Welcome to Red Thread, Euractiv’s weekly newsletter on the EU’s relationship with China and the wider Asia-Pacific.
I’m Christina Zhao in Oceania, joined by Anupriya Datta in Europe.
This week, we explore Beijing’s economic coercion playbook…
Over the past two decades, Europe watched China test its economic leverage on other countries.
Australia lost access to its biggest export market for wine. Lithuania found itself frozen out of Chinese customs systems. Japan suddenly discovered how dependent it was on Chinese rare earths. South Korea saw tourism collapse and businesses targeted after a dispute over missile defence.
As Brussels edges closer to a trade war with Beijing, Europe is no longer studying China’s playbook from afar.
Following a special College of Commissioners debate on China last Friday, the European Commission insisted its strategy remains one of “de-risking, not decoupling” even as it promised tougher measures to shield European industry from surging Chinese imports.
Beijing’s response was blunt. There is no meaningful difference, Chinese officials argued. De-risking is decoupling by another name.
“Decoupling failed, so they rebranded it as ‘de-risking’,” read a commentary published by Xinhua, the Communist Party’s official news outlet – the world’s biggest propaganda agency. Another foreign ministry spokesperson dismissed “de-risking,” “reducing dependence” and “trade rebalancing” as protectionism.
China has warned of “firm countermeasures” if the EU proceeds with further restrictions and repeatedly referred to a “full policy toolkit” to defend its interests.
Exactly what that means remains deliberately unclear, but Beijing’s past disputes offer some clues.
When Australia called for an inquiry into the origins of Covid-19, China imposed restrictions on wine, barley, beef and lobster exports. Wine exports to China collapsed by more than 90%. Notably, Beijing avoided iron ore, which it still needed. The goal was targeted, not maximum, pain.
When Lithuania deepened ties with Taiwan, China did not just target Lithuanian exports. It reportedly pressured multinational companies to remove Lithuanian components from products destined for the Chinese market, extending the pressure deep into European supply chains.
Japan’s dispute in the East China Sea exposed its dependence on Chinese rare earths. South Korea’s decision to deploy the THAAD missile defence system triggered tourism restrictions, consumer boycotts and regulatory pressure on Korean companies operating in China.
The lesson from all four is that China looks for asymmetry. The objective is not necessarily to cripple an economy, but to identify where dependence runs largely in one direction and apply pressure there.
That logic helps explain why Brussels is increasingly focused on batteries, critical minerals, pharmaceuticals, semiconductors, and drones. The concern is that those sectors resemble the kinds of dependencies Beijing has exploited elsewhere.
Chinese state media last week questioned whether Europe could withstand the costs of reducing its reliance on China, arguing that building alternative supply chains would take at least “five to ten years.”
Australia, Lithuania, Japan and South Korea all suffered significant economic disruption. But the good news for Brussels is that each ultimately weathered the pressure – and, in different ways, emerged less vulnerable than before.
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From Asia
EU firms double down on China
A survey published last week by the EU Chamber of Commerce in China found that 68% of respondents had maintained or expanded manufacturing and sourcing operations in China over the past two years, while just 7% were shifting production elsewhere.
Jens Eskelund, the chamber’s president, said the findings suggested EU firms were becoming more, not less, dependent on Chinese supply chains. Cost, efficiency and automation were cited as key drivers, with three-quarters of respondents saying their Chinese facilities outperformed those elsewhere.
A reversal of fortunes: Twenty years ago, European firms went to China for cheap labour. Today, China is a high-tech manufacturing superpower.
Beijing fumes over Czech Taiwan visit
China condemned Czech Senate President Miloš Vystrčil’s visit to Taiwan this week, accusing Prague of interfering in its internal affairs and damaging bilateral relations.
Vystrčil, a senior opposition politician, is leading a business delegation to the self-governing island and is due to meet President Lai Ching-te and Taiwanese companies. The dispute highlights growing Czech-Taiwan ties despite Prague’s adherence to the one-China policy.
