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In this week’s edition: EU-China summit preview, Hungary doubling down on Ukraine and a leak on the EU executive’s defence industry inquiry.

With just a few days to go before European Commission President Ursula von der Leyen, European Council President Charles Michel and EU’s chief diplomat Joseph Borrell arrive in Beijing for the EU-China Summit, the expectation is it may be a slightly frosty affair.

It will be the first in-person summit held in four years after China-EU relations nosedived during the pandemic, with trade tensions threatening to overshadow the talks as the bloc considers action against Chinese subsidies of electric vehicles, wind turbines, medical technology and solar equipment.

Both sides are currently stuck in a World Trade Organisation (WTO) dispute over what Brussels says was an overnight Chinese embargo on all Lithuanian exports- a retaliation for Vilnius opening a controversially named Taiwanese diplomatic office.

Beijing has, meanwhile, insisted its importers simply do not want to buy goods from countries that disrespect Chinese sovereignty.

It also comes as the EU has articulated a new strategy of de-risking from China by reducing its dependency on critical sectors and supplies, as well as mitigating Beijing’s ability to get its hands on advanced technologies that could be used for military purposes.

Despite assurances that the EU does not want to decouple its trade from China, Chinese companies operating in Europe have started making rounds and saying they are facing uncertainty regarding their future, but in fact nevertheless continue to invest in the bloc.

French President Emmanuel Macron, who met with Xi in China earlier this year, argued the bloc should ‘stop being naive’ and demand a level playing field with countries like China, and has been pushing the European Commission behind the scenes to launch a subsidies probe.

In Beijing, Von der Leyen and Michel are expected to meet Chinese President Xi Jinping, while Chinese Premier Li Qiang will chair.

The summit follows a series of regular high-level dialogues between Brussels and Beijing, focusing on issues including trade, energy and digital affairs, as well as a visit by Borrell in October.

Key to his agenda was convincing Beijing that the EU does not seek to decouple from China but rather reduce critical dependencies and achieve a more balanced relationship.

“In October, in Beijing, I passed a simple and clear message: the EU is committed to managing relations with China responsibly and constructively,” Borrell told Euractiv ahead of the talks.

While Borrell described the current EU-China relations as “complex” and both sides having “differences”, he called the summit “an occasion to have a frank discussion”.

“For instance, about a level playing field, so that our trade and economic relationship becomes balanced and mutually beneficial – presently, this is simply not the case,” Borrell said.

“China, as a permanent member of the UN Security Council, should use its influence on Russia to stop its illegal war of aggression against Ukraine and blatant disregard for international law,” he added.

Brussels will be keen to ensure that China doesn’t materially support the Kremlin’s war in Ukraine with lethal aid and that Beijing does more to curtail the supply of technologies and components that the EU has restricted and are used by Russia to manufacture weapons.

“With its economy severely underperforming, Beijing also has an interest in slowing Europe’s de-risking. China needs Europe, which should give Europeans the kind of leverage they failed to use in the past,” Zsuzsa Anna Ferenczy, Associated Research Fellow at the Institute for Security & Development Policy (ISDP) told Euractiv.

“With this in mind, the EU must stick to its de-risking strategy with confidence, and also uphold its position concerning China’s – and Chinese companies – support to Russia, mindful that China wants stability – and economic growth – in its relations with Europe,” she added.

EU leaders are expected to personally ask Chinese President Xi Jinping to rein in 13 Chinese entities accused of circumventing sanctions on Russia, according to people familiar with the preparations for the summit.

Up to 70% of sensitive, hi-tech products reaching the Russian military are coming through China, according to EU estimates.

Brussels had been preparing corresponding measures to include imposing export curbs on a handful of Chinese entities sending dual-use items to Russia, first reported by SCMP, as part of the bloc’s 12th sanctions package.

Chinese firms were initially excluded from the bloc’s 12th round of sanctions, but the names of the companies in question may be added to the list if Brussels does not secure a firm commitment from Beijing.

EU leaders also expect China to be more supportive of Ukraine’s peace formula, or at least to re-enter the format initiated by Kyiv, after not attending its last round of talks in Malta.

With the two contentious issues on the agenda, the summit’s outcomes might be, however, meagre, with the only deliverable potentially being the talks themselves.

There are concerns in Brussels that it could be another “dialogue of the deaf”, a term Borrell used to describe last year’s edition, EU diplomats say.

“Beijing’s relations with Brussels have significantly worsened in recent years, and China’s tacit approval for the war in Ukraine is seen in many European capitals, especially in Central and Eastern Europe, as a decisive element shaping the future of EU-China relations,” Alicja Bachulska, Policy Fellow at the European Council on Foreign Relations (ECFR) told Euractiv.

“It remains to be seen how seriously Beijing will treat Europe’s concerns and given China’s rather limited track record of accommodating those, the expectations towards the summit should be modest,” she added.

It also remains unclear yet whether both sides will be able to issue a joint statement following the talks, which has happened with the two previous summits.

Diplomatic groundwork on drafting a declaration with positions of mutual agreement was relatively slow, according to several EU officials and diplomats familiar with the matter.

“Frankly, there would be not much harm done if there isn’t one – we would simply add it on the pile of rather meaningless statements that are anyways just full of pleasant rhetoric,” one EU diplomat quipped.

EU IN THE WORLD

DOUBLING DOWN | Hungary is raising the temperature as the EU braces for a tough December summit battle over a proposed EU budget revision, which includes the €50 billion in new aid for Kyiv and is expected to be intertwined with the decision on whether to start Ukraine’s accession talks, as well as domestic demands by some members of the bloc.

Ukraine’s EU membership currently does not coincide with Hungary’s national interests, and the EU should propose a “strategic partnership” with Kyiv before starting accession talks with the war-torn country, Prime Minister Viktor Orbán said this week.

Meanwhile, Germany’s internal fiscal discussion is currently the biggest obstacle to a deal on a mid-term revision of the EU’s seven-year financing plan, the EU’s Budget Commissioner Johannes Hahn told us in a group interview.

OSCE VIBES | After months of back and forth over its leadership question, the world’s largest regional security organisation concluded its annual ministerial meeting with Russia expressing indifference over the body’s future.

An increasing number of European diplomats – not only those from the hawkish East – are growing increasingly uneasy about the idea of ‘normalising’ dialogue with the Russians in international forums.

ARAB REACH-OUT | Arab states and the EU earlier this week agreed that a two-state solution should be the answer to the Israel-Palestine conflict, with EU’s chief diplomat Josep Borrell saying the Palestinian Authority should rule Gaza after the war.

DEFENCE CORNER

DEFENCE INQUIRY | European Commission defence experts are asking EU countries and the arms industry how it can make the latter more flexible and less dependent on third countries with ideas on mapping production capacity, setting up a one-stop shop for all, and securing budgets, according to internal documents seen by Euractiv.

The EU should take Ukraine’s military needs into account as it designs Europe’s future defence industry strategy, European Commission President Ursula von der Leyen said earlier this week.

WINTER WOES | Russia is not giving up in Ukraine and its warring capacity must not be underestimated, NATO Secretary-General Jens Stoltenberg warned, amid a stalling Ukrainian counter-offensive and signs of Western fatigue.

NATO RACE | With less than a year to go, former Dutch prime minister Mark Rutte has become a frontrunner in the race to succeed outgoing NATO Secretary-General Jens Stoltenberg. However, the informal selection criteria have once again shone a light on the complexity of the process.

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