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Implications of China's Growing Geo-Economic Influence for the EU: Addressing Critical Dependencies in the Green Transition

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  • Olga Pindyuk

    (The Vienna Institute for International Economic Studies, wiiw)

Abstract

Although China has become a major trading partner of the EU, the EU-China relationship has deteriorated over the last decade. This has been demonstrated, for example, by disputes over trade issues, unequal treatment of EU investors by Beijing, frictions over the transfer of intellectual property, and human rights violations. The EU’s critical dependency on supplies from China, which became evident during the COVID-19 pandemic, further complicates the relationship. The issue of the green transition has a central importance in the context of intensified geo-economic competition and possible decoupling from China, as here the EU has critical dependencies on the country, which is responsible for about 60% of global extraction of rare earth elements, about 60-65% of global processing of lithium and cobalt, and nearly 90% of global processing of rare earth elements. So far, EU policy with respect to China has lacked co-ordination and solidarity, with the splits running across countries, institutions and economic sectors. This makes it challenging for the EU to develop a unified strategy toward Beijing. This paper examines the issues and sets out our suggestions for the policies the EU and Austria can undertake to decrease the bloc’s dependency on China in supplies of critical inputs for its green transition and to minimise the vulnerabilities of their economies.

Suggested Citation

  • Olga Pindyuk, 2023. "Implications of China's Growing Geo-Economic Influence for the EU: Addressing Critical Dependencies in the Green Transition," wiiw Policy Notes 67, The Vienna Institute for International Economic Studies, wiiw.
  • Handle: RePEc:wii:pnotes:pn:67
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    References listed on IDEAS

    as
    1. Roman Stöllinger, 2016. "Structural change and global value chains in the EU," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(4), pages 801-829, November.
    2. Michael Klien & Michael Böheim & Matthias Firgo & Andreas Reinstaller & Peter Reschenhofer & Yvonne Wolfmayr, 2021. "Stärkung der Unabhängigkeit des Wirtschaftsstandortes Österreich bei kritischen Produkten," WIFO Studies, WIFO, number 67234.
    3. Luc Leruth & Adnan Mazarei & Pierre Régibeau & Luc Renneboog, 2022. "Green energy depends on critical minerals. Who controls the supply chains?," Working Paper Series WP22-12, Peterson Institute for International Economics.
    4. Oliver Reiter & Robert Stehrer, 2021. "Learning from Tumultuous Times. An Analysis of Vulnerable Sectors in International Trade in the Context of the Corona Health Crisis," FIW Research Reports series 4, FIW.
    5. Leruth, Luc & Mazarei, Adnan & Regibeau, Pierre & Renneboog, Luc, 2022. "Green Energy Depends on Critical Minerals. Who Controls the Supply Chains?," Discussion Paper 2022-024, Tilburg University, Center for Economic Research.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    China; European Union; Geopolitics; Geo-economic policy; Renewable energy; Energy security; Energy transition; Critical materials; Rare earth elements;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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