MERICS China Forecast 2021

To shed some light on what observers think EU-China relations will look like in 2021, MERICS conducted a survey among 170 European China experts and roughly 1,000 members of the wider international public. A selection of the results was presented on January 13, 2021, at the MERICS China Forecast 2021 event and discussed by leading China specialists.

The MERICS China Forecast 2021 event

Following opening remarks by MERICS Executive Director, Mikko Huotari, the first panel on China’s domestic politics and economy featured George Magnus, Associate at the China Centre of the University of Oxford, Rana Mitter, Professor of the History and Politics of Modern China at the University of Oxford, Arthur R. Kroeber, Founding Partner & Head of Research at Gavekal Dragonomics Beijing and Nonresident Senior Fellow at Brookings, and Kristin Shi-Kupfer, Senior Associate at MERICS and Professor for Contemporary China at the University of Trier. It was moderated by Bernhard Bartsch, Senior Expert China and Asia Pacific at the Bertelsmann Foundation.

The second panel on Europe’s China strategy for 2021 featured Reinhard Bütikofer, Member of the European Parliament for the Group of the Greens/European Free Alliance, Gunnar Wiegand, Managing Director for Asia and the Pacific at the European External Action Service, Lucrezia Poggetti, Analyst at MERICS, and Plamen Tonchev, Head of the Asia Unit at the Institute of International Economic Relations and MERICS European China Policy Fellow. The panel was moderated by Jakob Hanke Vela, Trade Reporter for POLITICO Europe. A video recording of the two panels will be made available in the days following the event.

In a pre-recorded podcast panel titled "Global Challenges 2021" the Honorable Kevin Rudd, Isabel Hilton and Jonathan Hillmann discussed the issues of decoupling, climate and connectivity. It is available as an episode of our MERICS experts podcast. The results of MERICS’ annual survey were presented at the event by MERICS analyst Lucrezia Poggetti (also available as a short analysis on our website). Below you will find a number of take aways from this year’s forecasting exercise.

Technological self-reliance and socio-economic stability dominate Chinese domestic politics

Internal priorities and a geopolitical landscape marked by continued Sino-American competition will affect Chinese domestic and economic policies in 2021. Respondents say no doubts remain about Xi Jinping’s grip on power. More than 80 percent of all respondents expect him to continue to strengthen his position – interestingly, since the audience at last year’s MERICS Forecast event in January evaluated the coronavirus outbreak as a great risk to Xi’s legitimacy. After last year’s intensified crackdown in Hong Kong and new revelations about re-education camps in Xinjiang, respondents worry that Taiwan might be the next flashpoint. Almost 40 percent of the European China experts regard tensions surrounding Taiwan as the next trouble spot.

At the same time respondents expect China in 2021 to focus mainly on fostering partnerships in Asia and on achieving post-coronavirus economic recovery and technological self-reliance. The country’s goal of scientific and technological self-sufficiency is expected to be at the center of its 14th Five-Year Plan, which will most likely be approved by the National People’s Congress in March. According to 44 per cent of the China experts, technological self-reliance will be the focus of China’s domestic politics, whereas 27 per cent think that socio-economic stability is the issue that keeps Beijing awake at night.

US-China: Intensified tech and cyber competition

In recent years US-China relations have steadily deteriorated. For the coming year respondents see intensified tech and cyber competition between the two global powers. At the same time, 2021 could lead to a revival of the transatlantic partnership: 88 percent of China experts and 82 percent of the general public see the EU and its member states drawing closer to the United States under a Biden administration. And what about Sino-German relations? In September, Germans will elect Angela Merkel’s successor as Chancellor. Far from softening its stance towards Beijing after the election, almost 50 percent of China experts expect Berlin to get tougher on China.

EU China relations beyond the investment agreement

At the beginning of 2021, the Comprehensive Agreement on Investment (CAI) gave new momentum to EU-China relations. Late December’s conclusion in principle of negotiations occurred after most of the respondents had taken part in the survey. Policymakers around the world will be watching closely to see how the EU now manages to balance economic interests and systemic rivalry with China. Survey respondents think the two will continue to coexist: 66 percent of the experts surveyed expect political relations to deteriorate (seven percentage points more than last year!), but 50 percent of them also think that economic ties will remain stable. Respondents from the general public largely share these views. It is expected that decoupling will take place in the digital economy: 53 percent of the participating experts expect the areas most affected to be digital infrastructure and data followed by critical supply chains (23 percent of the respondents).

Asked which actions will be most important, survey respondents said the EU’s top priorities should be measures in response to Beijing’s human rights violations in Hong Kong and Xinjiang, and the diversification of supply chains to reduce exposure to China.

Hopes for climate cooperation but not on public health

What does this continued partner-rival dualism mean for international cooperation in public health? Survey respondents are pessimistic. No experts or members of the public surveyed see joint vaccine research and distribution as an area in which the EU and China can achieve a breakthrough. But survey respondents do hold some hope for climate policy, which is seen as having greater potential than the EU-China investment deal to bring tangible results. Almost 40 percent of experts and 45 percent of respondents from the general public think Europe should focus on a new cooperative grand bargain involving climate goals.