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China’s claws are digging into Europe’s soft underbelly to undercut America

President Xi Jinping delivers remarks at U.S. Department of State. (U.S. State Department/Released)
September 03, 2020

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Irrespective of who wins the forthcoming election, managing relations with China will be at the top of the United States’ foreign policy agenda. U.S. leadership should better engage Europe in the global struggle with China and to roll-back the country’s growing influence in the region.

When considering the challenges facing western policymakers in relation to China, the immediate and obvious focus is on the trade war and technology decoupling being driven by the Trump administration. The battle over 5G has seismic implications for security and the nature of the global economy. We should not overlook some of the less obvious — but very significant — ways in which China continues to extend its influence, and the danger this represents to both Europe and the U.S.

In Europe, the process began in earnest during the last financial crisis. With a distracted EU struggling to respond to an existential currency and debt crisis, and the U.S. increasingly reluctant to act as the global policeman, China seized the opportunity. It provided emergency financial support during the crisis to a number of European countries, including Greece.

It has also successfully exploited the EU’s de facto decision to halt the process of enlargement to the East. Without a clear and credible road map for accession to the EU, countries like Serbia have understandably hedged their bets. Through its partnership with China, it is estimated that Serbia has secured around $4 billion in direct investments and $5 billion in loans, and looks set to start importing weapons from China.

Political and economic opportunism has also played a part in the rise of China in Europe. Many countries and elites are happy to ignore the risks and enjoy the short-term, and often personal benefits of Chinese support. This includes Montenegro, which received a loan for the construction of the Bar-Boljare highway – a project with no clear economic rationale. The country is now in debt to China for $1 billion, equivalent to 21% of its GDP, and still has to raise an additional $1.7 billion to complete the final 136km of the highway.

Like Russia, China is also actively supporting anti-democratic forces in Europe and promoting its model of a communist surveillance state, including in Hungary, the poster child for authoritarianism in Europe. In addition to financial support and investment, China is also supplying surveillance technology that can be used both domestically, and against neighboring European states.

The EU has been slow to recognize and react to the Chinese threat, partly because of the EU’s reluctance to rock the commercial boat. It is also because of major differences between the member states about Europe’s place in the world, relations with the U.S., and the significance of the Chinese threat.

Germany, for example, still hopes that a Biden presidency will allow the US to resume its traditional role as the guardian of European security — a position supported by many of the newer, East European members of the EU. France’s President Macron, on the other hand, believes in European “sovereignty” — that the continent can no longer rely on the U.S. and must build a more independent foreign policy and military capability, as part of a tri-polar world order.

This landscape is complicated by the reality that for too many Europeans, Russia remains the primary threat. By comparison to China, Russia is an irritant that skillfully punches above its weight. In population and economic terms, only one is a genuine superpower and a serious long-term threat to the interests of the west.

There has, however, been a genuine and important shift in European attitudes towards China over recent months. The EU has introduced a foreign direct investment screening mechanism. This tool will allow EU governments to prevent foreign (mainly Chinese) direct investments in strategic assets, particularly through state-controlled or state-financed businesses.

The U.S. administration has also got some traction in Europe for its anti-Huawei 5G push. China is now formally on NATO’s agenda for the first time, as Secretary-General Jens Stoltenberg said “China is coming closer to us,” whether in the Arctic or Africa, through technology, or joint military exercises with Russia.

Despite this shift, it is clear that China still views Europe as the West’s soft underbelly, and it is right to do so. While the U.S. has the economic, military capability, and political will to stand up to China, Europe does not. Without more active U.S. leadership, China will continue to pursue its strategy of divide and rule. China will continue to look to weaken Europe’s democratic institutions and relations with the US while exporting its post-Communist surveillance state model to countries both in and out of the EU.

Europe must recognize the threat that China represents and shoulder more responsibility for countering this threat. Unfortunately, the U.S. cannot rely on Europe to do so.


Vladimir Krulj is a Fellow at the Institute of Economic Affairs in London.