EU-China Weekly Review
Dear readers,

In this issue of the EU-China Weekly Review, we cover the following topics:
  1. First China paper: European People’s Party calls for more assertive policy
  2. Dutch ASML extends semiconductor machinery sales deal with China’s SMIC
  3. Germany plans a freedom-of-navigation operation in the South China Sea
  4. CGTN registers in France, regaining rights to broadcast in Europe
  5. Lithuania ponders leaving the 17+1
EU-China Weekly Review is compiled by MERICS Analyst Grzegorz Stec. Share story tips with grzegorz.stec@merics.de or via Twitter: @grzestec.

We wish you an interesting read. Please send your feedback to: publications@merics.de

First China paper: European People’s Party calls for more assertive policy

The European People’s Party (EPP), the European Parliament’s largest political group, adopted its first China paper on March 9.

What you need to know
  • While maintaining that there is a need to “cooperate where possible, compete where needed, confront where necessary”, the EPP advocated for the EU’s cooperation with China to be more conditional on Beijing’s willingness to abide by the international rules. In this context, the grouping framed the EU’s relationship with China as part of a “global struggle between democracy and authoritarianism”. The EPP members expect the EU to work autonomously and with the United States as well as other like-minded countries to “persuade Chinese leadership to turn their inspiring country into a responsible member of the international community”.
  • The EPP proposes, among others, to:

           - prioritize the development of autonomous EU trade defense measures led
           by the EU Commission
           - enhance transparency of bilateral agreements between member states and China
           - limit China’s “sharp power” by increasing transparency in media investments in
           - Europe, empowering the European External Action Service to track China’s
           disinformation efforts, and funding buildup of China expertise across Europe
           - create a cross-institutional China task force modeled on the one deployed for
           Brexit negotiations
           - negotiate an investment agreement with Taiwan and support its bids for
           participation in the WHO while adhering to the EU’s One-China policy

Quick take

The timing of the paper is crucial. It came just ahead of the European Council’s stock-take of the EU-China Strategic Outlook’s action plan, scheduled to take place this month. The EPP’s paper is a call for rebalancing the EU’s China policy and putting greater emphasis on systemic rivalry. Discussions accompanying the review of the Strategic Outlook will enable an assessment of whether this sentiment is shared by the European capitals.

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Dutch ASML extends semiconductor machinery sales deal with China’s SMIC


The world’s leading supplier of lithography equipment for semiconductor fabrication, the Dutch firm ASML, on March 3 extended its equipment sales contract with China’s largest chipmaker, SMIC, until the end of this year. ASML’s exports are strategically sensitive, and the company’s sale of its most advanced equipment to SMIC has been on hold pending renewal of an export license by the Dutch government, following reported pressure from the United States.

What you need to know
  • The renewed deal relates to sales of the deep ultraviolet (DUV) manufacturing equipment used in the production of 14-nanometer chips. This represents SMIC’s cutting-edge deployed production capacity. By contrast, a day before the contract’s renewal was announced, a report released by the US National Security Commission on AI called for coordination between the United States, Japan and the Netherlands to cap China’s large-scale production capability at a level of 16-nanometer chips. Sources close to the Biden administration, however, dismissed the sensitivity of ASML’s extension deal.
  • ASML’s activities have been subject of increased scrutiny as it is the sole supplier of extreme ultraviolet (EUV) manufacturing equipment, required in the production of advanced chips. In 2019, following reported pressure from the Trump administration, Dutch authorities declined to renew ASML’s export license for sending EUV equipment to SMIC. If Chinese firms cannot obtain EUV technology from ASML, this will over the short term make it difficult for them to progress beyond the level of semiconductor fabrication represented by SMIC’s existing capabilities.
Quick take

European governments need to develop clear policies on export controls for advanced technologies to China. European companies need certainty with regards to the regulatory environment, given the significance of Chinese firms as business partners and customers. For example, 17 percent of ASML’s EUR 14 billion sales in 2020 went to China.  

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Germany plans a freedom-of-navigation operation in the South China Sea

Germany’s Ministry of Defense announced on March 3 that it will send a frigate on a freedom-of-navigation mission to the Indo-Pacific region, which includes the South China Sea (SCS). 

