The China dilemma: Europe wants a new relationship with Beijing but is wary of retaliation

Europe is charting a caller mode guardant for its relations with China, but officials successful the portion accidental they are wary astir the hazard of retaliation if they get it wrong.

There has been increasing momentum down the thought of de-risking from China. At a G7 gathering successful precocious May, some the U.S. and Europe agreed to trim their dependency connected Beijing — alternatively than wholly chopped ties.

The U.S. has go progressively much vocal astir China's menace to nationalist information successful caller years. Policymakers successful Europe, meanwhile, person taken a much cautious attack — alert of however important the Chinese marketplace is for its home companies.

A elder EU diplomat, who takes portion successful the negotiations among the 27 EU capitals but did not privation to beryllium named owed to the delicate quality of the issue, told CNBC determination is "certainly" consciousness that China mightiness retaliate. "But that's precisely wherefore we request to sermon this," the aforesaid diplomat said.

Another anonymous official, who works astatine the EU for 1 of the biggest European economies, besides said: "You'll ever person countries fearful of this oregon that, but it doesn't mean we shouldn't bash it."

The full bloc is figuring retired what de-risking from China means. Ursula von der Leyen, president of the European Commission, the enforcement limb of the EU, described it arsenic raising circumstantial concerns that the EU has with Beijing, including implicit quality rights, but besides negotiating fairer contention and marketplace access.

On Tuesday, the committee suggested the EU should reappraisal its overseas concern screening argumentation arsenic good arsenic toughen up its export power regulations. The instauration did not accidental these ideas had been developed due to the fact that of China directly, but it said the bloc needs to minimize risks "in the discourse of accrued geopolitical tensions and accelerated technological shifts."

The 27 heads of authorities from the EU volition statement the taxable astatine a acme aboriginal this month.

The Chinese embassy successful Brussels was not instantly disposable for remark erstwhile contacted by CNBC Thursday.

Lithuania, a Baltic federation successful the northeast of Europe, is simply a bully illustration of a federation alert of imaginable China retaliation. In 2021, it became the archetypal European state to person a Taiwanese practice bureau that went nether the sanction Taiwan. Most nations successful the portion usage the sanction of the metropolis Taipei.

China condemned the determination arsenic Beijing considers Taiwan portion of its territory, with nary close to independently behaviour diplomatic relations — truthful not needing its ain practice successful Lithuania. As a result, China withdrew its ambassador from Lithuania and it imposed a customs artifact connected Lithuanian imports into China.

"For years the West said economical practice would transportation dictators to enactment [a] rules based planetary order. But each we did was provender their economies portion letting them interruption each the rules. China is betting that we volition repetition this mistake. It's clip to effort thing else," Gabrielius Landsbergis, Lithuania overseas affairs minister, said connected Twitter successful April.

Earlier this month, the European Commission called connected more EU nations to prohibition the Chinese telecoms groups Huawei and ZTE.

So far, 10 countries successful Europe person banned oregon restricted the 2 firms from their 5G networks. They are acrophobic astir risks posed by these 2 companies to the information of the bloc.

China slammed Europe's stance and added that the committee had nary ineligible ground to prohibit the telecom giants, according to Reuters.

An EU official, who did not privation to beryllium named owed to the delicate quality of the issue, said: "We haven't seen the aforesaid level of retaliation" disconnected the backmost of that announcement erstwhile compared to idiosyncratic countries.

But the aforesaid authoritative said: "If we enactment nether a communal model we volition beryllium successful a overmuch stronger presumption erstwhile it comes to retaliation."

European leaders are inactive figuring retired however to reshape relations with what they person described arsenic a much assertive China, but their unit is alert that determination is simply a tricky equilibrium to execute betwixt reducing dependencies from China portion not upsetting it.