Highlight 8/2024 – Navigating Interdependence: Exploring the Vulnerability and Sensitivity of Sino-EU Economic Relations

Sahanuxi Tiliewujiang, 12 February 2024

The concept of « dependency » has increasingly influenced EU policy-making in recent years, with terms like « strategic dependency » and « vulnerability » becoming commonplace in EU policy documents. These terms reflect a growing concern over the intricacies of global economic interdependence. Behind these discussions lies a tendency among scholars to associate EU vulnerability with China’s rise, often framing it as a risk. However, if we delve deeper into the vulnerabilities and sensitivities inherent in the economic and trade relations between China and the EU, the Sino-EU economic relation is not unidirectional but rather one of mutual economic interdependence, extending into various realms beyond mere trade.

To a certain extent, the relationship between China and the EU can be interpreted through the lens of the theory of complex interdependence in international relations. Accordingly, different political actors mutually influence, constrain, and incur costs on each other. This can be summarized by two key features: sensitivity and vulnerability. Sensitivity refers to the magnitude and speed of the impact one party experiences from the changes in another. Vulnerability, on the other hand, measures a party’s ability to respond to changes from another and the magnitude of costs incurred. These two features gauge the symmetry/asymmetry of the interdependent relationship, where one party’s dominance over another stems from this asymmetry.

The EU dependence on China mainly covers the perspectives as following: Imports from China brings economic vulnerabilities, as disruptions in the supply chain could lead to shortages of critical goods and components. Integrating Chinese components and raw materials into EU’s supply chain exposes the region to challenges associated with interruptions in China, such as natural disasters, trade disputes, or changes in regulatory environments. EU businesses seeking access to the vast Chinese market may encounter barriers like regulatory hurdles, intellectual property issues, or unfair competition practices. EU industries may face competitiveness challenges due to lower production costs in China, state subsidies, or technological advancements. Relying on Chinese technology or investments in critical infrastructure projects may raise concerns about data security, intellectual property theft, or geopolitical influence.

However, as the EU reflects on its own vulnerabilities and dependence on China, it should also recognize the mutual interdependence between the EU and China. China’s reliance on the EU is not negligible either. For example, strategic dependencies exist in certain supply chains, where European machinery, materials, and components are crucial for China’s manufacturing industry, both in low-end and high-end technology sectors. Additionally, in the development of its semiconductor industry, China heavily relies on ASML, a company based in the Netherlands. In fact, China’s dependence on traditional European industries such as machinery and equipment is greater than commonly acknowledged. China faces greater difficulty in finding alternatives for high-end European machinery and equipment domestically or from third countries, compared to EU finding substitutes for Chinese end products.

For both EU and China, the crucial issue is not about eliminating dependencies, but rather managing these dependencies. This includes recognizing and valuing cooperation and coordination between both sides, as well as acknowledging the importance of maintaining market mechanisms. Both EU and China require competition to drive innovation and technological advancements in areas such as decarbonization and efficiency improvements.

Sahanuxi Tiliewujiang, Highlight 8/2024 – Navigating Interdependence: Exploring the Vulnerability and Sensitivity of Sino-EU Economic Relations, 12 February 2024, available at www.meig.ch

The views expressed in the MEIG Highlights are personal to the authors and neither reflect the positions of the MEIG Programme nor those of the University of Geneva.