What you need to know
  • The mission, presented as the implementation of Germany’s Indo-Pacific guidelines, will run from August 2021 to February 2022. The frigate will be the first German warship to pass through the SCS since 2002, but it will not enter the 12-nautical-mile limit set out by China and other actors that claim territorial rights in the region.
  • A Chinese Ministry of Foreign Affairs spokesperson cautioned against using freedom of navigation as an “excuse to undermine the sovereignty and security of littoral countries”. In January, Beijing passed a vaguely worded law allowing its Coast Guard to fire at foreign vessels in undefined “waters under national jurisdiction”.
Quick take

The momentum is building for a more joined-up European Indo-Pacific strategy. Militarily, the German operation follows France’s deployment of a nuclear submarine to the SCS and its joint military exercise with Japan and the US forces in February. These moves signal a greater readiness of European states to cooperate with like-minded countries in the Indo-Pacific security arena. Politically, the EU has already upgraded relationships in the region by announcing a strategic partnership with ASEAN last December. The EU is also working towards an EU-India summit in May this year.

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CGTN registers in France, regaining rights to broadcast in Europe

China Global Television Network (CGTN) obtained broadcast rights from French broadcast regulator Conseil Supérieur de l'Audiovisuel (CSA) on March 3. 

What you need to know
  • The British broadcast regulator had revoked CGTN’s license over its political links with the Chinese Communist Party. French regulations do not restrict such affiliations, only requiring a network to use a French satellite, which CGTN has been doing since 2016, and to emit the signal from France. Having obtained the broadcasting license in France, CGTN can once again legally broadcast its programs across Europe, including in the UK, as per regulations introduced in the European Convention on Transfrontier Television.
  • CSA stated that it will be “particularly attentive” to CGTN’s adherence to French media standards. These include prohibition of incitement to hatred and adherence to honesty and information pluralism. French regulators have excluded non-European channels in the past on this basis. CGTN was previously found in breach of impartiality rules in the UK over its reports on Hong Kong protests and has allegedly aired forced confessions issued by detainees in Mainland China.
Quick take

The CGTN case highlights the asymmetry in media access between the EU and China. The Chinese media, including party-state media, are free to operate in Europe, providing they adhere to legal requirements. European media do not enjoy similar access to the Chinese public, and their correspondents in China face growing extra-legal challenges. These range from alleged retaliatory visa rejections over stories to intimidation of journalists and their families by security services.

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Lithuania ponders leaving the 17+1

Lithuania’s Minister of Foreign Affairs, Gabrielius Landsbergis, indicated on March 3 that the country is reassessing its participation in the 17+1 framework. The Baltic state may become the first member of the 17+1 framework to leave the grouping. 

What you need to know
  • Landsbergis said that 17+1 has brought Lithuania “almost no benefits” and that the format is “dividing Europe”. The move follows the support expressed in February by Lithuania's parliamentary Committee on Foreign Affairs to leave the format and the decision not to send its President or Prime Minister to the 17+1 summit, despite pressure from Beijing.
  • Lithuanian authorities also announced plans to open an “enterprise office” in Taiwan this year. Other countries from the region - the Czech Republic, Hungary and Poland - already have such representations in Taipei. However, they established them in less politically charged circumstances.  
Quick take

Should Lithuania leave the 17+1, the other two Baltic states - Estonia and Latvia - may follow. The trio already coordinated their limited participation in the last summit. Given the poor economic results of the framework, and Baltic states’ lack of interest in Chinese vaccines, Beijing might find it difficult to change the shifting geoeconomics calculus of Baltic leaders. In response to Lithuania’s statement, a Chinese Ministry of Foreign Affairs’ spokesperson called it a framework guided by a principle of “freewill-based consultation” and “openness and inclusiveness”, highlighting its loose nature and the fact that, from Beijing’s perspective, the number of participants may fluctuate. 

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About MERICS EU-China Weekly Review

The MERICS EU-China Weekly Review is compiled by MERICS Analyst Grzegorz Stec. Share story tips to grzegorz.stec@merics.de. Twitter: @grzestec


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