In the first part of this two-part series, we looked at three of five possible takeaways for China from the war against Ukraine. We argued that it’s likely that Chinese leadership will make a much more substantial push than before to reduce technological dependencies, build alternative financial structures and secure energy supplies against geopolitical conflicts. In this second part, we focus on the remaining two takeaways, as well as on the implications for the EU.

#4 Pushing military development

Developing “world-class forces” is an integral part of China’s goal to become a global superpower by 2049. Therefore, Chinese leadership under Xi Jinping has introduced important reforms to modernize the organization, structure and operational capacities of the People’s Liberation Army (PLA). Military expenses have steadily grown in recent years to bolster these efforts. At an estimated 252 billion USD, China has the second-largest annual military expenditure worldwide, right behind the United States. But it’s still dwarfed by the latter’s 778 billion USD (see chart below).

Shortly after Russia’s invasion of Ukraine, China announced a 7-percent increase in its official defense budget (not directly comparable to the SIPRI estimates used in the chart below) for 2022, up from a 6.8 percent increase in 2021. In terms of expenses per capita of armed forces personnel (a rough proxy for the equipment of an army, e.g. in regard to high-end and digital technology and training) China also lags well behind the United States.

graph: annual military expenditure China and USA

Therefore, an important step for further modernizing the PLA is increasing the army’s mechanization, informatization, and intelligentization making it capable of intelligentized warfare. China wants to achieve this goal by 2027, and it is assumed that a strike against Taiwan, which requires complex joint operations, is substantially more credible after that period.

Taiwan most certainly is the key issue for China when observing and analyzing Russia’s military progress – or rather regress – in Ukraine. And the unexpectedly miserable development of the Russian invasion is most likely to gain intense attention from the Chinese leadership. First, they will scrutinize the key factors at play here to draw lessons for China’s own military. According to current analysis, these include misjudgment of the adversary’s capabilities, operational and logistical mismanagement and cumbersome top-down command structures. But also communication and motivation issues among the troop. Secondly, China will probably also reassess the compilation and sources of its arms imports, 81 percent of which came from Russia between 2017 and 2021 (see chart below), to check whether diversification is required and possible. Thirdly, China is likely to push investments in high-end equipment and training of its forces as well as the development of domestic military technology with much more might than before.

graph: Chinas main suppliers of majors arms imports

#5 Pushing the “new world order”

The last takeaway for China actually is a cumulation of the previous four: Pushing its technological and financial independence, its energy security and military development is the foundation for a “new world order” with Chinese characteristics. According to China’s take, this new world order under Chinese leadership, which is the core of Xi Jinping’s vision of a “community with a shared future for mankind,” is supposed to be more equal, more inclusive and multipolar. Countries will be able to freely choose their own development path and socio-political system.  Non-interference in countries’ internal affairs will be a key principle – as opposed to the current US-led order, which China regards as increasingly unipolar, confrontational and unstable.

To achieve this, China actively participates in existing international and regional organizations and agreements to make and, if need be, change rules – not just follow them. It currently heads, for example, two UN agencies, the Food and Agriculture Organization (FAO) and the International Telecommunications Union (ITU). China has also raised the wish to join the Comprehensive and Progressive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a free trade agreement connecting the Asia-Pacific region to Latin America. Its predecessor TPP was initially supported by the United States but dropped by the Trump Administration, leaving a power vacuum that China would not at all mind filling.

On the other hand, China pushes its own initiatives to build alternatives to western structures and approaches that bolster its own global leadership claims. The Belt and Road Initiative (BRI), a globe-spanning connectivity plan, is a much-cited example of how China has been trying to influence other countries and turn their international positioning in critical issues in its favor.

Looking at three different internationally contested Chinese policies – the treatment of the Uyghur minority in Xinjiang, the New National Security law for Hong Kong and the territorial conflict in the South China sea – one can see that the overwhelming majority of the 72 countries supporting China in at least one of these policies share two characteristics in common (see chart below): first, they are official participants of the BRI; second, they are autocracies according to the Bertelsmann Transformation Index (BTI), which analyses the political systems of 137 developing and emerging countries.

