Report on the development of EU law in 2023 : 'de-risking' China and European economy security

Abstract

In 2023, the European Commission introduced the ‘de-risking’ frame toward China alongside measures to enhance economic security. This report starts with the EU’s renewed position on China, looking into the annual development of EU law in relation to economic security, digitalisation and green transition, as well as the economic and trade policies with extraterritorial effects. It finds that the EU further instrumentalises internal market rules in the sense of ‘economic security’, such as a strengthened foreign investment screening mechanism and the proposed outbound investment screening tool. In parallel, the EU finalised significant legislative acts, including the Critical Raw Materials Act and the Net-Zero Industry Act, with the aim of bolstering industrial competitiveness and self-reliance in critical supply chains. The EU has proceeded with regulatory efforts for the digital market, particularly in artificial intelligence and data-related governance. In climate and environmental areas, recent legislation features global ambition in shaping economic and trade activities beyond the EU internal market. Examples are drawn in this report, such as the established Carbon Border Adjustment Mechanism (CBAM), the Deforestation Regulation (EUDR), and the Battery Regulation. Additionally, the landmark Corporate Sustainability Due Diligence Directive (CSDDD) has finally been adopted and entered into force amid challenges and pushback during the final voting process in the Council. In relation to EU-China relations, while China remains the EU’s second-largest trading partner in 2023, there is a considerable decrease in the EU’s deficit with China in the trade in goods. Overall, the EU-China relationship is undergoing a significant transformation, fueled by increasing geopolitical risks and excessive concerns about European industrial competitiveness.