say.
Talking of China expertise: The European Commission has awarded the first China fellowship to Andrew Small, a renowned expert on EU-China relations and author of No Limits: The Inside Story of China’s War with the West. More fellowships are expected to follow.
THE CRITICS
BERLIN DROPS THE D-WORD: China on Monday summoned the German Ambassador to China Patricia Flor over Foreign Minister Annalena Baerbock‘s reference to Chinese President Xi Jinping as a “dictator.”
“China is strongly dissatisfied with and firmly opposes the German side’s remarks, which are extremely absurd, a serious infringement of China’s political dignity and an open political provocation,” China’s foreign ministry spokesperson Mao Ning said Monday. “China has made serious inquiries to the German side through diplomatic channels.”
Where the disputes began: Last week, Baerbock gave an interview to Fox News underlining Germany’s support for Ukraine— in which she fired a broadside at Xi. “If Putin were to win this war, what sign would that be for other dictators in the world, like Xi, like the Chinese president?” said Baerbock, from the German Green Party that has taken a tough line on China.
End of Germany’s China illusion? Here’s the take from European Council on Foreign Relations’ Janka Oertel.
OVER IN THE UK: Labour Party leader and Prime Minister hopeful Keir Starmer said the U.K. needs to “wean itself off” China “when it comes to trade, commerce and technology.”
Speaking to Anne McElvoy, the host of POLITICO’s new Power Play podcast, Starmer said: “We need to be absolutely clear about the security of the U.K. and issues like spying and interference which goes on and of course the human rights abuses that are taking place.”
“How do we wean ourselves off Chinese influence across the world?” Starmer asked. “There are big questions that progressive governments could face together.” However, he acknowledged that it was impossible to “distance ourselves” completely from China on big-ticket issues like climate change.
IN THE GOVERNMENT, VIEWS ARE SPLIT: U.K. Foreign Secretary James Cleverly continues to sound conciliatory on China. “Pretending China doesn’t exist is not a credible policy,” he told the BBC. Meanwhile, Home Secretary Suella Braverman said she supports adding China to the “enhanced” list of the upcoming Foreign Influence Registration Scheme. “I think there is a strong case to be made for China to be put into that,” she told lawmakers yesterday.
TRANSLATING WASHINGTON
SULLIVAN, WANG TALK UP ‘CONSULTATIONS’ IN MALTA: National security adviser Jake Sullivan met with Chinese Foreign Minister Wang Yi over the weekend in the latest effort to ease U.S.-China tensions. “The two sides committed to consultations in key areas, specifically on political and security developments in the Asia Pacific,” according to a senior administration official who briefed reporters on their discussions on Sunday. The meeting could help pave the way for a long-anticipated Biden-Xi phone call and a possible one-on-one between the two leaders on the sidelines of the APEC meeting in San Francisco in November. You can read POLITICO’s Nahal Toosi and Ari Hawkins’s full story here.
TAIWAN PRESIDENTIAL CANDIDATE: I’M NO ‘TROUBLEMAKER’: The presidential candidate for Taiwan’s opposition KMT, or Nationalist Party, Hou You-yi, is pitching himself as the more Washington-friendly successor to outgoing President Tsai Ing-wen during a visit to the U.S. this week. Under a Hou presidency “Taiwan will not be a trouble-maker, but instead will play a role in facilitating peace and reducing risks in the region,” Hou said in a statement released by his campaign on Sunday. That language parrots China’s foreign ministry criticism last month of Hou’s pro-Taiwan independence electoral rival, Vice President Lai Ching-te, as “a troublemaker through and through.” Hou hammered that point home in a Foreign Affairs piece published on Monday in which he pledged to lead Taiwan with “proactive pragmatism and be a responsible stakeholder in the Indo-Pacific region.” Latest polls for the four-way presidential race have Hou trailing Lai but slightly ahead of former Taipei mayor Ko Wen-je and electronics manufacturing giant founder Terry Gou.
LAWMAKER: GUAM VULNERABLE TO CYBERATTACKS: The U.S. delegate representing the Pacific Island territory of Guam has warned that the island is at high risk of malicious cyber-attacks by Chinese forces. Chinese state-sponsored hackers “have been slowly testing their limits with Guam,” Del. James Moylan (R-Guam) told POLITICO in an emailed statement published on Saturday. “These attacks … are clear signs that China wants to gain an edge over the U.S., starting with Guam,” Moylan said. That warning follows an attack on essential infrastructure in the island’s U.S. military outpost in May. POLITICO’s Maggie Miller has the full story here.
GALLAGHER TARGETS TECH SECTOR CHINA TIES: Rep. Mike Gallagher (R-Wis.), chair of the House Select Committee on China, wants to run a tabletop war game exercise with U.S. high tech firms to alert them to the risks posed by their China ties. “These tabletop exercises have a useful way of kind of pushing people outside their intellectual comfort zone and forcing them to go beyond just the standard conversation,” Gallagher told Steven Overly in the POLITICO Tech Podcast on Friday. Gallagher has already convened both lawmakers and finance experts in war game exercises since the committee’s launch in March.
MORE HEADLINES THIS WEEK
Aljazeera: Taliban give a warm welcome to China’s new ambassador to Afghanistan.
Bloomberg: Alcoholic chocolate sells out as another boozy craze hits China.
New York Times: China’s import curbs on cosmetics face pushback in Europe.
Observer: ‘He’s had a bad summer’: Xi faces calls to loosen grip as China’s crises mount.
Wall Street Journal: An even bigger housing crisis threatens China’s economy.
MANY THANKS: To editor Christian Oliver, reporters Clothilde Goujard, Camille Gijs, Joshua Posaner, Giorgio Leali, Barbara Moens, Nahal Toosi, Ari Hawkins Steven Overly and producer Seb Starcevic.
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