A member of the People’s Armed Police stands guard in front of the European Union flag at the European Delegation in Beijing, China.
Kevin Frayer | Getty Images | News Getty’s paintings
As the US contemplates withdrawing from China, Europe may soon find itself in a difficult position.
US President Joe Biden has taken a harsh tone on China for many of his term to this point, calling it the world’s second largest economy the most serious competitor to America. Diplomatic dialogue between the two hit a more turbulent period earlier this 12 months when Washington accused Beijing of using munitions spy balloon to acquire intelligence from US military facilities.
“The US hawkish policy towards China signifies that China needs to enhance relations with Europe to mitigate the effects of export controls. Due to this fact, China has an incentive to work hard to enhance relations with the EU,” Anna Rosenberg, head of geopolitics at the Amundi Institute, told CNBC via email.
Officials in Europe have taken a barely different approach than the Biden administration, preferring a softer stance towards Beijing, recognizing its importance to the European economy. This is shown by the data of the European statistical office China was the third largest recipient of European goods in 2021
“The EU is in a very different situation from the US, which is clearly searching for a political withdrawal from China,” Jacob Kirkegaard, a non-resident at the Peterson Institute for International Economics, said by email.
“From China, the EU is the most significant high-income market to which it still has largely unfettered access. This in turn greatly reduces the likelihood that China will actively attempt to limit trade with the EU,” he said, adding that China “has a lot to lose in a trade war with the EU.”
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The president of the European Commission, Ursula von der Leyen, has pushed in recent months for Beijing’s risk mitigation policy – reducing dependence on the country in critical sectors corresponding to raw materials and semiconductors. Yet European officials are nowhere near backing a complete severance of economic and diplomatic ties.
“The political need to cut back risk in EU-China relations is completely different from that of US-China relations. In a world characterised by competition between the US and China, the EU is the most significant economic partner for each parties – this offers the EU significant political benefits in comparison with each Beijing and Washington,” Kirkegaard also said.
In accordance with data from the European Council, the EU’s single market, where goods and services move freely across borders, is home to 23 million businesses and over 450 million consumers.
“We don’t desire to fuel the rivalry between the US and China,” an EU official who declined to be named as a consequence of the sensitive nature of the situation told CNBC. “We prefer to calm the situation … without being naive,” said the same official.
US rhetoric towards China has softened somewhat after the G7 leaders’ meeting over the weekend, where Biden warmed up about risk mitigation relatively than completely separating the world’s two largest economies.
Beijing wouldn’t like the idea of the G7 leaders meeting to criticize China’s policies. In the aftermath of the assembly, China imposed a ban on its corporations from buying from US chip maker Micron.
Alicia García-Herrero, a senior fellow at European think tank Bruegel, said Europe may not find itself in a straightforward situation amid tensions between the US and China.
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“I actually very much doubt that can occur,” she said, referring to the prospect of Washington and Beijing trying to Europe for economic links.
“China is taking a lot of retaliation against Europe in some ways, and the feeling that Europe is increasingly depending on China – this type of strategic dependence on green energy is becoming more pronounced,” she said, noting that Beijing is aware of the leverage that continues as Europe moves towards a more sustainable economy. The biggest supplier is China several critical raw materials in the world, based on a study published by the European Commission, that are utilized in products corresponding to electric vehicles.