Address by EVP Valdis Dombrovskis at Tsinghua University in Beijing on 25 September 2023

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Introduction  

Professor Bai, Professor He, dear faculty members, dear students, ladies and gentlemen, 

It’s my honour to join you in this distinguished and historic university.  

Tsinghua University has a particular reputation for excellence in science and engineering.  

As a trained physicist, I therefore have a double honour in addressing you today.  

Although - of course – I know that your students excel in all fields of academic study. You have made a central contribution to China’s remarkable story of growth and development.  

Tsinghua has strong links to Europe, with partner universities in France, Germany, Italy, The Netherlands and Sweden.

I hope many of you will take advantage of the opportunity to study in these European universities. Europe welcomes you.  

Today’s graduates of Tsinghua will be tomorrow’s leaders. 

So today I will speak directly to you – the leaders and builders of tomorrow.  

My key message is a simple one: 

Cooperation between Europe and China remains essential. But in a world characterised by rising geopolitical tensions, we need to work harder to continue building positive cooperation.  

We stand at a crossroads. We can choose a path towards mutually beneficial relations. One which is based on open, fair trade and investment, and working hand in hand on the great challenges of our time. 

Or, we can choose a path that slowly moves us apart. Where the shared benefits we enjoyed in recent decades weaken, and fade. And as a result, where our people and economies face reduced opportunities.  

Later today Vice-Premier He Lifeng and I will co-chair the EU-China High-Level Economic and Trade Dialogue.  

In this major forum we have a welcome opportunity to examine our bilateral and global engagement.  

Europe and China are both pillars of the global economy and institutions. We act independently, in the interests of our people and planet. We choose our own paths. 

But, if we talk candidly, and make the right choices, we can make our paths converge. We can re-energise our engagement. 

Of course, while engagement is a good start, we must ultimately aim to deliver results.  

Confucius taught us that “A superior man is modest in his speech, but exceeds in his actions.”

This lesson of humility, combined with a commitment to action, should frame and drive EU-China relations. 

Openness 

Ladies and gentlemen,  

In recent decades, the EU and China both benefited immensely from being open to the world. Trading and cooperating across borders helped to shape our economic and geopolitical strength. 

A willingness to open up and reform supported growth, development, jobs, and prosperity. And, it provided a platform to grow our global footprint and influence. 

China’s economic rise in recent decades is not just impressive – it is unprecedented. You opened your economy to trade and investment. You globalised your industrial and manufacturing base. You lifted millions of people out of poverty – and faster – than any country before or since. 

You joined global institutions, such as the World Trade Organization, and made full use of their benefits. You grew your economy by steadily working your way up global value chains.

As a result, we today applaud China’s industrial and technological leadership in many areas. Indeed, I am confident that many graduates of this university have contributed to that success. 

And I repeat: it is a success built on global engagement. President Xi in his New Year Address said that “today's China is a country closely linked with the world”.

Openness is also central to the EU’s economic strength. We have the world’s largest and most integrated single market. Our own success is built on transparency, diversity, access to information, and predictability.  

We remain the world’s number one trader, with the largest network of free trade agreements. We continue to be a global investment powerhouse, both inward and outward. 

Our open, rules-based approach delivers mutual economic gain for us and our partners.  

But equally, we leverage our relationships to support positive change across a range of areas, such as climate action and sustainable development, including labour rights. 

The EU is a vocal advocate for strong multilateral institutions and rules. We believe that without these, global cooperation cannot flourish. 

And, we are convinced that the benefits of such an open, rules-based approach remain valid for the future, including in the EU-China relationship. 

That’s why I continue making the case for openness as a winning strategy in the long run. We should leave no stone unturned in generating new opportunities for our people and companies. 

But we need to acknowledge that in a challenging new global context, both the EU and China face significant political and economic headwinds. And some of these headwinds may cause us to drift apart. 

The strongest, yet not the only, headwind is Russia’s war of aggression against Ukraine, and how China positions itself on this issue.

The EU view on this may not be fully understood in China, so please allow me to explain. 

Ukraine 

Ladies and gentlemen,  

I am pleased to see Chinese businessmen and tourists travelling to Europe once again.  

When they travel around our countries, they see Ukrainian flags flying over municipal buildings in cities, towns and villages.  

Over schools and kindergartens. 

From houses and apartments.  

Those flags have been raised by Europeans governments and people alike.  

This reflects how deeply Russia’s aggression affects hearts across our continent.

We believe Russia’s aggression to be unprovoked, unjustified, illegal, and barbaric.

Since the invasion began on 24 February 2022, there have been over 27, 000 civilian casualties in Ukraine: 9,614 civilians killed, and 17,535 injured.

