Will China blink? EU to push Xi to cut dual-use exports to Russia

BRUSSELS — The EU’s two leaders are expected on Thursday to push China’s President Xi Jinping to take action to curb exports of dual-use goods by Chinese companies to Russia, including a veiled threat of sanctions absent fresh commitments from Beijing, according to five EU officials and diplomats.

"We’re very concerned about circumvention of sanctions ... And we would like China to take care of some of the entities that are circumventing our sanctions," a senior EU official said on Tuesday. "The preferred option is that China deals with [the problem] themselves — but we have tools to deal with it ourselves, if necessary."

The strong message is the latest sign of what could be a frosty summit meeting between Xi, Charles Michel and Ursula von der Leyen, presidents of the European Council and the European Commission.

While China has stopped short of sending weapons to Russia, there are concerns it has shipped nonlethal but militarily useful gear such as body armor or drones. Analysis of trade data indicates that China is also a conduit for technology that the West says is used in battlefield weapons. And Xi has consistently defended a close strategic relationship with Russia’s Vladimir Putin, with Chinese officials voicing opposition to EU threats of what they call unilateral sanctions.

The EU is considering including 13 Chinese companies in an upcoming package of Russia sanctions, according to another official. That decision will depend on Xi’s response at Thursday’s summit, the first to take place in person since 2019.

Any move by Brussels to sanction Chinese companies would worsen already volatile EU-China relations, which have been complicated recently by Beijing’s control of critical minerals, by an EU investigation into made-in-China electric vehicles, and by Europe’s strategic push to "de-risk" its exposure to China.

For now, the EU still sees value in conveying its message all the way up to China’s top leadership. "My experience on the Chinese side is, if you have their assurances that [they will] take care of individual companies or entities [involved in circumvention], they have been fulfilling what they’ve assured us," the official said, stressing the need for diplomacy.

"It is a summit of choices," he added, "and it’s time for Beijing to make a choice."

Pushback

Another EU official expected Beijing to push back on the point about Russia. "What I expect from China is to say, but if we have circumventions, there are also European companies that are involved in a way. I think on our side ... we have to pass this message clearly to the member states."

Brussels has been warning Beijing to take a clear line not to support the Kremlin’s nuclear threats or to send Moscow weapons — with dual-use goods considered a grey area.

Even if China makes a tactical move on these issues, the EU faces deeper, structural problems due to Chinese overcapacity. That concern, EU officials fear, is compounded by the recent sluggishness of the Chinese economy, which could dampen local consumption and drive Chinese products outward.

"European leaders will not tolerate an imbalance in trade over the long term," said von der Leyen in an interview with EU media, via AFP, adding that the EU’s trade deficit with China had doubled in two years to a record €390 billion in 2022.

The "imbalance is visible," she insisted, with Chinese exports to the EU three times greater than EU exports to China. "In other words, when you have three containers coming from China to Europe, two of them go back empty."

The problem could grow even worse given the EU’s isolation as Beijing’s trading partners close their doors to Chinese exports.

"Major economies around us ... are increasingly closing their markets to Chinese products — you can see this in the United States, in India, in Japan, in South Korea," the first EU official said. In turn, if Europe remains open to Chinese products, the EU market will likely be flooded by Chinese supplies critical for Europe’s green transition, including solar panels, heat pumps and wind turbines.

"There is a chance for China to adjust some of their overcapacities," the official added. "They have domestic issues with it. It’s a very expensive policy of producing overcapacities at this level."