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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This week, top European Union leaders are traveling to Beijing

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Speaker 2: for a high level summit where they'll address everything from

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Speaker 2: climate change to trade. The meeting coincides with the fiftieth

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Speaker 2: anniversary of diplomatic ties between the EU and China and

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Speaker 2: could signal a turning point in what's often been a

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Speaker 2: turbulent relationship.

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Speaker 1: The US, UK and EU sanctioned China for human rights

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Speaker 1: abuses in Shinjung. Beijing retaliates, immediately, putting its relations with

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Speaker 1: Western nations on course for a further so China is

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Speaker 1: prepared to live some sanctions on EU officials in a

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Speaker 1: bid to work towards a dayton.

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Speaker 2: The EU and China often find themselves at odds on

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Speaker 2: a number of geopolitical and economic issues, but lately they

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Speaker 2: can agree on one thing, the need to counter President

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Speaker 2: Donald Trump's terra.

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Speaker 3: EU nations buy and large do want to de risk

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Speaker 3: from the US market because they see it as unpredictable.

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Speaker 2: Alan Crawford is a senior editor at Bloomberg. He's been

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Speaker 2: covering international relations from Berlin for nearly two decades, and

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Speaker 2: he says by distancing itself from the US. The EU

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Speaker 2: is putting itself in a position to recalibrate its relationship

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Speaker 2: with China, its second largest trading partner.

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Speaker 3: There are different voices in Europe advocating different paths as

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Speaker 3: regards relations with China, and there is an official skepticism,

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Speaker 3: if you like. The official line from the European Commission

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Speaker 3: Chief or Shulaf underline is to d risk as regards China,

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Speaker 3: but that is not quite reflected in some of the

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Speaker 3: individual EU member states, the governments and the government leaders.

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Speaker 2: Alan says, you don't have to look too hard to

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Speaker 2: see signs that European country are warming up to China.

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Speaker 2: The presidents of Spain and France have publicly endorsed deeper ties,

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Speaker 2: and companies like Chinese EV manufacturer BYD have expanded operations

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Speaker 2: into the region.

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Speaker 3: Byd its main European plant is under construction at the

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Speaker 3: moment in Hungary. Slovakia is also attracting EV and battery technology.

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Speaker 2: These developments haven't gone unnoticed by the US. Earlier this year,

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Speaker 2: Treasury Secretary Scott Bessant warned the continent against pivoting to China.

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Speaker 1: A minister, the Economic Minister in Spain, made some comments

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Speaker 1: this morning, Oh well, maybe we should align ourselves more

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Speaker 1: with China.

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Speaker 2: That would be cutting your own throat, Alan says. With

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Speaker 2: geopolitical tensions rising and Trump's tariffs taking their toll, the

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Speaker 2: EU is at a crossroads.

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Speaker 3: Does it pursue strategic autonomy, as it's called, or does

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Speaker 3: it try and align more closely with China, or indeed,

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Speaker 3: does it just look past Trump's tariffs and overall aggression

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Speaker 3: and continue its transatlantic ties.

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Speaker 2: This is the Big Take Asia from Bloomberg News. I'm Wanha.

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Speaker 2: Every week we take you inside some of the world's

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Speaker 2: biggest and most powerful economies and the markets, tycoons, and

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Speaker 2: businesses that drive this ever shifting region. Today on the show,

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Speaker 2: how Trump's trade war is changing the EU's approach to

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Speaker 2: Chinese investment. Relations between the EU and China have fluctuated

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Speaker 2: over the past half century. From nineteen seventy five to

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Speaker 2: twenty ten, trade between the two grew steadily as China

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Speaker 2: initiated reforms, signed economic cooperation agreements, and joined the World

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Speaker 2: Trade Organization. In two thousand and nine, Chinese investments in

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Speaker 2: Europe rose to three billion dollars. By twenty sixteen, it

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Speaker 2: had reached forty billion dollars. Here's Bloomberg Senior editor Alan Crawford.