504 Ukrainian children have been killed and 1,123  injured.

And, 19 546 children were stolen away from their parents – either deported to Russia or forcefully displaced. Only 386 children were returned.

These are official figures from the United Nations High Commissioner. 

Russia’s war has caused a humanitarian crisis in Europe. We have given shelter to over 4 million war refugees from Ukraine. 

We are committed to supporting Ukraine to victory, for as long as it takes. 

Why? 

Because Ukraine is a sovereign and independent nation, with clear and established territorial boundaries.  

In successive democratic elections, the Ukrainian people have chosen a development path that brings them closer to the European Union.

Under international law, they are entitled to pursue whatever alliances they wish. 

Territorial integrity has always been a key principle for China in international diplomacy. Russia’s war is a blatant breach of this principle.  

And, China always advocates for each country being to free to choose its own development path.  

So it’s very difficult for us to understand China’s stance on Russia’s war against Ukraine, as it breaches China’s own fundamental principles. 

That being said, we do recognise China’s work on nuclear non-proliferation. We are thankful for these efforts. 

The war is a disaster, not only for Europe. It is also weakening the developing world. Ukraine is a major global food exporter, and by attacking its capacity to trade in agricultural products, Russia is driving up global food prices.  

This hurts the world's most vulnerable most as they will pay the heaviest price.   

Food safety is also high on China’s agenda. So it is difficult to see how Russia’s sabotage of grain export from Ukraine can be in China’s best interest.  

Furthermore, by increasing energy prices and driving inflation, the war is weakening the global economy. This directly affects China, because the world’s manufacturing powerhouse is always harmed by external instability and depressed demand.  

In particular, it weakens the EU, as China’s major export market. Our purchasing and importing power is weakened.

Simply put, we can buy less.

And there is also a reputational risk to China. Its position on the war in Ukraine is affecting the country’s image, not only with European consumers, but also businesses.  

Over a third of EU companies in this country have indicated that China’s position on the war is making it a less attractive investment destination. 

Economic Security & De-risking 

Russia’s war has also forced the EU to rethink our economic security. We want to maintain an open approach to trade and investment, but we cannot ignore the risks we face. 

Our excessive reliance on Russian fossil fuels, and Russia’s weaponisation of food supplies, taught us a lesson.  

We were forced to take a hard look at our economic dependencies, and ask the question: how can we avoid such dependencies in the future?  

Our answer is: economic diversification and de-risking.  

What does this mean, concretely? 

I understand that in China, de-risking is sometimes viewed as a synonym for “protectionist” or “China-sceptic”.

This is not the case. Our strategy is not protectionist. And it is country-agnostic. 

In such a turbulent global context, any responsible actor – be it government or company board – must analyse the impact of new risks.  

Our approach to economic security is proportionate and precise. Our action will be purely risk-based. Surgical. Because most trade is not problematic.  

This is why our economic security strategy will be fully in line with our international obligations, including World Trade Organization rules. 

De-risking is therefore a strategy to maintain our openness, not undermine it.  

Indeed, China itself has a long and well-established tradition of promoting economic security through various means. 

Let me be absolutely clear:   

We heard President Xi Jinping in July opposing “decoupling and breaking links”. We agree. De-risking is not another word for decoupling. 

The Europe-China economic relationship is deep and has benefitted both sides. There is no intention of cutting off that relationship. We do not seek self-sufficiency or import substitution – which are concerns that the EU has actually raised about China’s own policies.  

The EU hopes that a large part of our trade and investment relationship can remain in place and develop further. The EU market will remain open. The EU rejects protectionism. We will not change our position on this. 

The EU applauds the impressive development of China’s economy. Indeed, we would like to see this continue. We need a strong China to help the world succeed in the green and digital transitions.  

But the EU cannot allow itself to be unprotected when our openness is abused or when our national security is at stake.  

And ‘national security’ is a very well and narrowly defined concept in Europe.

China could do a lot to help reduce our perception of risk. There are several cases where the weaponization of trade and investment is unhelpful. 

Reciprocity 

In a wider sense, we urge China to address the lack of reciprocity in our economic relationship. The figures speak for themselves. The current trade deficit stands at 396 billion euro in China’s favour.

So, delivering reciprocity in this and other economic areas would help restore confidence. 

Let me explain: 

The EU internal market remains open to investment and trade. It is underpinned by a clearly defined rules base, a reliable business environment, and strong transparency.  

Meanwhile, European companies are concerned with China’s direction of travel.  

Many are questioning their position in this country. They are asking themselves whether what many saw as a “win-win” relationship in past decades could become a “lose-lose” dynamic in the coming years.  

