This mountain may give birth to a mouse, but Brussels approaches the July 24 EU-China Summit with a clear sense of new realities, lessons learned, and principles for the future. EU member states must hold the line, not yield to Beijing’s divide and conquer strategy. 

The meeting, already described as a “major showdown” by the South China Morning Post, unfolds against escalating trade tensions that will decide Europe's technological future. Brussels is in talks with Beijing over rare earth exports, electric vehicles, medical devices and cognac while simultaneously holding protracted tariff negotiations with Washington and looking to buy US-made weapons for Ukraine, creating a web of competing strategic interests. 

China’s support for Moscow’s war on Ukraine strengthens Beijing’s hand in trade negotiations with the EU and the US - now that Washington understood a “Reverse Nixon” won’t work with Putin - and underscores the growing consensus that the threat to European interests and values is more systemic than simply trade disputes. As European Commission President Ursula von der Leyen said this month, “China is de facto enabling Russia’s war economy, and we cannot accept this.” Former NATO Secretary General Jens Stoltenberg was even clearer: “China says it wants good relations with the West, but at the same time, Beijing continues to fuel the largest armed conflict in Europe since WW II. They cannot have it both ways.”  

Little surprise that the Summit's second day, dubbed as a business forum, has reportedly been cancelled. President Xi even signalled last week he would not attend before agreeing last-minute to meet Commission President von der Leyen and Council President Costa - sending a calculated message of how China sees its own global position and the EU’s. 

The stakes could not be higher: Europe's technological sovereignty hangs in the balance. Beijing’s approach is not to seek traditional competitive advantage, it is a targeted threat to Europe’s industrial base, as highlighted in Germany’s 2023 China Strategy. This strategy must be implemented, and Europe must act decisively to address critical supply chain vulnerabilities.  

Recent moves illustrate Brussels’ hardening stance: in June, the EU’s first International Procurement Instrument investigation concluded with new restrictions for Chinese medical device producers in EU public tenders. The same month, two Chinese banks were included in the EU’s 18th Russia sanctions package, and President von der Leyen condemned Beijing’s rare earth “blackmail” at the G7 summit. 

As is now well known through recent export restrictions, China controls 70 percent of global rare earth mining and over 90 percent of processing capacity, turning off the taps whenever it suits its interests. In 2023, it restricted exports of dual-use minerals, including antimony, gallium, germanium, graphite and tungsten. As far back as 2010, in a more benign era, China limited rare earth exports to Japan in a dispute over territorial waters. Meanwhile, global energy and transport technology markets are increasingly flooded with Chinese goods, undercutting ex-China competitors. This is a roadmap to dependency as severe as Europe's reliance on Russian energy ever was.  

Ironically, the well-documented challenges in the transatlantic relationship have helped focus attention in Brussels and national capitals, bolstering resolve for more realistic stance toward the US relationship. Europe has shown it can move fast when political will exists. In just a few months, Member States have committed to and taken practical steps to enable defence spending increases and even greater future commitments.  

The same urgency driving military investment must fuel strategic energy and dual-use technology independence. Europe must shore up domestic production of strategic materials, components and finished products; marshal demand where market signals are inadequate; and stockpile to mitigate further disruption. China's economic coercion warrants paying a security premium for European-manufactured goods.  

Europe cannot win a race to the bottom against state-subsidised production. Instead, it must leverage its strongest card in its relationship with China: conditional access to the world's largest trading bloc in the form of tariffs, mandatory technology transfers through joint ventures or equivalent, and enhanced foreign direct investment (FDI) screening – ensuring such investment serves European - rather than Chinese - strategic objectives.  

Overcapacity and lack of domestic demand means Beijing needs export markets at a time when many countries – including in the Global South – are erecting barriers to reduce the influx of Chinese goods. This summit will not produce breakthroughs but is an opportunity for frank discussions with Beijing to lay out Europe’s firm and reasonable demands, and between European leaders to agree concerted actions to level the playing field. 

• Use trade defence to protect Europe’s industrial base. China aims to control 80% of global battery supply chains by 2030 while expanding across other strategic verticals. The firm use of EU tools such as the Foreign Subsidy Regulation and tariffs on targeted products will shield European industry from subsidised competition and allow to scale domestic production. 

• Make access to the EU market conditional on genuine domestic benefits. Local joint ventures must feature 51% European ownership with obligations for local workforce hiring and technology transfer programmes, ensuring market access does not just facilitate Chinese exports. Such agreements must be closely monitored to ensure compliance.  

• Enforce resilience and security requirements for strategic sectors and critical infrastructure. Enhance and harmonise FDI screening and supplier vetting across EU member states to ensure control, physical and cyber security across strategic sectors, infrastructure and components. 

• Focus public funding on "Made in Europe”. All forms of EU funding and national state aid must require strong domestic supply chains from project developers. Investment must focus on technological innovation and developing integrated value chains. Production-based funding, à la IRA, will improve transparency, scalability and cost competitiveness. 

• Leverage ex-China partnerships. This week is not only about the EU-China Summit. Importantly, the EU-Japan summit, held the day before, is expected to reinforce cooperation on economic security and industrial policy through a new “competitiveness alliance” built on joint procurement of raw materials and stronger business-to-business links. In mineral and battery supply chains, strategic partnerships with Japanese and Korean technology manufacturers should be a priority for their European counterparts. 

For the Summit and beyond, European leaders must stand behind the Commission and empower the EU executive to exert leverage over Beijing, else Horace’s warning will echo past this moment.   

Image: Getty