The China-EU Relationship: From Strategic Ambiguity to Cold Realism

As the global power balance shifts in the wake of Russia’s war in Ukraine and escalating U.S.-China competition, one idea is rapidly falling out of favor: that trade can smooth over deep political divides. The relationship between China and the European Union is now a case study in how that assumption is being undone.

Ahead of the China-EU summit scheduled for July 24 in Beijing, expectations are low. On paper, both sides remain committed to dialogue. But beneath diplomatic smiles lie deeper—and likely irreconcilable—differences in values, strategic priorities, and political systems.

From Cooperation to Collision

For decades, the EU embraced a model of “compartmentalization,” maintaining robust economic ties with China while sidestepping political frictions. But this balance has become unsustainable. China’s implicit support for Russia’s war in Ukraine—underscored by Foreign Minister Wang Yi’s comment that “Beijing does not want to see Russia fail”—made clear that China sees global affairs through a different lens. Where Brussels upholds a rules-based order, Beijing increasingly operates in terms of power, hierarchy, and strategic calculation.

What’s more, China appears ready to sacrifice economic gain for geopolitical advantage. The EU had hoped that China’s dependence on European markets would pressure it to moderate its ties with Moscow. Instead, China has doubled down on its “dual circulation” strategy: insulating its domestic economy while turning outward only when strategically advantageous.

Coercion, Codified

China’s economic statecraft has evolved from quiet retaliation to legalized coercion. A decade ago, trade boycotts and sudden regulatory crackdowns were ad hoc responses to political tension. Now, they’re embedded in law. The 2021 Anti-Foreign Sanctions Law and the 2023 Foreign Relations Law provide broad authority to penalize foreign entities seen as undermining China’s interests.

These measures are deliberately vague and lack transparency—unlike the U.S., where even controversial sanctions undergo formal legal processes. For European companies, this creates a high-risk environment where business decisions must now factor in political loyalty. Market access comes with strings attached.

Exporting Authoritarian Norms

This blurring of economic and political boundaries reflects China’s broader governance model. In recent years, Beijing has applied its domestic tools—surveillance, information control, and opaque legal enforcement—to its international dealings. Foreign companies such as Bain & Company and the Mintz Group have faced raids under China’s revised anti-espionage laws.

These developments go beyond trade. They now affect academic exchanges, tech partnerships, and regulatory cooperation. European universities and research centers are rethinking engagement with China amid growing concern about data security and intellectual freedom.

A Strategic Misreading

Beijing views the EU as economically important but politically fractured and deferential to the U.S. That perspective once allowed China to pursue investment while dismissing Europe’s geopolitical clout. But this is changing. The EU is now investigating China’s electric vehicle subsidies, implementing investment screening tools, and pursuing digital sovereignty initiatives. Public opinion is shifting too: surveys in France, Germany, and Nordic countries show growing mistrust of China’s human rights record and foreign policy behavior.

Why China Won’t Liberalize

Understanding China’s behavior requires looking inward. Under Xi Jinping, the Chinese Communist Party’s main goal is regime survival. Domestic security and loyalty trump efficiency or international approval. Legal reforms are less about modernizing governance than about tightening control.

For China’s leadership, political discipline at home and strategic ambiguity abroad are two sides of the same coin. Supporting Russia, for instance, isn’t about friendship—it’s about preserving a world where U.S.-led coalitions can be counterbalanced. This logic is antithetical to the EU’s faith in multilateralism and liberal economics.

Looking Ahead: Engagement Without Illusion

The upcoming summit is unlikely to resolve any of these tensions. While some symbolic gestures may emerge, the broader trajectory is clear: China and the EU are diverging, not converging. That doesn’t mean Europe should abandon engagement—but it must engage with realism.

The EU needs to develop greater internal cohesion, bolster its resilience, and view China as it is—not as it once hoped it would become. The real challenge isn’t managing diplomatic theater. It’s preparing for a future defined not by shared values, but by strategic competition, contested rules, and hard choices.