7 things to watch — COVID measures — TikTok’s EU tour – POLITICO

Exploring Europe’s diplomatic and commercial relationship with China.

By STUART LAU

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HAPPY NEW ANNUS INCOGNITUS! China Direct is back after a two-week break, but China barely gave Europe any break at all. Here in Brussels, some health officials had to end their holidays early for an emergency meeting to decide what to do about the thousands of inbound Chinese travelers who will be arriving shortly, thanks to Beijing’s abrupt decision to lift both domestic and international restrictions for the pandemic at the same time. With the Chinese New Year holidays only over two weeks away, European policymakers are under pressure to figure out what to do — with tourism hotspots France, Spain and Italy already imposing their own measures.

In the end, late on Wednesday, European diplomats agreed a raft of travel-related measures including facemasks, pre-flight testing and wastewater surveillance in response to the COVID wave currently engulfing China — raising the prospect of retaliatory action from Beijing. More on that below.

WELCOME TO CHINA DIRECT! This is your host Stuart Lau, POLITICO’s EU-China Correspondent. Buckle up for 2023. It will be a bumpy, bumpy ride.

7 THINGS TO WATCH IN 2023

MAKING PREDICTIONS is certainly a riskier-than-ever business after February 2022 but we’ll take up the challenge.

Here’s a checklist of seven things to watch this year:

1. XI’S NEW TEAM: The final lineup for key government positions under Xi’s new five-year term will be finalized around March, during the Communist Party’s Two Sessions.

Already, we’ve known over the past week that Foreign Minister Wang Yi has won a promotion, with his original job being replaced by China’s Ambassador to the U.S. Qin Gang, who’s now expected to be the counterpart for most European foreign ministers.

There are still other key posts to watch, most notably Li Keqiang’s successor as premier. It will almost certainly be Li Qiang, the newly promoted No. 2 in the Party, while all his four vice-premiers will also be fresh faces. One of the current deputies is the well-known Liu He, a top economic aide to President Xi Jinping and key interlocutor during the trade war with former U.S. President Donald Trump’s administration. He’s also been the one in charge of trade policies with the EU. All eyes will be on who succeeds him in March.

2. UKRAINE WAR SPILLOVER: Xi has made no effort to dial down his cozy relationship with Russian President Vladimir Putin, whose image in the West could hardly plunge any lower. As Putin was launching attacks against Ukraine right before New Year, Xi made clear to him during an end-of-year video chat that China wouldn’t ditch Russia.

“China stands ready to join hands with Russia and all other progressive forces around the world who oppose hegemony and power politics, to reject any unilateralism, protectionism and bullying, firmly safeguard the sovereignty, security and development interests of the two countries and uphold international fairness and justice,” Xi said, according to the Chinese government statement.

The question is: How does this sustained Beijing-Moscow cooperation change Europe’s assessment of Beijing in the medium term? While German Chancellor Olaf Scholz and European Council President Charles Michel secured assurances from Xi opposing nuclear threats on Ukraine, diplomats noted that this was merely a repeat of China’s long-standing foreign policy speak. On the other hand, China is keen to shore up ties with Russia on trade, finance, energy, and joint military exercises. Beijing’s line is that China-Russia relations — and its equivocal stance on Ukraine — should not be a problem for EU-China relations, though 2023 is unlikely to bear out that theory.

3. CHIP WAR: Europe — and in particular the Netherlands — plays a key role in defining the success or failure of the U.S. tech war on China. At the center of this is the equipment supplier giant ASML. The Dutch government is still deliberating how to handle U.S. requests to limit ASML’s sale to China of world-leading microchip printing technology. More clarity should come through this year.

Meanwhile, European governments started blocking the takeover of chips companies or plans by Chinese-owned companies last year — and this will likely intensify in 2023. An — up until now — unnoticed takeover of Delft-based chips startup Nowi by Chinese-owned Nexperia might be the test case for a Dutch law that allows for a takeover review when investments, mergers or acquisitions involve critical infrastructure, sensitive technology or industrial real estate. The law is currently not yet in place, but if it is, the Dutch government can retroactively use it to probe the acquisition. “I will investigate if the acquisition of Nowi falls under the scope of the law and if a review is possible,” Economy Minister Micky Adriaansens said.

4. BATTLE FOR BERLIN: Germany will unveil its China strategy this year. Scholz’s chancellory office is widely expected to take a cautious approach, as opposed to plans by the junior coalition partner Green Party — which controls the foreign office and economy ministry — to be more assertive. For now, “diversification” is the biggest common denominator, but German businesses remain skeptical about leaving the lucrative China market.

