Power dialogue: Chinese policy towards the EU

The year 2025, celebrated as the 50th anniversary of diplomatic relations between the European Union and the People's Republic of China (PRC), is at the same time recorded in the past of common relations as a period of the top political and economical force Beijing has on Europe. In April, it reached for the strongest tool of force so far – introduced export restrictions on uncommon earth metals and permanent magnets, on 9 October it announced unprecedented tightening of regulations. Export controls of the PRC may slow down both the modernisation of the European defence sector and the improvement of industry. In parallel, the PRC refuses to make concessions in the 2 most crucial areas of dispute with the EU: to support Russian aggression against Ukraine and to prosecute an expansive industrial policy threatening the competitiveness of the European economy.

As a result, despite the worsening transatlantic relations, the Union's cooperation field with China is besides narrowing down and is increasingly pointy. While most EU countries share the diagnosis of Beijing's risks, there is no consensus on concrete action to tackle them, which makes this issue a comparatively low precedence in associate States' external policies. This enables the PRC to play its own peculiar interests effectively, to build divisions within the EU, and to torpedo the actions of the European Commission – spiritus movens an assertive EU policy towards China.

Beijing is convinced of the weakening global position of Europe. Donald Trump's return to the White home and his critical attitude towards United States allies – including the European Union – strengthen this view. Although there have been signals in fresh months suggesting that the Old Continent could be opened softer, the Chinese authorities yet adopted a strategy based on a demonstration of force. As a result, they do not show a willingness to compromise on key issues of dispute: to support the Russian war effort and industrial policy that reconciles EU competitiveness.

The EU-China long-wave relation is being burdened by an expanding strategical discrepancy, both in terms of safety and the economy. Moscow's assistance is fundamental in Beijing's eyes: Russia's failure to fight Ukraine would mean, from its perspective, an increase in NATO's force on China. In turn, their export expansion^[1] This is due to interior overproduction and weak home demand. The PRC seeks to guarantee that abroad economies, including the EU, absorb interior imbalances in its economies. This risks displacing local production from the Union, expanding trade deficits and expanding unemployment and debt. Hence, the European Commission, led by Ursula von der Leyen, by developing instruments to defend the Union marketplace from China's pressures, has become a symbol of a more assertive policy towards them.

Beijing has chosen to neutralise its function in the increasing rivalry of the USA-China as its political goal towards Europe. In its perspective, it is peculiarly crucial not to consolidate NATO and to prosecute a coherent technological policy in the transatlantic area. In the short term, it wants to prevent Trump from creating a "sanitary cordon towards China", which aims to include Washington's bilateral and multilateral agreements with partners, including the EU, in Beijing's interests. The main economical objectives of the PRC towards Europe are to keep broad access to its market, which is crucial for the absorption of Chinese overproduction. Hence, the abolition of tariffs on electrical cars produced in China remains symbolically crucial for Beijing in relations with the EU.

Economic and regulatory pressures on Europe are key tools for the PRC to accomplish its objectives. Beijing consistently instrumentalises existing economical dependence, utilizing it to play associate States against each other, forcing political concessions and weakening the coherence of EU policy towards China. These tactics include, among others, the introduction of a strategy of export licences for uncommon earths and magnets, the initiation of anti-dumping and anti-subsidy proceedings and selective restrictions on access by European companies to the Chinese market. In the current policy of the PRC, pressures and means of coercion are expanding towards the EU, and the traditionally applied "fault of charm".

Rare earth metals as weapons

Beijing's most powerful instrument of emphasis on Western countries, including the European Union, is the export restrictions on uncommon earth metals and permanent magnets. In this area, the planet remains heavy dependent on the PRC, which accounts for around 70% of its global production and 90% of refining^[2]. They are of critical importance to both the military sector (e.g. in radar systems, rocket guidance, sensors, communications and precision drives in advanced weapons) and civilian (e.g. they are utilized in wind turbines, automotive and electromobility industries and utility electronics).

As of 4 April, 7 (of a full of 17) uncommon earth metals – samarium, gadolin, terb, dysprosium, lutet, scandium and yttrium – and permanent magnets were subject to export restrictions imposed by the Chinese Ministry of Commerce and Customs Administration. Under the regulations of the sellers of these products, they are required to get a licence from the state authorities, and the application for it requires, inter alia, information on the end-user, detailed data on the usage and method parameters of the product, declaration of non-military usage and provision of method documentation. In this way, Beijing acquires cognition of the final usage of exported natural materials and retains the ability to control their use, while possibly acquiring delicate technological and commercial data. This is accompanied by an intensive run to prevent the re-export of rare-earth metals and permanent magnets by 3rd countries (e.g. holding stocks of South Korea) to the arms sector, in peculiar the US^[3].