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Speaker 3: There were some really big, notable Chinese investments. The figures

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Speaker 3: vary somewhat, but they reached a peak around twenty sixteen,

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Speaker 3: and it was tens of billions of dollars. One example

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Speaker 3: back then was ken China's takeover of the Swiss agrochemical

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Speaker 3: company Syngenta, and that was valued at forty three billion dollars,

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Speaker 3: So it gives you an indication of the kind of

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Speaker 3: volumes we're talking about.

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Speaker 2: And Bradley Allen, where were these investments going in Europe

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Speaker 2: back then?

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Speaker 3: In twenty fifteen sixteen, It was really in the big

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Speaker 3: economies of France, Germany, Italy and the UK. China was

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Speaker 3: investing in a real mixed bag of companies and assets.

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Speaker 3: They were buying things like football clubs. They bought into Milan,

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Speaker 3: a famous club in Italy. They bought travel companies. But

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Speaker 3: then there started to be more investments in infrastructure, so

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Speaker 3: in rail lines specifically, we saw ports. The famous one

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Speaker 3: is Costco bought into Perea's port, which is the harbor

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Speaker 3: for Athens and key to all of the Mediterranean shipping. Subsequently,

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Speaker 3: China brought into other ports in the Mediterranean and in

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Speaker 3: the Adriatic, So it looked very suspiciously as if Chinese companies,

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Speaker 3: some of them were state backing, were deliberately buying up infrastructure.

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Speaker 2: So when Chinese companies were picking up things like football

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Speaker 2: clubs and travel companies, no problem. But when they started

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Speaker 2: investing infrastructure, that really raised the alarm bells for a

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Speaker 2: lot of European governments.

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Speaker 3: Yes, it took up while for the concerns to be shared.

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Speaker 3: Germany and France had concerns before Italy did, and this

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Speaker 3: was communicated interestingly by a business group in Germany. They

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Speaker 3: were among the first to issue a landmark which was

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Speaker 3: critical of some of the investments and urging the government

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Speaker 3: to be very cautious. And this was subsequently taken up

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Speaker 3: at EU level and it became a new law in

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Speaker 3: term that granted rights for investment screening.

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Speaker 2: While China's infrastructure investments raised flags, there have been points

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Speaker 2: of contention politically between the EU and China too.

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Speaker 3: The pandemic was really an inflection point. There was a

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Speaker 3: lot of criticism in Europe of China's mask diplomacy. If

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Speaker 3: you remember that China produces a lot of the medical

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Speaker 3: equipment which the world suddenly found themselves without, and China

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Speaker 3: was criticized for favoring its allies in terms of these supplies. Subsequently,

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Speaker 3: there were criticisms directed by European politicians at Beijing over

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Speaker 3: the treatment of minorities in Shinjang, and that actually culminated

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Speaker 3: in trading of sanctions between EU lawmakers and China.

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Speaker 2: What was the impact of this increased scrutiny, How did

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Speaker 2: that affect Chinese investments in Europe?

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Speaker 3: After that, it's been very clear that if you just

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Speaker 3: look at a graph, is on a clear downward trajectory.

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Speaker 3: There was a recent report by Merricks that studies China

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Speaker 3: based in Berlin, where I am here, and it found

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Speaker 3: that there were seven consecutive years of declines in terms

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Speaker 3: of overall Chinese investment in Europe, but twenty twenty four

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Speaker 3: Chinese investments ticked up for the first time. It's important

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Speaker 3: to make the point that this is still just a

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Speaker 3: very small uptick, and it's still at a low level

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Speaker 3: compared to back in the heyday, the Golden era. But

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Speaker 3: given the global environment we're talking about, it still seems

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Speaker 3: significant to point out this change after seven consecutive years

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Speaker 3: of decline.

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Speaker 2: According to the report, last year's rebound of Chinese investments

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Speaker 2: into Europe total ten billion euros or about twelve billion dollars.

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Speaker 3: One of the interesting developments of recent years is that

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Speaker 3: the investment profile has changed. It's starting to shift from

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Speaker 3: taking stakes in companies or in particular projects or infrastructure.