Moreover, nearly half of them are African countries, showing how well China has already spread its economic and political influence on the world’s second-largest continent, while the EU is still struggling to find the right approach towards it.

graph: political system and bri participation

In its own neighborhood, China is expanding its political, economic and military influence through plurilateral and bilateral agreements, such as the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement initiated by the 10 members of the Association of Southeast Asian Nations (ASEAN) plus Japan, South Korea, Australia and New Zealand, or most recently a new security pact with the Solomon Islands.

This is also against the backdrop of more and more Western countries adopting Indo-Pacific strategies. China suspects the goal of which is containment and even the creation of an “Indo-Pacific version of NATO to maintain the US-dominated hegemony.” From a Chinese perspective, this proves yet again the unhealthiness of the current order.

China, therefore, understands Russia’s security concerns as NATO has moved ever closer to its borders. From the Chinese point of view, the war against Ukraine is the very result of these actions, and “the US, the habitual boat-rocker, is the culprit for the ongoing crisis.” The war could thus play into China’s hands in the long run, as it is driving deeper the wedge between mainly western liberal democracies on the one side and autocracies as well as countries that want to remain flexible (e.g., India) on the other. It could act as a catalyst for Chinese global ambitions and lead to a full-fledged alliance of autocracies or at least consolidate China’s own alliance of like-minded countries, which for various reasons are in favor of a rearrangement of the current international order.

Implications for the EU and its relations with China

The relations between the EU and China are already on thin ice. The EU-China summit on April 1st, 2022 – the first such high-level meeting for two years – did nothing to change that. On the contrary, it showed even more openly how different the views of both sides are on key issues, such as the war against Ukraine. China also made its displeasure clear (between the lines) on the revitalized transatlantic alliance, which threatens its own geopolitical ambitions.  Xi Jinping “called on the EU to form its own perception of China and adopt an independent China policy”, meaning one that is independent from that of the United States.”

However, if China strives for the implementation of its vision for the world, the EU is left with little choice but to do precisely that: pivot even more strongly towards the United States, as long as they have leadership that shares the liberal democratic values on which the current international order is built. Since the future of the US administration beyond 2024 is highly unclear, the EU should – just as China does itself – first internally push its sovereignty and independence, or in the EU’s own words, “strategic autonomy.” And secondly, readjust its external relations, especially with respect to developing and emerging countries.

Regarding the first aspect, the EU cannot resolve its technological and energy-related dependencies in the short term. Still, wherever possible, it certainly could choose more wisely on whom to depend. Like-minded countries like the United States should be the first choice here to avoid political exploitation of critical dependencies by autocratic regimes. Moreover, since the green and digital transformation are likely to generate new dependencies, the EU should also strive to actively and strategically manage these from the start or even avoid them by making sure EU players are part of the game.

As for the second aspect, the EU should rethink its approach towards other regions, such as Africa. If the EU is determined that liberal democracy along with universal human rights, as well as high labor, social and environmental standards are better alternatives than that offered by China and other autocracies vying for influence in developing and emerging countries – more political and economic efforts to prove it must follow. Given such a potent opponent as China, the emerging “competition of systems” will not be easily decided in the EU’s favor.

Under these circumstances, EU-China relations are now poised to enter a phase of increasing divergence, distance and decoupling. Nevertheless, both sides should prevent the ice from breaking in the end. They should strive to keep open channels for exchange and cooperation, even though these will unavoidably be narrower than in the past and, especially on the side of the EU, better-armed with new instruments of defense against the geo-politicization of economic relations.

About the author

Cora is a senior expert in the Europe’s Future Program at the Bertelsmann Stiftung. Her research focus is foreign direct investment and international trade (especially the role of emerging economies).

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Read more about China’s role in the changing geopolitical situation:

The War against Ukraine – 5 Takeaways for China and Their Implications for the EU – Takeaways 1-3

How the War Against Ukraine can Change the Global Economy

Caught between Russia and the West? China’s Struggle for a Position on Ukraine

China can Only Offer an Immediate Respite For the Russian Economy

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