On October 9, an unprecedented, extraterritorial tightening of the control government was announced. As of December, the request to get an export licence will apply to all products that contain even traces of uncommon earth metals of Chinese origin or are produced utilizing Chinese extraction and processing technologies. In turn, from November onwards, the catalogue of metals subject to metallic restrictions will grow with Holm, Erb, Tul, Europ and iterb^[4]. Under the fresh legislation, the PRC will besides not be able to participate in abroad projects on the exploration, extraction and processing of uncommon earths or magnet production without the prior approval of the authorities, which is intended to limit the transfer of cognition abroad. The most serious consequences of the regulation concern defence: as announced by the Ministry of Commerce of the PRC, applications for the usage of uncommon earths and magnets in the military sector will be rejected.

In the past, China has utilized export restrictions on uncommon earth metals respective times as a tool for force on abroad partners in matters considered strategically crucial by it. They first did so in 2010, when, following the tightening of the territorial dispute with Japan over the islands of Senkaku/Diaoy, they reduced the sales of these natural materials, formally citing environmental considerations. Between 2023 and 2025, Beijing systematically expanded its control of uncommon earth metals, introducing an work to study exports including gallium, germanium, antimony, graphite and tungsten. abroad sales of technology, extraction and separation of these natural materials were besides banned in 2023 to slow the improvement of alternate chains outside China.^[5].

The current situation differs from the erstwhile 1 by both scale and weight of consequences - fresh restrictions affect the full of the European Union and cover its strategical sectors, including defence and advanced industry. In the military sector, this may limit Europe's capacity to grow its military capacity, peculiarly in the context of the unprecedented announced increase in NATO defence spending to 5% of GDP by 2035.^[6]Beijing's introduction of restrictions officially justifies the request to defend the safety and interests of the state and to comply with global obligations to prevent proliferation of weapons – stresses that uncommon earth metals are commonly utilized in the arms sector^[7].

In fact, however, these moves are part of a broader strategy of distancing from the expansion of NATO's military potential. The PRC sees the Alliance as an instrument of influence of the United States, which in the future can be utilized in a possible confrontation in the Indo-Pacific region. Beijing so avoids activities that could lead to the strengthening of NATO's capabilities. It thus supports Russia in its confrontation with the West and allows it to proceed to exert military force on Europe.

In the Union industry, in peculiar Germany, companies have become the mark of unprecedented force from China^[8]. For example, in the automotive sector – which already experiences immense competition from this country, especially in the area of electromobility^[9] – April export restrictions have led to crucial disruptions in the supply chains resulting in temporary cessation of production in parts of plants and assembly lines. As stressed by the European Automotive Suppliers Association^[10], between April and the beginning of June, hundreds of applications for export licences were received by Chinese authorities, of which only about 25% were considered positively. EU companies measure the licensing process as opaque and inconsistent: differences in enforcement by Chinese provinces and unclear assessment criteria make regulatory uncertainty. Furthermore, in any cases, applicants are required to disclose intellectual property information, which raises serious concerns among European companies. The long-term maintenance of specified practices can not only reduce the competitiveness of the industry, but besides affect the pace and cost of energy transition in the EU, as the automotive sector, which is crucial for the improvement of electromobility, is 1 of the pillars of the Green Agenda.

The effects of the restrictions introduced in April are clearly seen in commercial data: in March 2025 the volume of exports of permanent magnets produced from uncommon earths from China to the EU was 1843 tonnes, and in April, after the restrictions imposed by Beijing, it fell by almost half (44%), to 1035 tonnes, in order to decrease to 395 tonnes in May (-62% compared to April). The reflection occurred in June (+245% m/m, +32% compared to April), and in July abroad sales returned to levels from the beginning of the year. Despite this improvement, the hazard of re-sustaining or slowing down licensing procedures remains real, which for European manufacture means continuing uncertainty in the supply of key components for advanced production.