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Speaker 3: Then it's shifting now to more green field investments, which

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Speaker 3: means they're building new factories. And it's reflective of the

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Speaker 3: fact that China has moved up the value chain that

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Speaker 3: now China has its own world leading technologies, notably of course,

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Speaker 3: in electric vehicles and EV technology, clean tech, and European

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Speaker 3: governments buy and large are very keen to have those.

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Speaker 2: And then of course there's Trump's tariffs after the break

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Speaker 2: the new China EU approach. Last year was an important

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Speaker 2: year for Chinese investments in Europe. It was the first

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Speaker 2: time that Chinese companies up their spending there after seven

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Speaker 2: years of declines. Alan Crawford and a team of Bloomberg

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Speaker 2: reporters dug into these figures and found there was a

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Speaker 2: shift in the nature of these investments as well as

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Speaker 2: where the money was going.

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Speaker 3: Broadly speaking, a very notable development has been this shift

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Speaker 3: from Western Europe to Central and Eastern Europe byd Its

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Speaker 3: main European plant is under construction at the moment in Hungary.

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Speaker 3: Slovakia is also attracting EV and battery technology. I think

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Speaker 3: what's interesting about these two countries is that they're both

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Speaker 3: run by leaders who are very close to China politically.

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Speaker 3: They're both somewhat problematic in terms of the European mainstream,

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Speaker 3: and by that I mean that they have ties to

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Speaker 3: Moscow and they are proud of their those relationships with

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Speaker 3: Shi Jinping.

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Speaker 2: And it sounds like the governments are also responding differently

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Speaker 2: this time around, right like some of these investments are

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Speaker 2: actually being very much welcomed.

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Speaker 3: That's exactly true. These are actually plants that bring jobs

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Speaker 3: and technology and arguably prestige to the nations that have these.

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Speaker 3: It's essentially a race for the technology at the moment,

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Speaker 3: which is a change of course. Rather than China trying

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Speaker 3: to get hold of Western technology, this is European countries

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Speaker 3: that are very keen to have Chinese advanced EV plants

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Speaker 3: in their countries.

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Speaker 2: But it's not just prestige and shared political interests that

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Speaker 2: are pushing European nations closer to China. Trump's terrorists have

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Speaker 2: played a significant role.

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Speaker 3: The US is already threatening the EU with thirty percent tariffs.

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Speaker 3: It's not exactly designed to win friends and influence in Europe.

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Speaker 3: It can only turn Europe away from the US. There

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Speaker 3: are different voices in Europe advocating different paths as regards

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Speaker 3: relations with China. There is an official skepticism, if you like.

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Speaker 3: The official line from the European Commission Chief or Shulaf

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Speaker 3: underline is to d risk as regards China.

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Speaker 2: Europe is fully committed to result oriented engagement with China

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Speaker 2: and this Commission is leading the way when it comes

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Speaker 2: to d risking not decoupling.

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Speaker 3: But that is not quite reflected in some of the

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Speaker 3: individual EU member states. We recently had the Spanish Prime

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Speaker 3: Minister Pedro Sanchez. He was in Beijing meeting with Xi Jinping,

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Speaker 3: and he was talking very much about opening up more

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Speaker 3: to China and his emphasis was on much more in

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Speaker 3: terms of investment, much closer relations. But other leaders are

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Speaker 3: somewhat more weary and are hedging their relations, notably the government,

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Speaker 3: which is the biggest economy in Europe's the number three

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Speaker 3: economy worldwide. It tends to set the tone in Europe

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Speaker 3: and the EU as a whole.

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Speaker 2: What are some of the concerns the reservations that specific

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Speaker 2: countries have about the warming ties to China and the investments.

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Speaker 3: The single biggest issue that is shared by the vast

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Speaker 3: majority of EU nations, the governments, and the EU itself

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Speaker 3: in Brussels is China's close relationship with Russia. European governments

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Speaker 3: leaders individually, the German Chancellor, the French President, and EU

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Speaker 3: officials have been making the case to Shi Jinping to

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Speaker 3: exert influence on Vladimir Putine to stop the war in Ukraine.

