The European Parliament has voted to stop a massive investment deal with China — a move following tit-for-tat sanctions and a prolonged dispute over Beijing’s treatment of its Uyghur and Muslim population in Xinjiang Province.
In order for the investment deal to come into effect, it must be ratified by the European Parliament. But under a resolution passed on May 20, European lawmakers have demanded that “China lift the sanctions before parliament can deal with the Comprehensive Agreement on Investment (CAI).”
The motion to freeze the deal was overwhelmingly passed by a vote of 599-30, with 58 abstentions.
Some legislators signaled that they won’t support the agreement even if China lifts its sanctions, which were imposed in March against five members of the European Parliament and various institutions.
The vote is a blow to hopes that the European Union-China deal — championed by German Chancellor Angela Merkel and hammered out through seven years of negotiations — could be ratified in the coming months. Instead, the outcome is another sign of deteriorating relations between the EU and China.
The 27-nation bloc is now struggling to balance between growing concerns about human rights in China and its desire to gain deeper access to China’s lucrative market. Brussels also is searching for its place amid an intensifying global rivalry between Beijing and Washington.
“Those observing EU-China relations knew that it was questionable whether the European Parliament would approve the agreement,” Vuk Vuksanovic, a researcher at the Belgrade Center for Security Policy and a former Serbian diplomat, told RFE/RL. “The real lesson from this situation is that the EU still has not devised a policy to deal with the rise of China and the world of a growing Sino-American rivalry.”
The decision to freeze the deal also comes as China is more intertwined with domestic European politics, with countries like the Czech Republic, Germany, and Hungary all facing elections that could usher in new governments and a harsher line toward Beijing.
“China-related issues [have] become major political topics in many [Central and Eastern European] countries, and may have an impact on coming elections in the Czech Republic [in September], or in Hungary [in 2022],” says Tamas Matura, an assistant professor at Corvinus University in Budapest.
Deal On Ice
The investment agreement signed in December 2020 was controversial from the beginning. The pact aimed to offer European companies access to Chinese markets by loosening some of Beijing’s notoriously strict rules for foreign firms and facilitate Chinese investment in Europe.
But as soon as final talks wrapped up between Chinese President Xi Jinping, French President Emmanuel Macron, Merkel, and European Commission President Ursula von der Leyen, the deal faced immediate pushback from the bloc’s China critics, who urged Brussels to prioritize human rights in its relations with Beijing.
Then, on March 22, the EU imposed sanctions against Beijing for its treatment of Uyghurs and other Muslim minorities in Xinjiang — where China is accused of running an internment-camp system. Those sanctions were the first imposed by Europe over China’s human rights record since the 1989 Tiananmen Square massacre.
Beijing denies it is running internment camps. It immediately announced countersanctions against members of the European Parliament, as well as members of national parliaments, EU committees, and several European researchers who focus on China.
Since then, the agreement has remained on ice — with European lawmakers holding up ratification as criticism about the deal has grown louder.
“CAI is not beneficial for European geopolitical interests,” Jakub Janda, director of the Prague-based European Values for Security Policy, told RFE/RL.
The resolution on freezing the investment deal comes as many member states — and the EU as a whole — begin to adjust their policies toward China.
In a move largely aimed at China, the European Commission proposed rules on May 5 to restrain companies that benefit from foreign subsidies to buy EU businesses or take part in public tenders.
The bloc signed a deal with India on May 8 to increase cooperation on funding infrastructure. It is also engaged in discussions with the United States ahead of a G7 summit in June about how to form an alternative to Beijing’s massive infrastructure project, the Belt and Road Initiative.
Analysts say the decision to freeze the deal could also embolden China critics and lead to potential policy changes for several European countries, both in and outside the EU.
Germany, Europe’s largest economy, will hold federal elections in September as Merkel will step down after serving as chancellor for 16 years. Under Merkel, Germany has mostly taken a middle path in its policy toward Beijing. It has spoken up about human rights violations and democratic ideals, while also pushing for greater access to Chinese markets.
Forecasts suggest a coalition between Annalena Baerbock’s Greens and Armin Laschet’s Christian Democratic Union is the most likely outcome. The latest polls, however, show Baerbock, who has criticized China during her campaign and slammed Merkel’s approach, in the lead to become chancellor. That signals a potential shift on foreign policy that could ripple out across the bloc.
In Hungary, where Prime Minister Viktor Orban maintains close relations with Beijing, the construction of a controversial Chinese university has become a growing political issue in Budapest. At issue is the use of public funds by Orban’s government and land previously allotted for affordable student housing.
One of the most vocal critics of the project is Budapest Mayor Gergely Karacsony. He is running as an opposition candidate who is trying to unseat Orban in Hungary’s 2022 parliamentary elections.
The Czech Republic has elections in October. A coalition with the major opposition blocs, who are outspoken China critics, is gaining ground against Prime Minister Andrej Babis’s government. “It could be one of the most hawkish ones on China in Europe,” Janda says.
The decision to hold up the agreement could also have ramifications in the Balkans, especially in Serbia — China’s main partner in the region. According to Vuksanovic, the move will be noticed across the region and the decision could make Belgrade’s balancing act between China and the EU more difficult.
“[Belgrade] will not be able to hide behind the EU-China deal as a justification for its own collaboration projects with Beijing,” Vuksanovic says. “However, Serbia will not terminate its partnership with China. It will pursue its [existing] course as long as the risks are not too high.”