(Bloomberg) -- The European Union’s top trade negotiator blasted Beijing’s failure to condemn Russia’s war in Ukraine, making it clear the bloc won’t separate economics from key political issues.
Valdis Dombrovskis, an executive vice president at the European Commission, on Tuesday issued some of the group’s strongest criticisms yet about President Xi Jinping’s stance on the war, telling reporters at a press briefing in Beijing the conflict is a “blatant breach” of Chinese principals on territorial integrity.
As he wrapped a four-day visit to China designed to stabilize bilateral relations, Dombrovskis also warned that Beijing’s position — it claims to be neutral on the conflict while providing Moscow with diplomatic and economic support — carried reputational risks. Russia’s “sabotage” of grain export should concern the Chinese government, he added.
“China’s position is affecting its image, not only with European consumers but also with businesses,” he said. “The war is making it a less attractive investment destination.”
In the past, trade leaders have “only rarely” made explicit links between their remit and foreign policy, said Deborah Elms, executive director at Asian Trade Centre in Singapore.
“This reluctance has been changing rather rapidly, especially with the connections between trade and security,” she added. “While China might suggest these issues are separate, the EU does not.”
US Commerce Secretary Gina Raimondo last month said companies had told her about risks of doing business in China, saying Communist Party policies were making the nation “risky” and “uninvestable,” during her visit to the Asian giant. Those comments come as China tries to woo foreign investors to help reinvigorate its slowing economy.
The block’s pushback against Beijing comes at a tense time for an economic relationship that represents more than $900 billion in bilateral commerce. Earlier this month, Brussels announced a probe into Beijing’s electric-car subsidies, dealing a blow to Xi’s strategy of courting the EU as a counter to Washington.
While the bloc said the move is intended to project jobs and supply chains at home, China’s Commerce Ministry has blasted that investigation as “a naked act of protectionism.”
Chinese Vice Premier He Lifeng expressed his “strong concern and dissatisfaction” over the EV investigation on Monday, after emerging from talks with his European counterpart. Those comments didn’t go as far as some of the harsh criticism Beijing has leveled at the US for trade curbs.
China’s Commerce Ministry described the talks with Dombrovskis this week as “productive,” after the two sides made a slew of agreements in other areas. The economic powerhouses pledged to improve relations in their financial industries, speed up market access for EU agricultural products and strengthen cooperation between securities and futures regulatory authorities.
Both the US and Europe have expressed optimism about working with the world’s second-largest economy, while also taking steps to de-risk their economies in areas deemed sensitive to national security. Raimondo insisted to Chinese Premier Li Qiang during her trip that “we do not seek to decouple.”
The European executive’s visit this week — which took place as part of a major forum called the EU-China “High-Level Economic and Trade Dialogue” — may also foreshadow higher-level meetings, including a summit between Xi and the EU’s Ursula von der Leyen later this year. The EU’s top diplomat Josep Borrell will visit China next month, the Foreign Ministry in Beijing announced in a statement.
“Restarting the high-level dialogue means China-EU relations are gradually getting back on track,” said Wang Yiwei, director of Renmin University’s Center for European Studies.
There were no concrete steps made to resolve major areas of dispute, including access to government procurement for EU companies, China’s subsidies for its burgeoning EV market and the trade deficit. Dombrovskis has described that deficit — which sits at roughly $400 billion — as “very imbalanced.”
The two sides agreed to establish a communication mechanism for export controls, mirroring a similar group the US and China recently agreed to set up. Dombrovskis defended the electric car subsidy probe, saying the bloc would be “assertive” in protecting its interests.
Jens Eskelund, president of the European Union Chamber of Commerce in Beijing, said the group hoped the trade dialogue will provide an “opportunity” to address any obstacles — though pointed to a laundry list of concerns from China’s “increasing focus on national security” to its “growing regulatory ambiguity.”
“These challenges appear to be at odds with the repeated assurances from the Chinese government that China is open for business and on the path of continued opening up.”
--With assistance from Lucille Liu.
(Updates with details throughout.)
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