So far, on European grounds, Beijing has tested the effectiveness of economical coercion primarily towards individual countries. The most typical example of this is Lithuania, against which China applied unprecedented economical force after the beginning of the Taiwan typical Office in Vilnius. The experience of this crisis, as well as the economical pressures on the part of the US during Trump's first word of office, prompted the European Union to make tools to partially respond to specified moves, including the anti-fraud instrument of 3rd countries. Until now, however, it has not been decided to usage them against China – even though these have introduced export restrictions on uncommon earth metals and magnets. specified a step would require a qualified majority vote in the Council of the EU, which, in the light of the current divisions between associate States, visible, inter alia, erstwhile establishing customs duties on Chinese electrical cars, and the reflection of imports of uncommon earths and magnets, remains unlikely. Moreover, given China's global dominance of the uncommon earths marketplace and the deficiency of simple alternatives, the EU, besides heavy dependent on supplies from the PRC, is presently not ready to respond in the "cius for blow" formula. It so focuses on the critical natural materials proposed since 2024: diversification of supply sources, stockpiling, improvement of recycling and investment in fresh technologies limiting dependence on 3rd countries. However, Chinese export restrictions stay in force and can be utilized arbitrarily against the EU, depending on the current political situation.

“Share and rule” in a fresh installment

Beijing continues to apply proven instruments of influence to the European Union, based on its action on the presumption that the way to Brussels concessions is led through a ‘share and rule’ policy – the emphasis on individual associate States and the mobilisation of European business environments with crucial economical interests in China or related to the Chinese marketplace (both export and import).

Three countries are presently key players in the European arena for the PRC: Germany, France and, recently, Spain. In view of these, they apply the “kids and carrots” policy, focusing force primarily on industrial and agri-food sectors. It hopes that the force of these industries will lead governments to mitigate the position of the European Commission, in peculiar in 3 areas: 1) strategical – limiting the EU's function in the US-China rivalry, 2) safety – preventing NATO consolidation and developing a coherent technological policy in the transatlantic space, 3) economical – maintaining wide access to the EU marketplace for Chinese goods. In addition, Beijing traditionally cultivates good relations with Hungary, becoming a key hub for Chinese production investments in the EU^[11], although aware of the limited impact of Budapest on the mainstream EU policy.

In the face of the German automotive industry, which is heavy dependent on the Chinese market, export restrictions on the uncommon earth metals and permanent magnets are peculiarly severe. Just before the July EU-China summit, Beijing further lowered the threshold for considering cars as luxury (including higher taxation), hitting German premium brands specified as Mercedes-Benz (43% share in this segment) and Porsche (18%). In contrast, he utilized a combination of pressures and concessions for France. On the 1 hand, he imposed 5 years of duties on brandy (including mainly French cognac) – commonly interpreted as retaliation for EU electrical car duties (EV) from China. On the another hand, it partially excluded certain producers of this product from the increased duties provided that they were sold at a fixed minimum price. At the same time, the PRC is actively developing cooperation with France and Germany in the area of advanced industry, including joint investments in battery technologies, as well as technological partnerships with European automotive companies.

The Spanish agri-food sector, on the another hand, has become the subject of Chinese force before the EU vote on duties on EV from that country, including pork, which is the key commodity of Spanish exports to the PRC, as part of a series of anti-dumping and anti-subsidy proceedings. At the same time, as part of the force balance, Beijing signed 2 trade protocols with Madrid for the sale of fresh product categories, including pork stomachs and cherries. As a result, Spain abstained on duties and Prime Minister Pedro Sánchez was the first European leader to visit China after Trump's administration tightened its customs policy in April this year. The cases of Germany, France and Spain show that Beijing differentiates the tools of force depending on the economical sensitivity of the individual associate States, but has 1 objective: to weaken the coherence of the EU's position towards China.

At the political level, the PRC besides conducts a two-track policy towards the Union, combining formal organization channels with intensive bilateral diplomacy. The June EU-China advanced Level dialog in Brussels was coordinated by abroad Minister Wang Yi with visits to Berlin and Paris, clearly showing where Beijing is looking for leverage. At the same time, sanctions against erstwhile Euro MPs have been abolished as part of balancing pressures with gestures of goodwill since 2021. However, these actions stay purely tactical and do not show China's real willingness to compromise on key issues. Their policy towards the EU is evolving towards more assertive, expanding pressures and coercive measures and less incentives.

Beijing says "check"

The July EU-China Summit has become a "check" for the European Commission's assertive agenda towards Beijing, promoted by president von der Leyen. The Chinese authorities' attitude was chilly at this demonstration: the event was moved from Brussels to Beijing due to Xi Jinping's reluctance to travel to Europe (although he made a four-day visit to Moscow in May), and its format was shortened from 2 days to one. In addition, the media there stressed the fact that the Xi-von der Leyen-Costa gathering had taken place even before the beginning of the meeting, which was intended to signal a decline in the level of the event (since 2020 Xi took part in regular EU summits).