Not the first time: Vystrčil sparked outrage in Beijing during a 2020 Taiwan visit when he declared, “I am Taiwanese” – an echo of JFK’s “Ich bin ein Berliner” speech.
The tech fight gets personal
Chinese state media is portraying Europe’s push to reduce technological dependencies as an act of insecurity rather than sovereignty.
In recent commentary, the Global Times argued Brussels risked undermining its competitiveness by restricting Chinese suppliers, particularly in telecoms, and accused the bloc of disguising discrimination as national security. The commentary appeared days before EU tech chief Henna Virkkunen unveiled a technology sovereignty package on Wednesday.
“Are the Chinese going to be happy? No. Are the Americans going to love it? No. Do we care? Also no, this is about bolstering European sovereignty,” a senior Commission official told Euractiv’s Magnus Lund Nielsen. The package aims to reduce dependence on US and Chinese technology and shield sensitive data from foreign laws but stops short of excluding specific firms.
The missing giant: Of the world’s 20 most valuable technology companies, only one is European – Dutch chip-equipment maker ASML.
From Europe
Another round of trade talks
EU Trade Commissioner Maroš Šefčovič will meet Chinese trade envoy Li Chenggang in Paris on Thursday, kicking off a month of intensified trade diplomacy ahead of Commerce Minister Wang Wentao’s planned visit to Brussels on 28-29 June, according to the South China Morning Post.
The talks come as Brussels and Beijing explore a new trade and investment consultation mechanism, even as the EU prepares a tougher response to what it sees as growing economic imbalances stemming from China.
Ex-Dutch foreign minister tapped as China ambassador
Caspar Veldkamp has been tapped as the EU’s ambassador to China, foreign policy chief Kaja Kallas announced on Wednesday.
Veldkamp served as Dutch foreign minister from July 2024 to August 2025 and visited China in May last year for talks with Chinese Foreign Minister Wang Yi.
Kallas also proposed Marina Rafti as ambassador to ASEAN, Lawrence Meredith to Australia, Jean-Éric Paquet to India, and Giorgio Aliberti to Japan. The appointments are subject to approval by the host countries.
Parliament trade chair warns against China phobia
The EU must avoid lapsing into “China phobia” as it debates how to respond to Beijing’s economic rise, Bernd Lange, chair of the European Parliament’s trade committee, told Euractiv’s Eddy Wax and Sofía Sánchez Manzanaro.
His warning comes as commissioners deem the EU-China trade relationship “not sustainable” and leaders prepare to discuss competitiveness, trade distortions and global economic imbalances later this month.
“They will talk about China – but to avoid haggling over language, there won’t be substantive conclusions on it,” a senior Commission official said of the upcoming European Council meeting.
Modi’s AI mission to Paris
Indian Prime Minister Narendra Modi is expected in Paris between 17 and 20 June to headline Vivatech, France’s flagship annual tech and AI conference.
Organisers described Modi as a “leading figure in global artificial intelligence governance,” underscoring India’s ambitions to shape the international AI debate. Earlier this year, Modi hosted the AI Action Summit in New Delhi, where he pitched India as a rising AI power.
China’s e-commerce giants under fire
France on Wednesday fined Chinese fast-fashion retailer Shein €22 million over alleged failures related to returns, product information and order confirmations. The company said it would challenge the penalty.
The move follows a string of EU actions against Chinese e-commerce groups. Last week, the Commission opened a foreign subsidies probe into JD.com’s bid for German retailer Ceconomy, citing concerns over possible state support.
A JD.com spokesperson told Euractiv that the company would cooperate and denied receiving subsidies linked to the acquisition.
The same day, the Commission fined Temu €200 million under the Digital Services Act for allegedly failing to curb illegal and unsafe products. The measures come as the bloc prepares to introduce a €3 levy on small parcels from 1 July, targeting low-cost imports from Chinese online retailers.
Also on Euractiv
The EU’s trade dispute with China is entering a more dangerous phase. But as Brussels sharpens its economic defences – Spanish economist Alicia García-Herrero writes in her latest op-ed for Euractiv – the Commission faces a familiar problem: states that support toughness in principle, but not always in practice.
Source:
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