EU-China relations in 2026, with Grzegorz Stec

[Music] More so than usual, Europe has found itself between the rock and the hard place in the last couple of months. In the autumn of 2025, China set up export controls on rare earth elements to counter US tariffs. Europe was shown its own vulnerability and, in a way, shown its place by being seen as an acceptable collateral damage per China. In early 2026, the Trump administration argued that an effective countering of China and Russia in the Arctic would necessitate the incorporation of Greenland into the United States, disregarding the right to self-determination of Greenlanders and the territorial integrity of the Kingdom of Denmark. Where does this leave the EU's China policy? Do we continue to derisk, do we reconnect with China to hedge in this great power confrontation? I hope to answer some of these questions, but my guest, my name is Johannes Helio and to talk about EU-China relations in 2026. I'm joined by my colleague, Krzikov Stets, senior analyst and head of the Merrick's Brussels office. Welcome back to the podcast, Greg. Hi Johannes, it's a pleasure to join you here. Before we dive into 2026, I'd like to ask you how the EU-China relations have developed last year. So how was 2025 in EU-China relations? Sure, in many ways the relations have made a circle. We started the year with Trump entering the White House, we had the Liberation Day and the Tire Force. And this was the moment where there was a consideration on the European side also in Brussels. How about we explore engagement? And there was more outreach towards beating with softer rhetoric and high-level dialogues. As part of this re-engagement, China removed the sanctions on the MEPs in the political gesture but hasn't really engaged with those more substantive asks from the European side. We also have seen President Xi Jinping not coming to Europe for the 50th anniversary of EU-China relations and the EU-China summit that was happening at that time. But instead, he decided to show up at the victory day in Moscow. At the same time, the concerns related to China's over capacity, the question of erred controls, exports that you already mentioned before, all of that has been disrupting the EU-China relations. And that led us to a relatively disappointing EU-China summit which didn't really offer much breakthrough. So from Brussels' assessment, this entire time of trying to engage China and pursue outreach, or so dialogue didn't really manifest in any concrete gifts from the Chinese side. And this is where President von der Leyen talked about the relations arriving at an inflection point, a moment where we're really shifting our thinking on China and the relations. And as we all arrived to the end of the year, in many ways, you could see those two dynamics playing out on the European side. On one hand, the EU is turning to more unilateral and more defensive measures. We see that with the resource EU to tackle the question of erreds, the joint communication on updating and upgrading the strategic thinking behind Europe's economic security, industrial accelerator act that is in the making. The revision of the Cybersecurity Act, a number of things that are being pushed through in terms of legislations and Brussels, but at the same time, the EU has also finished with multiple European leaders visiting China, and that is extending into 2026. So it's been a year that has seen kind of a cycle of going from trying to explore the engagement towards a bit of a disappointment, and now the member states are acting much more strongly in that sphere. Yeah, and if the calculation on how to engage with China wasn't complicated enough, as mentioned in the beginning, the US administration under Donald Trump stated quite clearly that it wanted to acquire a conquer Greenland. And that sent shockwaves through the European understanding of the global alliance structure. I mean, the view was always being closely aligned with a more or less reliable partner, maybe, but with the US. And then like the question is like how to engage with China in this situation. What have you heard in your conversations in Brussels and maybe in the chatter from China regarding the EU-China relationship if the US will become a threat rather than an ally? In many ways, the challenge aspect of the relationship with the US has been on the forefront of discussions of the transatlantic relationship in Brussels already throughout the past year. But the Greenland, the back hole that you referred to really has been this moment of mental shift, or at least a strong reassessment on the European side. So it's there has been a build up to this point. And finally there was a moment of this genuine preparation on the European side to make use of anti-corruption instrument and actually stand up to Trump. Of course, I think everyone was relieved that it didn't come to that, but there was this moment of preparation on the European side, which is learning that the fact that it needs to be cautious doesn't mean that it should act as if it's powerless. And this is something that is also noted by our Chinese partners. And this is exactly interesting how the Chinese side has been reacting, what have been the discussions among the Chinese analysts of this entire situation. And in many ways, the Greenland moment of crisis in transatlantic relations have been discussed by our Chinese colleagues as this pivotal moment for the EU's strategic autonomy in terms of both security and economic terms when the EU in their words is coming to terms with predatory hajemenism or resource hajemenism coming from the side of the US. And some of those colleagues argue that this may be a moment of the new opening in EU-China relations as the logic goes from the Chinese perspective that largely Europe's position on China has been driven by Washington. If you remove that constraint, there might be much more leeway for the two to actually engage in which they very much overlook some of the structural and systemic issues that are there in