De-Risking (Buzzwords of European Affairs 4/8)

The term itself has been around for decades in the parlance of financial institutions, where it has been meaning restricting or terminating business relations with potentially difficult clients to avoid rather than manage risk. As a buzzword of European affairs, it was made relevant by a speech held in March 2023, of President of the European Commission von der Leyen, who called for a "a sober assessment of our current relations and of China's strategic intentions.". According to von der Leyen, China's strategic posture under the leadership of Xi Jinping has changed significantly, with the goal to challenge the current international order and to ultimately put China at its center. Under these conditions, Europe ought to reconsider its policies towards China, not by totally decoupling from China, but by pursuing a de-risking strategy.  As such, de-risking is intrinsically linked to another buzzword of European affairs, "strategic autonomy". Since 2020, the European Commission has framed "strategic autonomy" as "reducing dependence on others for things we need the most: critical materials and technologies, food, infrastructure, security and other strategic areas".

Just lately, in April 2024, the German chancellor Olaf Scholz paid a visit to China. During his visit, Scholz stressed that “China should and will remain a key business partner for Germany and all of Europe”. According to this logic, Germany should maintain its current trade with and investment in China while gradually diversifying to reduce dependence on the country. Scholz is in a difficult position in between the interest of the German economy’s on trade with China and the Green party as a government coalition partner pushing for a harder stance on China.

Also, it can be observed that within the S&D faction in the European Parliament, there is a split when it comes to the EU-China trade relations. While the German SPD faction in the EP, in line with chancellor Scholz, is arguing for a more moderate approach, the French socialists are pushing for tougher measures like increasing tariffs on electric vehicles, following the US-government, to counter the high Chinese subsidies for their car manufacturers.

Despite the ongoing debates about the intensity of certain measures, it has to be stated that fundamentally the German Social-Democrats are in line with the European de-risking strategy saying:” …decoupling is not the right answer. Instead, we need a European resilience and risk reduction strategy, not least with a view to protecting critical infrastructure in Europe. We also need to diversify our economic relations in order to minimize economic dependencies on China, for example when it comes to procuring raw materials in accordance with the "China plus one" principle, which means that we always have an alternative supplier in addition to China. We must create incentives for German companies to diversify their value chains and sales markets, which would include banning the import of products from forced labor through a European supply chain law.” (Social democratic responses to a world in upheaval).

Summarizing the difficulty of a redefinition of the EU-China relationship, the doctrine for Europe and Germany alike describes China as a: partner, systemic rival and competitor.

You should read:

Andreea Brinza et al, EU-China relations: De-risking or de-coupling −the future of the EU strategy towards China.  https://www.europarl.europa.eu/RegData/etudes/STUD/2024/754446/EXPO_STU(2024)754446_EN.pdf , study requested by the AFET committee 03/2024.

Chung-in Moon, How a Mature Democracy Formulates Its Security Strategy. https://www.apln.network/news/member_activities/how-a-mature-democracy-formulates-its-security-strategy , Asian Pacific Leadership Network 26/07/2023.

Jonathan Packroff, Fresh US tariffs on China split EU Social Democrats along Franco-German divide. https://www.euractiv.com/section/economy-jobs/news/fresh-us-tariffs-on-china-split-eu-social-democrats-along-franco-german-divide/ , Euractiv 15/05/2024.