What is happening?
The first meeting of the China-EU Working Group on Financial Cooperation took place on March 18 and 19, 2024. Financial authorities from both sides met in Beijing to foster better communication and hedge against future risks and uncertainties.
The working group was established in September 2023 and aims to help the two sides address market access, supervisory conditions, anti-money laundering, sustainable finances, and other critical issues in cooperation between their respective financial sectors. This comes against the backdrop of increasing tensions within the EU-China ties, the EU launching an investigation into China’s electric vehicle producers in October 2023, and an anti-subsidy probe against China’s state-owned train maker company in February 2024.
What is the broader picture?
The European Commission president, Ursula Von Der Leyen, introduced the concept of de-risking in 2023, emphasizing that economic security and stability have become closely intertwined with member states’ national security.
China has been repeatedly accused of using its economic might and dependencies in trade, investment, goods, and services to coerce, punish, influence, or deter other countries. Moreover, the EU-China relations have been plagued by limited market access in China, a lack of a level-playing field for European companies, concerns over security threats related to 5G, China’s human rights violations, and Beijing’s tacit support for Russia during the ongoing invasion of Ukraine.
As a result, the European Union started introducing defensive measures to lower its economic dependence on China and increase European economies’ resilience against Beijing’s coercive methods and potential financial shocks. These measures included an investment screening mechanism, a 5G toolbox, anti-subsidy probes, — all of which have been widely criticized by China and described as “decoupling in disguise.”
Apart from the accusations of Beijing weaponizing economic interdependence, its struggle to bounce back from the COVID-19 pandemic has worried European investors and businesses in China. Beijing faces currency depreciation, rising debts, and a raging property crisis. Furthermore, while the EU has hoped for increased market openness and liberalization of Chinese markets, the CCP has embarked on a path towards greater nationalism and more state and party control over its markets and companies.
Given the current geopolitical climate and economic relations between the EU and China, the Working Group on Financial Cooperation is envisioned as a platform for improving communication and solving on-the-ground issues to prevent further escalation. For the EU, the main topic on the agenda will be China’s discriminatory financial measures, which limit access to China’s markets. At the same time, China is worried about the EU’s “repressive actions against Chinese portfolios and direct investment in the EU.”
Why it matters?
The China-EU Working Group on Financial Cooperation is one of the efforts to improve global economic and financial stability and discuss respective partners’ domestic macroeconomic and financial situations. Although concrete actions are expected to take a while to materialize, the working group can be seen as a positive development in EU-China ties. It highlights the two parties’ continuous efforts to maintain communication channels and financial cooperation despite intensifying geopolitical tensions.