their relationship. But this comes at the price from the Chinese perspective, which would be to really abandon our own downscale, the derisking policy that EU is pursuing. And that relates to the fact that even though there is this moment in discussion about the re-engagement in Chinese thinking, there doesn't seem to be a fundamental reassessment of how China sees Europe and what are the Chinese objectives vis-a-vis Europe, which remain to be trying to provide Europe from joining any sort of containment initiatives, making sure that the EU doesn't overly restrict access to its technology and doesn't overly restrict access to its market. So in many ways, we're supposed to stay this good, big, quiet open market for China. Thinking back to Davos, there was the speech by Prime Minister Karney from Canada who kind of announced a pivot towards China, at least, or hedging towards the United States. From talking with representatives and others and Brussels, what is your sense? Because I remember just when the Green Inc. broke, there was kind of this knee-jerk reaction of like, well, then we have to turn to China. Not like any official things, but like there was chatter about that. What was your feeling talking to officials here? Sure. I mean, this is exactly as you described it, it's a knee-jerk reaction. I think, as you said also at the very beginning, Europe does find itself between the rock and the hard place. And this situation is going to continue. I think we have to get used to the fact that US is not a solution to China. China is not a solution to the US. There has been already this assessment in Brussels. We've seen that with the trade deals with Merkel's war with India, there is a move towards diversification and achieving more, let's say, strategic autonomy through diversifying our partners, but also at the same time investing more in ourselves. And this is also where the Industrial Accelerator Act is coming to the forefront. So I think there is a moment of shift of thinking where Europe is coming really to terms, at least in Brussels, when it comes to the complicated position we have with China. And that Beijing doesn't necessarily offer easy solutions just because we have troubles with the US. You mentioned before that there has been quite a flurry of visits to China that is still ongoing. Do you see a risk that the member states pursue their own China policy or do you see like a unified China policy in danger? Or can this also further common European China policy? I mean, first of all, we have to take note of the fact that the EU China track is relatively quiet at the start of 2026. We don't have a specific high level dialogue that would be lined up. There doesn't seem to be that much happening on that track. But at the same time, as you mentioned, the capitals are extremely active. We had President Macron traveling to China. We had German Foreign Minister of Waterfu, being there to prepare the visit of German Chancellor Friedrich Mert happening in February, most likely. We have British Prime Minister Kierstarmer, who is there right now as we record this. But also we had visits from Spain's king from the Irish T-Shul. from the Finnish Prime Minister and the list actually goes on. We could add also ministers from some of the European countries. Interestingly, Chinese media and Alice actually even speak of European leaders queuing up at Beijing's door in order to talk to China at this specific moment. So there is definitely a risk of Beijing playing them against one another. As you've mentioned also before, it's to a large extent a question of Europe's interest in investments from China. That much was very clear and was even mentioned by President Macron during his speech at Davos, specifically welcoming Chinese investments into Europe, but crucially as he added, on specific conditions. And I think this is something that's going to remain crucial as this engagement by capitals is pursued. That it's first of all about the fact that making sure that if Chinese investments are secured, it's not done so at the expense of European unity or our commitment to the risking, which is and remains to be very valid in the context of European strategic autonomy over the long term. But second of all, that it's also not going to be beneficial for the European economies, that those are not just investments that only create jobs, but they should also transfer technology or build up the European ecosystem. They should be simply part of a bigger plan. And finally, the third, it's also about the fact that we don't really allow China to play us off against one another. Because all this engagement with Beijing, especially at this moment of geopolitical shift, is absolutely necessary. This is not something where any sort of decoupling should be happening, but it's very important that we navigate it in a way that is resilient. The sounds like Europe is finally starting to get a more organized, almost structured view of how to engage with China and knowing what it needs from this interaction. It seems that this has been quite a long time coming, but it seems to be that we're finally getting there. Do you share this assessment? I would say that's an optimistic assessment. So I would very gladly want to share it, but there are of course a lot of challenges that still remain. In many ways, it's first of all about making sure that there is commitment. A lot of those initiatives that I mentioned before at the beginning of our conversation, they still require a support of the member states. A lot of them are coming from the position where the member states haven't necessarily wanted to play ball with Brussels, and this is why we need some of the tightening of our thinking, whether that's cybersecurity or matters related to economic security. So there is definitely room for improvement and getting more serious on this. And second of all, there is also a question of really right sizing, the risking our ambitions, because there's simply a lot of different initiatives that are calling for our