China, the largest country in East Asia both demographically and in geopolitical significance, has played a central role in reshaping global trade since its economic opening in the 1970s. Before then, China’s economic architecture was closed to other countries, with its economy managed largely through state planning. By 1978, however, political and economic reform aimed at curbing its traditional policy of isolationism was brought to China under Deng Xiaoping. By the 1980s, reforms had attracted foreign investments throughout China’s booming coastal regions and exports were on the rise.

By 2001, China acceded the World Trade Organisation (WTO) in what is now considered one of the most pivotal moments in the country’s pathway of global engagement. By gradually standardising itself to international rules, relations between the EU and China stabilised. Trade increased, Europe invested in China, and China became a market yet to be untapped of its full potential for Europe. As a result, Europe’s engagement with China accelerated, becoming a key node for cheap goods, all while believing that trade would soon lead to political rapprochement. Europe’s fundamental philosophy was the Germans’ famous “Wandel durch Handel” approach: when economic ties with authoritarian regimes developed over time, the latter would gradually adhere closer to Western values and democracy. China’s accession to the WTO was, for the West, precisely this optimistic vision of mutual interdependence; less about economic gain and more about a project to integrate China into the liberal international order. The EU did not view China as a threat, but rather as a major market with optimistic prospects of political alignment.

From Trade Partnership to Competition

Contrary to what was expected, China did not ‘liberalise’. On the contrary, China’s remarkable economic growth has turned it into an unquestioned superpower, all while maintaining its authoritarian political structure. Like now with Russia, the merit of ‘Wandel durch Handel’ began to be questioned. Free trade and opening up, we learnt, did not inherently precede liberalisation.

Instead, China’s state-centred economic model, paired with its size, gave rise to a new competitive dynamic in international trade. Starting in the 2010s, China’s industrial policies, state subsidies, and rapid rise put economic security ever higher on the agenda in EU-China relations. China was no longer merely an emerging ‘market’, but increasingly also a ‘rival’, where mutual interdependence became a strategic vulnerability—not a means of alignment.

As the era mutual interdependence peaked, China had become the ‘world’s factory’ and as such had begun to assert its own interests and influence. While China remains today an indispensable trading partner for the EU, and its second-largest economic partner, the risks posed by increasing interdependence are now at the fore.

The EU’s 2019 Reassessment

By 2019, the European Commission had, for the first time, positioned China as both a partner for cooperation and an economic and systemic rival. While it was understood that cooperation and trade with China would continue, risk simply had to be taken into account, because completely severing ties was impossible. In Ursula von der Leyen’s own words, the primary goal was not to decouple from China, but rather to reduce risky dependencies and strengthen economic security. ‘De-risking’, not ‘de-coupling’, was to be the new buzzword in Europe’s economic strategy with China.

Systemic Shocks and the Rise of Economic Security Concerns

By 2020, the emergence of the COVID-19 pandemic shook the world’s economy. While China felt the pandemic’s economic impact most acutely in the first quarter of 2020, EU countries such as Spain, France, and Italy experienced it more significantly in 2020’s second quarter. Unlike other EU countries, Ireland emerged as the sole EU nation whose economy did not contract. As noted by Doğan and Öner (2022), job losses in the United States during March and April 2020 resulted in a rate that was twice as high as that seen in 2008–2009. U.S. foreign trade had fallen.

COVID-19 exposed how supply chains previously considered robust, could easily be broken. By February 24, 2022, Russia’s war on Ukraine had begun, marking the second economic crisis to hit Europe in two years, exposing yet again the vulnerability of economic dependencies, in this case on energy. The EU began re-evaluating its bilateral relations and aimed to reduce its dependence.

Critical technologies became one of the central ‘de-risking’ policies the EU implemented against China in 2022 and beyond. During this process, the EU and the US acted in concert to limit access to advanced semiconductor technologies and to restrict and target technologies with potential applications in artificial intelligence and military use—so-called ‘dual use’ tech—aimed at constraining China’s high-tech sectors. In raw material sectors where China holds dominance, the EU shifted its focus toward establishing new partnerships in Africa and Latin America. To diversify risk and avoid concentration in a single area, EU companies began relocating production to countries such as Vietnam, India, and Mexico. 

Huawei became a central target, with restrictions of Huawei equipment in some EU countries due to their designation as a ‘security risk’ for telecommunications infrastructure. Technology had ceased to be merely an economic issue and had become intertwined with security concerns. By 2020, the European Commission had introduced the concept of ‘high-risk suppliers’ in 5G networks, designating Huawei and ZTE as such, and recommended that member states conduct risk assessments. Thereafter, countries such as the United Kingdom, Germany, France, and Italy adopted measures to restrict and phase out the use of Huawei. The United Kingdom decided in 2020 to phase out Huawei’s presence by 2027 while Germany, on the other hand, opted to implement security audits and certification processes rather than banning Huawei outright. Viewing telecommunication infrastructure as a critical sector.

But neither has Beijing been silent. The ‘Made in Europe’ approach, a recent extension of the EU’s de-risking strategy, has been characterised by China as discriminatory economic practices. By prioritising European production in energy-intensive sectors such as automotive, green technology, aluminium, and steel, and impose stricter conditions on foreign companies, Beijing is accusing the EU, as they see it, of overly-securitising an otherwise harmonious relationship.

Possible Future of EU–China Relations

The transformation in EU-China relations over the course of two decades is remarkable. Once viewed as an opportunity to embed Western soft power, the EU no longer approaches China from a one-dimensional perspective. Rather than merely a trading partner, China is now officially considered an economic rival, a systemic actor, and a security risk.

The question of whether a complete break is possible or even desired has come to the fore. Whatever the case, the trend toward selective decoupling will likely continue and evolve into a model of managed interdependence.