In a recent survey by the EU Chamber of Commerce in China, nearly two-thirds of respondents, more than ever before, indicated that doing business has become more difficult in China. 

The Chinese government has created a more politicised business environment by expanding its toolkit to protect national security and development interests. This has resulted in less transparency, unequal access to procurement, discriminatory standards and security requirements, and data localisation and transfer requirements.  

To give you just one example:  

The new Foreign Relations Law and updated Anti-espionage Law are of great concern to our business community.  

Their ambiguity allows too much room for interpretation. This means European companies struggle to understand their compliance obligations: a factor that significantly decreases business confidence and deters new investments in China.  

This is exactly what I mean by a lose-lose outcome. 

It’s a great pity, because China remains an attractive market and many European companies still want to invest here – but only if the conditions are right.  

If provided with greater market access, 63 per cent of respondents to a recent business survey said they would consider expanding their footprint in China.  

Instead, some companies are now looking to diversify to other markets.  

China’s response to these developments will be crucial in shaping investor sentiment for the years to come.  

China is navigating a challenging transition from an investment-led economy to a broad-based economy. For this it needs to remain open.  

By contrast, if China chooses the opposite path, it risks hampering the economic rebalancing it needs. 

 Ladies and gentlemen,  

we recognise that the world needs China. But China also needs the world. 

The lack of reciprocity and level playing field from China, coupled with wider geopolitical shifts, has forced the EU to become more assertive.  

We have developed autonomous tools to protect our interests when our openness is at risk. We have developed other tools to safeguard our own economic security and the level playing field of our internal market.  

The European Commission recently announced the launch of an anti-subsidy investigation on imports of battery electric vehicles coming from China. I can assure you that we will do this work diligently, in consultation with the Chinese authorities and stakeholders, and we will follow well-established rules in doing so.  

The EU welcomes competition. It makes our companies stronger and more innovative. However, competition must be fair. And we will be more assertive in tackling unfairness.  

Cooperation on Global Challenges 

Let me now take you briefly back in time. To the late 16^th century.

In 1582, Matteo Ricci, an Italian Jesuit priest, arrived in China, soon becoming one of the first Westerners to master Chinese script and Classical Chinese.

In 1601, he became the first European to enter the Forbidden City in Beijing. The Wanli Emperor of the Ming Dynasty invited him to advise on court astronomy and calendrical science.

He also worked with prominent members of Chinese society to complete the translation of Euclid's Elements into Chinese, and the Confucian classics into Latin. It was a historical first.

This, in my view, is an inspiring early example of Europe-China engagement delivering positive results.

Now, fast-forward to 2023.

We want to see more EU-China engagement leading to results at global level. Our cooperation on climate change is a positive example.

My personal experience working with the People’s Bank of China on sustainable finance is a positive one. 

BUT clearly there is a lot of untapped potential.  

Let me give just two examples:  

 First, multilateralism: As I mentioned, China’s economic development benefited enormously from joining the World Trade Organization in 2001.  

The world has changed dramatically, and for that matter China’s weight in world trade has increased significantly since the start of this century.   

The WTO needs to be reformed to make it fit for the global trading system of today.   

It requires wholesale reform.   The EU and China cooperate proactively on many WTO files, such as services domestic regulation and investment facilitation. But we could do more together on reform.   

For example, by completing the Fisheries Subsidies negotiations, or by starting new deliberations on the interplay between trade and industrial subsidies and climate measures.    

I’m sure you will agree that this is in China’s direct interest, because a well-functioning WTO should be a cornerstone for your future growth and development.  

Second, we could also do more on global macroeconomic stability.  

Many low-income economies risk the prospect of a lost decade of development due to their debt burdens. 

Working together, we can help ensure that these burdens are sustainable. 

The recent work to support individual countries – Ghana and Zambia, for example – is promising. 

The EU stands ready to work with China on this and other global challenges. 

Conclusion 

To conclude, ladies and gentlemen, let me present you with the following reflections: 

First, I remain convinced that an open approach to economic development and global engagement continues to present the best opportunities for both the EU and China.  

It can provide young people like you with the best foundation to succeed. 

Second, Europe will continue to chart its own course in global economic affairs and geopolitics. Part of this approach is our desire to maintain a dynamic and mutually beneficial relationship with China. 

However, this would require China to address the challenges I mentioned earlier. We stand ready to engage.

Finally,  let me repeat that I hope you will have an occasion to come and study in Europe. We very much look forward to resumption of people to people exchanges.  

We need to build a better understanding of each other, and find new ways to work together.  

More generally, I wish you the best of luck for your future careers. China, and indeed the world, will need your energy, creativity, self-discipline and social commitment. 

Thank you.

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