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Speaker 3: The argument is that China could exert pressure on North

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Speaker 3: Korea not to supply Russia with artillery and with troops. Actually,

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Speaker 3: but that doesn't seem to have had any influence either,

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Speaker 3: which to take us back to the upcoming EU China summit,

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Speaker 3: that will undoubtedly be a sticking point in any development

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Speaker 3: towards closer relations.

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Speaker 2: I'm wondering, then, where does this leave us now? Are

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Speaker 2: we seeing a pivot to China from the EU side.

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Speaker 2: Is there a strong sense that EU countries want to

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Speaker 2: do risk or do you leverage from the US market?

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Speaker 3: These are two separate but connected issues. Yes, EU nations

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Speaker 3: Buy and Large do want to de risk from the

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Speaker 3: US market because they see it as unpredictable. At the

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Speaker 3: very least, the Transatlantic relationship is arguably in more trouble

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Speaker 3: than it has been for decades. At the same time,

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Speaker 3: I don't think that yet translates to a pivot towards China,

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Speaker 3: for the reasons of China's support for Russia during the

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Speaker 3: Ukraine War. But also there is a skepticism, an inherent

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Speaker 3: wariness which has developed over the past decade, which means

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Speaker 3: that Buy and Large as a whole Europe isn't quite

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Speaker 3: ready to fall into bed with China, if you like.

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Speaker 3: I think that there's a recognition that Europe needs to

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Speaker 3: find its own path between the two giants of Beijing

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Speaker 3: and Washington.

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Speaker 2: Now, US Treasury Secretary Scott Bessnont had warned European governments

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Speaker 2: against aligning more with China. At the same time the

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Speaker 2: US seems to be cozying up to China itself.

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Speaker 3: Of course, things change on a day to day basis.

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Speaker 3: A few weeks ago where we're talking about threats of

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Speaker 3: one hundred and forty five percent tariffs on China. Now

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Speaker 3: we've seen that the US is allowing Nvidia to sell

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Speaker 3: some of its AI chips to China, which is a

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Speaker 3: complete reversal of the Biden administration's policy and indeed the

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Speaker 3: Trump administration's policy of a few weeks ago. And we're

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Speaker 3: talking about a potential she Trump summit. Trump seems to

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Speaker 3: be willing to do some kind of broader deal with China,

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Speaker 3: and by its very nature, I think that would carve

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Speaker 3: out Europe and leave Europe further adrift, which kind of

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Speaker 3: gives more ammunition to the calls in Europe for more

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Speaker 3: autonomy here on the continent.

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Speaker 2: Back to the EU China summit later this week. What

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Speaker 2: outcomes do we expect from the talks? You know, what

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Speaker 2: could be the biggest signals that things are warming up

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Speaker 2: between the EU and China or are there things to

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Speaker 2: watch in terms of flags red flags? Possibly?

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Speaker 3: I think it will be very easy for the both

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Speaker 3: sides to agree on the need for free trade and

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Speaker 3: to call out protectionism. They are highly unlikely to name

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Speaker 3: the US or Donald Trump, but they will, presumably, I

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Speaker 3: would imagine, put out a robust statement in terms of

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Speaker 3: global values, multilateralism against unilateralism going it alone. So reading

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Speaker 3: between the lines is clear that they don't like the

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Speaker 3: approach of the Trump administration slapping tariffs and unilaterally pulling

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Speaker 3: out of the Paris Climate Accord and so on. I

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Speaker 3: think that they will agree on climate issues. One of

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Speaker 3: the biggest potential sticking point is over this China support

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Speaker 3: for Russia. China is still withholding rare earth experts to Europe.

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Speaker 3: I guess the issue really for me is whether these

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Speaker 3: blow up and come out into the open, or whether

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Speaker 3: they manage to keep them behind closed doors and maintain

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Speaker 3: a unified stance on those points they can agree on.

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Speaker 2: This is The Big Take Asia from Bloomberg News. I'm

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