attention immediately. And it's about making sure that the resources that we have available are spent in the right way. So there are a lot of challenges. It's also about keeping the European economy in a good spot. And this is where all this interest from member states and investments from China is partially coming from. So there is no perfect solution where leaning too strong to one side only is going to be the right call. We need to keep everything in the right balance and the right mix in order to move forward. And this is why exactly this question of engagement with China remains valid. It's very much about how we do it, rather than whether we should do it. In our conversation, you also mentioned what's kind of a need for a more resilient engagement. Can you maybe expand a little more on this concept of resilient engagement? Sure. So this idea comes from the place that we basically need to talk to China for three major reasons. First of all, having an open channel of conversation is really essential for crisis management. And this relates not only to economic or economic security related issues, such as the discussions about the rare earths, access and export controls, but also more operational things. Like the situation we had throughout last year where a German aircraft was targeted by laser from a Chinese warship allegedly, but keeping the channels of communication open in such situations is really essential. Second of all, China is going to remain a key actor in addressing the global challenges, whether that's climate change, regulating technologies like AI or reforming the international order. It's just going to stay there. We don't really seem to look eye to eye on a number of those issues, but it's really important to keep the conversation going with China while being very mindful of those differences that we do have. And finally, it's also about the fact that those high-level exchanges with China really offer quite rare opportunity to try to puncture the party state's echo chamber. This is an opportunity for the European side to signal resolve, to pursue the terrains, to reduce the misreadings that the Chinese side might have of the European side. So in many ways, the engagement with China can reduce risks that we have in our relationship. And there is plenty of those in the China relations. But in the case of this engagement with China, it is equally crucial that this can also be the engagement itself, can be a source of risk in itself. And those need to be mitigated. So in a way, irresponsible engagement can be a source of risks. Beijing has a track record of using diplomatic encounters to erode unity, either the European level on even on national level. It also tends to try to seize the narrative of the exchange that may lead to Europe's partners' misinterpreting the engagement that we're seeing out there. Or it can also use the exchanges for stalling. Because if you have a very important visit of your prime minister coming up, maybe you're not going to really introduce this measure that is going to not necessarily land well with Beijing, and you're wasting time in this way on issues that sometimes require fast action. There are also situations where China has simply not delivered on what it has promised. So really making sure that engagement is done with all of this in mind is really crucial. We need to talk, but we need to be really mindful how. And this is why we work that Merrick's on a resilient engagement playbook, which is a list of suggestions and recommendations, thoughts on how to engage with China without those risks. Because the engagement is going to continue, how do we do it in a way that is as responsible and as resilient as possible? And in that way, we're basically navigating a diplomatic derisking, but not diplomatic decoupling. I would like to wrap up this conversation with a look into 2026 when I'm at the end of January. So the last call to make a prediction for 2026, I would say, what are maybe three things you look out for this year if people follow your China relations? Sure. So in 2026 with all the geopolitical shifts that we already had so far, it's a very big gamble to venture predictions, but let me maybe go with three points. First, I think we can safely predict that the EU will continue to feel the squeeze from both the US and China. And this is really something that we need to come to terms with and really forego the idea that we can solve one with the other. It's really about finding solutions that come from Europe itself and also diversifying the risking. There is just simply a very broad agenda. We need to get very mature about navigating the push from both sides. Second, I think that 2026 will be largely about operationalizing and right sizing the risking. And there is exactly this question of what we can afford, how we want to pursue it, and also making sure that we're aligned. So this is going to be really one of the driving discussions, I think, from the Brussels side in terms of the 2026. And finally, I think that Beijing will continue to be reluctant to extend any major grant bargain offers to Europe, but rather try to buy of support of individual countries. So all this discussion about China potentially holding the keys to some sort of solution that is a grand scale option for Europe. I would be very cautious on that, and I think it's really important that the member states don't give too much to the bilateral temptations. So in essence, to my mind, 2026 shapes up to be the year of really intense work ahead of us on strategic autonomy done right. So we should get started with this work, with this call to action. Thank you Greg for joining the podcast and for contributing your time and your thoughts here. Thank you very much Johannes. And to listen if you want to know more about what Greg is working on, I'll share a link to his profile in the show notes and also link the Brazilian engagement report that we mentioned before. And with this, I thank you all for listening. Until next time, goodbye. (upbeat music)