Chinese premier avoids ‘factional confrontation’ with Europe on maiden trip

China’s new prime minister used his first trip abroad to pitch a new approach to Europe, focusing on areas where the two sides see eye to eye in a bid to avoid replicating Beijing’s rocky relationship with Washington.

In Germany and France this week, Li Qiang went on a charm offensive with government officials and business leaders, pledging to focus on the fight against climate change and announcing a debt relief deal for Zambia at a climate financing summit convened by Emmanuel Macron — a diplomatic win for the French president.

Li’s approach signalled that Beijing is embarking on a two-track approach with Europe, attempting to handle business relations and climate co-operation separately from thornier issues, such as China’s support for Russia in the Ukraine war.

By contrast, Chinese officials have often made climate co-operation with the US conditional on foreign policy demands.

“Chinese elites see reassuring and engaging with Europe as a top strategic priority,” said Seaver Wang of the Breakthrough Institute, a California-based think-tank. “Due to Russia’s war in Ukraine, Europe and the US are more strategically aligned than they have been in decades.”

Beijing’s new tack comes as the European Commission explores ways to “de-risk” its economic relationship by reducing its dependence on raw materials from China and limiting the export of cutting-edge technology to the Asian giant, spurred by the US’s more far-reaching restrictions.

Chinese state media and diplomats have roundly criticised that term and warned European capitals against becoming too closely drawn into US trade disputes.

In May, China’s foreign minister Qin Gang warned his German counterpart that if the EU “seeks to decouple from China in the name of ‘de-risking’, it will decouple from opportunities, co-operation, stability and development”.

But Li, whose brief covers tackling a sluggish Chinese economy that is increasingly in need of private investment, adopted a more conciliatory approach in Berlin. During a roundtable with German businesses, Li said that he “understood each side’s concerns about security”, and that “protecting against risks does not conflict with co-operation”.

As the concept of de-risking still leaves room for interpretation, the Chinese side is “trying to figure what the gap is between rhetoric and action,” said Yu Jie, senior research fellow at the Chatham House think-tank. “Political Europe talks about it all the time, while Business Europe is less keen.”

Li channelled some of the business leaders’ own fears, warning them that “not co-operating is the biggest risk, not developing is the biggest insecurity”. Martin Brudermüller, chief executive of chemicals giant BASF, in March warned that while there were risks linked to operating in China, “there’s also a huge risk not to be in China”.

BASF is one of several large German groups, including chipmaker Infineon and the country’s leading carmakers, that are heavily dependent on China in terms of both sales and supply chains.

A growing number of chief executives, including the bosses of Siemens and Mercedes-Benz, have been publicly rejecting calls from Berlin and Brussels to diversify away from China, arguing that the market is simply too big. In the words of one automotive supplier executive: “We are totally dependent on China.”

This development has turned German multinationals into “the most outspoken and arguably effective lobbying force in favour of more, not less, economic engagement with China,” said Yanmei Xie, Europe-China analyst at consultancy Gavekal Dragonomics.

On his trip to Germany and France, Li was accompanied by Chinese companies including the battery giant CATL, which has opened a German plant, and solar-panel maker Longi, which hopes to build one in the country.

Li also praised France’s opposition to decoupling and “factional confrontation”, in a veiled reference to the US approach.

Last week, President Xi Jinping met Antony Blinken, the first US secretary of state to visit Beijing in five years, and announced there was “progress” towards stabilising ties. But just a day later, President Joe Biden sparked Beijing’s outrage by calling Xi a “dictator” at a private fundraising event.

By contrast, Li said during a roundtable with French business leaders: “The good level of political trust between France and China enables us to see stability, certainty and common growth opportunities in our mutual interdependence, rather than risks.”

On Tuesday, as Li was on his way to dine with a delegation of Bavarian officials and businesses in a marble-clad hall, the European Commission said it would bring forward a proposal for screening outbound investments and improve the implementation of export controls — measures seen as targeting technology links with China. EU member states, however, remain cautious about such measures.

Commission president Ursula von der Leyen, one of Europe’s most hawkish officials on China, urged member states to get behind the “de-risking” strategy. But she acknowledged that “the vast majority of trade and economic relations” with China would remain “business as usual”.

While the commission’s new proposals remain controversial, German executives remain convinced of a broader need to diversify supply away from China. Some say the Chinese side is overestimating its ability to build a coalition with European companies against de-risking.

“Li’s line that the business community does not want to de-risk is nonsense. We care,” one German executive told the Financial Times.

Jens Hildebrandt, head of the German chamber of commerce in Beijing, said: “We see clear signs of de-risking.” He said some companies were shifting their production away from China to other Asian countries, to guard against future sanctions or export controls.

“The reasons for de-risking come from multiple sides. The Chinese government doesn’t have all the tools in their hands to tell German companies they need to do less de-risking,” added Hildebrandt.

Climate change and the green transition also featured heavily in Li’s German meetings, with the two sides releasing a memorandum setting out broad principles on climate co-operation.

Beijing froze climate talks with the US for several months last year, and attempts to reboot them have made little progress. But Europe’s more stable relationship with China “helps the west preserve its last beachhead of working together with China on climate change, which will never be meaningfully addressed without speaking to Beijing,” said Li Shuo of Greenpeace Asia.

But both climate analysts and German businesses warn that they have been awaiting Chinese action on cutting emissions, rather than words, for a long time.

“It’s now time to deliver. We need to be realistic; there are some things they just cannot solve,” Hildebrandt added.

Additional reporting by Patricia Nilsson in Frankfurt