The Chinese approach to the summit falls within the open hostility to the Union's assertive agenda, including the introduction of protective mechanisms, specified as de-risking^[12], a tool to defend against economical blackmail^[13] whether duties on electrical cars from the PRC^[14] – and to von der Leyen herself, described by the Chinese press as the maker of American politics^[15]. Beijing has consistently avoided discussions on the impact of its own industrial policy on the EU single market,aparticularly sectors strategically crucial for the Union's green transition, specified as electrical vehicles, photovoltaics and lithium-ion batteries. He limited his position to calling on organisations to stay open to exports from China. In this context, Xi's message at the summit on Europe's request to "make the right strategical choices" and Prime Minister Li Qiang's message that cooperation with the PRC is "the only right choice" are attempts to divert attention from structural disputes in EU-Pekin relations and to propose that the Union should quit a hard course towards Beijing in the face of expanding uncertainty about the future of transatlantic relations under Trump's rule.

President Xi has not referred straight to the war in Ukraine once, but has called for dialog in general and for “the resolution of both symptoms and causes of problems” (倡导标本兼治) – thus indirectly referring to Russian narrative, attributing work for the conflict of Western countries^[16]. In addition, just after the summit, Beijing announced the introduction of a counter-sanction against 2 Lithuanian banks – UAB Urbo Bankas and AB Mano Bankas – in consequence to the EU decision to include restrictions on 2 Chinese financial institutions (Heihe agrarian Commercial Bank and Suifenhe agrarian Commercial Bank) as part of the 18th Sanctions Package. This decision was a signal that China was reacting "took for a blow" besides in the context of the war in Ukraine.

The gathering confirmed the deficiency of area for compromise – the parties did not issue a joint final communication, and the only agreed paper was a joint press release on climate cooperation, prepared in connection with the forthcoming 30th UN Climate Change Conference.

European dilemmas

The impasse at the summit in EU-China relations asks Europe how to form relations with Beijing erstwhile it is conducting a dialog with a position of strength. The PRC present has a sense of predominance over the West: in its assessment of the restrictions on exports of uncommon earths and magnets – which have proven to be an effective tool of force even towards Trump – they confirm the effectiveness of the force policy. This further strengthens the Chinese authorities' conviction that Europe, weakened by war in Ukraine and transatlantic tensions, is in a peculiarly hard position.

Europe's first step towards uncovering itself in current circumstances should be to recognise that Beijing's relation with the EU has changed substantially. China cannot be seen as a place of inexpensive production and an attractive outlet, but the Union must treat it as a threat to manufacture and security. The second step is to presume that Beijing is actively utilizing lobbying selected sectors, specified as agri-food or automotive, to influence Union policy towards the PRC. It should so be assumed that the ad hoc interests of individual industries may conflict with the long-term interests of the associate States and the EU as a whole. The 3rd step is to recognise that China is on the other side in the safety sphere than Europe – through the supply of dual-use items, the acquisition of Russian natural materials, diplomatic support for Moscow and its acceptance of attempts to undermine the existing global safety architecture^[17]. The perception of these 3 key issues is inactive different between associate States and their consensus is simply a prerequisite for a coherent and effective Union policy towards China.

The starting point for an effective policy towards China is to presume that disputes in 2 main areas – safety and industrial policy – arise from Beijing's long-term strategical objectives that cannot be changed or ignored by the EU. They are more clearly subject to the logic of preparation for confrontation with the United States, both through support for Russia and by an expansionary industrial policy. Under specified conditions, only point cooperation between the EU and the PRC remains possible, for example in the field of non-proliferation and countering the usage of atomic weapons by Moscow or in support of the recovery of Ukrainian children abducted by Russians. However, this kind of initiative poses a risk: Beijing participates in the dialogue, but avoids its formal confirmation, primarily treating it as a tool for building the image of a advocate of peace and not exerting real force on Russia.

In the industrial area, it would be a constructive solution for Chinese companies to invest in production facilities in Europe – necessarily on the basis of EU regulation forcing the EU to place as many supply chains as possible. However, specified regulations do not be yet, although their creation is simply a condition for reducing the hazard of further flooding the Union marketplace with Chinese export surpluses. However, this presumption requires that Europe does not come down to the function of a Chinese product assembly plant, and that it acquires technologies – just as China drew them from Europe in erstwhile decades.