Not much to celebrate for EU, China

Union has failed to find an adequate response to China's increasingly active policy

This year is the 40th anniversary of the establishment of diplomatic relations between China and the European Union. There will be much self-congratulation by both sides. But underlying the celebration there are questions to be asked about where the relationship is going.

The EU completed the installation of its new commission and other senior officials late last year. The completion of the long process of the EU's political transition that has lasted many months since the elections for the European Parliament might provide an opportunity for a new departure in EU-China relations, but there are signs that the relationship is losing direction.

China's leadership, unlike its EU counterparts, is no longer new, and it is pushing ahead with a program of domestic reform. President Xi Jinping has declared that China's economy has a new normal of lower GDP growth rates and a focus on quality of growth. Despite recent declining economic growth rates, there is no sign of a return to the old normal. For instance, fixed asset investment, which had been the key driver of growth over three decades, is now growing at the lowest rates in years. There has been no indication that China's current leadership is about to reverse course and create the same type of investment-led growth of years past.

China still faces problems on an enormous scale, but the difficult process of change is underway that seeks to address these problems through reforms. The EU, by contrast, is still struggling to formulate a coherent response to its economic and political crises. Changes have occurred since the economic crisis began in 2008, but there is little hope of the EU recovering and returning to health in the near future. The best it can hope for is to avoid yet another recession. Economic and financial conditions continue to deteriorate in several countries, and the EU remains deeply divided over the policy that should be adopted.

The different economic trajectories of the EU and China typify the problems in their relationship. Despite the growing importance of China both as a bilateral partner and on the global stage, the EU has found difficulty in keeping up with the pace of change and formulating a coherent policy for the relationship.

When Xi visited Brussels last year, he set out his view of how the relationship between the EU and China should develop. He argued that the two sides should base their relationship on a strategic perspective, and build four partnerships based on peace, growth, reform and civilization. In 2013, the two sides had already agreed on an agenda for their relationship up until 2020. However, neither of these initiatives has succeeded in pushing forward the relationship in the past year.

This could in part be attributed to the EU's preoccupation with the installation of its new senior officials. Though they are now in place, the EU's incoming officials have shown themselves to be largely absorbed by domestic problems. In setting out their priorities for their time in office, senior European Commission and European Council officials such as Jean-Claude Juncker and Donald Tusk have said that they will be focusing on domestic problems. To the extent that they give priority to external matters, they are focusing on the EU's immediate neighborhood, which can be understood as Ukraine and Russia. Further afield, they have shown a preference for giving priority to the relationship with the United States over others.

This is understandable. The EU faces massive domestic economic problems and a deep political crisis. The Ukraine, and also much of North Africa and the Middle East, are in a desperate situation. Given these challenges close to home and its weak external capacities, it is not surprising that EU is self-absorbed and eager to cling to the US. But in their public pronouncements setting out their priorities, officials such as Juncker and Tusk have almost entirely ignored China, let alone Asia and much of the rest of the world. China, it seems, may become merely an afterthought for EU policymakers.

At the same time China is becoming increasingly vocal internationally. One recent example of China's growing importance was the successful APEC summit where China took center stage. It demonstrated not just its regional but also global importance, especially in its dealings with the US. China has also taken a number of initiatives regionally and globally. Obvious examples are the Asian Infrastructure Investment Bank and the BRICS' New Development Bank, but there are many others. One of the most important initiatives of all is the New Silk Road. The economic land belt has a regional impact in China's relations with Central Asia, but also extends all the way to Europe.

The EU has failed to find an adequate response to China's increasingly vigorous policy. At the moment, the EU's highest ambition in its relationship with China is negotiating the Bilateral Investment Treaty. A BIT may be positive for both sides, if a successful outcome can be achieved. It will have an impact on investment flows, which are small, but will not transform the relationship. And it does not provide any answer to the request from China to launch negotiations for a free trade agreement.

There is much substance in the EU-China relationship. The relationship amounts to more than just trade, important though it is, and extends to many areas of cooperation. This and the achievements of the past 40 years can be acknowledged in 2015. But the real question is the future. The direction of the relationship at the moment is not clear, and there may be not much to celebrate in the coming year.

The author is a senior research fellow with the Brussels Institute of Contemporary China Studies at Vrije Universiteit Brussel.