Germany, meanwhile, is also siding with France in calling for a tough response to Washington’s plan for protectionist subsidies, which could have left European electric vehicles at a vast disadvantage. Even though the Biden administration made some last-minute concessions after Christmas, that doesn’t mean all the problems have disappeared. And the transatlantic tension will have a direct bearing on how far the EU goes in terms of China policies.

5. WILL OUTBOUND INVESTMENT BE THE NEXT STEP? Berlin’s China discussion will help determine whether Europe should start blocking certain types of investments in China, either for national security or competition concerns. The German government is looking into the legal basis for such a game-changing policy, while the EU is (forced) to do the same.

So far, external investment scrutiny is just in the idea phase at the Commission, two officials briefed on the internal Commission discussions said. However, they thought that the process would speed up in Brussels if Germany were to actively push for the concept, especially as it’s in line with Europe’s trade defense policy toward China.

It might start small, but directing how certain companies can invest abroad holds potentially systemic consequences for the global trading system, which seems to be splitting increasingly into politically aligned blocs. POLITICO’s Sarah Anne Aarup has the story.

6. EU-CHINA MEETINGS: Expect China to pursue a more active approach in winning European hearts in 2023, especially as its tension with Washington presses on. Now that the COVID restrictions are gone, Beijing hopes that high-level visits will become regular again. French President Emmanuel Macron is planning to visit China early this year and meet Xi. We’ll see if this risks being derailed by Europe’s fear of China’s coronavirus outbreak. (Philippine President Ferdinand “Bongbong” Marcos Jr has no such concerns — he was in Beijing this week, with a heavy focus on trade ties. AP has the story.) Also, we’ll be watching whether the EU-China summit will finally take place physically for the first time since 2019.

7. TAIWAN TENSION: Last but certainly not least, the Taiwan question will feature even more prominently in 2023. The U.S. has been warning about the increasingly likely military, while Xi repeatedly called for military preparedness. Just a fortnight ago, U.S. and Chinese warplanes were only three meters apart over the South China Sea. (More on that on a detailed CNN report.) Expect China to be more high-profile against any European official interaction with Taiwan (which the EU says is fully in line with how it interprets the “One China” policy, to Beijing’s disapproval.) Meanwhile, the EU will also talk more about diversification of semiconductor supply, a large chunk of which relies on Taiwan.

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DRIVING THE WEEK: COVID

EU AGREES COVID RESPONSE BUT IT’S NOT MANDATORY: At a crisis meeting in Brussels on Wednesday, national diplomats agreed on a “coordinated precautionary approach” in light of the surging COVID wave in China, the Swedish presidency said in a statement.

Our health reporter Helen Collis writes that the diplomats agreed EU countries would recommend all passengers on flights to and from China wear high-grade face masks, and would issue advice to travelers on hygiene and health measures. 

Room for maneuver: However, the wording of the remaining actions leaves countries with a fair bit of wiggle room. They are “strongly encouraged” to introduce requirements for negative pre-departure tests 48 hours before leaving China, as well as “encouraged” to randomly test passengers arriving from China and sequence positive results. Countries are also “encouraged” to test and sequence wastewater samples from airports and aircraft from China, and to promote vaccine-sharing and immunization campaigns.

Uh oh: The move is unlikely to go down well in China. During a briefing on Tuesday, foreign ministry spokeswoman Mao Ning told reporters in Beijing that they were “willing to improve communication with the world” on COVID, but they were “firmly opposed to attempts to manipulate the epidemic prevention and control measures for political purposes,” adding that they “will take countermeasures … according to the principle of reciprocity.”

TAIWAN EQUIPMENT SHIPPED TO CHINA FOR REPAIR: An optical instrument used for launch measurements for Taiwan’s Hsiung-Feng III anti-ship missiles was shipped to its manufacturer, Leica, in Switzerland for repairs. And then — it was sent back to Taiwan from Shandong province in eastern China. “I don’t know whether to laugh or cry!” quipped Bonnie Glaser, a cross-straits expert at the German Marshall Fund, a U.S. think tank.

ICYMI — GLOBAL GATEWAY LATEST: Barbara Moens and I reported that the EU is preparing to roll out “flagship projects” early this year under Global Gateway, a scheme designed to counter China’s Belt and Road initiative — almost a year after European Commission President Ursula von der Leyen proposed it. She’s not happy with the lack of visibility.

MANY THANKS TO: Editor Christian Oliver, reporters Helen Collis, Pieter Haeck and producer Grace Stranger.

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