The evolving relationship between Europe and China has long been one of both opportunity and complexity. Today it sits at the intersection of shifting geopolitics, rising economic competition and questions of strategic security. Join us at the ACT’s Treasury Forum on 12 November to learn how this impacts the role business and the corporate treasurer.
For Europe, the stakes are high. China is a critical trading partner and a key player in areas that will shape the future economy, from green technology to artificial intelligence. Yet Europe must also navigate its historic alliance with the United States, which increasingly views China through the lens of rivalry. This places Europe in a delicate position, balancing economic engagement with China and security ties with the United States while safeguarding its strategic autonomy.
Against this backdrop, the central question becomes: how will Europe define its relationship with China in the years ahead, and what will this mean for businesses and treasurers operating in an interconnected global market?
Over the past two decades, EU-China relations have been defined largely by trade and mutual benefit. European companies turned to China as the ‘world’s factory’, relying on its vast manufacturing base, competitive costs and increasingly high-skilled labour. In turn, China found in Europe a lucrative market for its exports and a source of advanced technology, investment and expertise, with this interdependence deepening after China joined the World Trade Organization in 2001.
However, the last decade has brought greater scrutiny of Chinese investment, intellectual property and market access. Attempts to formalise ties through the EU-China Comprehensive Agreement on Investment highlighted both the scale of the opportunity and the political difficulties of reaching consensus.
Today, Europe’s relationship with China is marked by both collaboration and competition. On the one hand, cooperation continues in areas of mutual interest: climate change, green energy and trade remain central pillars of dialogue. China’s scale in renewable technology, electric vehicles and digital infrastructure makes it a critical partner for Europe’s own sustainability agenda.
At the same time, the relationship has grown more cautious. Policymakers in Brussels (with similar conversations taking place in London) speak of ‘de-risking’, seeking to reduce over-reliance on Chinese supply chains without severing ties altogether. This shift was underlined in the EU’s 2019 strategy paper EU-China: A Strategic Outlook, which for the first time officially described China as simultaneously a partner, competitor and systemic rival. It marked a turning point in how Europe conceptualised the relationship.
Overlaying this is the influence of global politics. As the United States adopts a more confrontational stance toward Beijing, Europe is under pressure to align with Washington. Yet it also recognises it must maintain its own approach, engaging China where it sees mutual benefit while pushing back on issues such as market access, human rights and geopolitical tensions. The result is a careful, sometimes uneasy, balancing act.
Looking ahead, Europe’s relationship with China will be a mix of cooperation, competition and caution. Opportunities for partnership are clear: China’s leadership in green technology, artificial intelligence and digital infrastructure aligns with Europe’s priorities on climate transition and technological innovation.
At the same time, potential flashpoints loom. Tensions over Taiwan, disputes around cybersecurity and concerns over strategic autonomy are likely to remain sources of friction. Europe’s challenge will be to maintain open channels for cooperation without becoming overdependent, and to protect its strategic industries while still benefiting from Chinese demand and innovation.
Perhaps the most significant factor shaping the years ahead will be Europe’s effort to define its own role. Neither fully aligned with Washington nor willing to embrace Beijing uncritically, its success will shape both EU-Chinese relations and the wider global order.
For corporate treasurers, the evolution of European-Chinese relations is not an abstract geopolitical debate. It has immediate implications for risk management, planning, and long-term strategic positioning. In addition to the broader geopolitical factors mentioned above, companies with significant exposure to international trade must be alert to three broad areas of commercial risk: supply chain resilience, financial risk, and regulatory change.
China remains central to many global supply chains, particularly in manufacturing, critical minerals, and renewable technologies. China has been careful in recent years to gain access to the raw materials that it will need in future. Treasurers should expect greater scrutiny from boards and investors over supplier concentration and the resilience of operations in China. This means stress-testing working capital requirements, planning for potential disruption in logistics and procurement, and building buffers into liquidity planning. Diversification strategies, whether by geography, supplier, or financing structure, are no longer optional but essential.
The RMB’s role in global trade settlement is slowly expanding, especially with Chinese efforts to promote alternatives to dollar-dominated systems. For the meantime, however, it seems China will tend to prefer keeping control over its currency rather than permitting it to be truly free floating. Treasurers must monitor the potential for increased RMB usage in trade invoicing, as well as the volatility that arises from US-China tensions. Currency hedging strategies and funding diversification may need to be regularly reassessed in light of these dynamics.
As Europe defines its stance between the US and China, regulatory complexity will intensify. Treasurers need to anticipate the impact of potential sanctions, export controls, and sustainability-linked disclosure requirements, all of which carry financial and reputational risk. For treasurers supporting Chinese commercial activities, this includes an assessment of operational risks around the funding of local ventures such as fiscal policy, payment processes and sweeping arrangements as well as the risks of ‘trapped cash’ and how to conduct financial due diligence on potential partners or counterparties. China’s rapid development in green technology also offers opportunities: financing partnerships and joint sustainability initiatives could open new avenues for funding, but only if managed with rigorous due diligence and compliance oversight.
In short, treasurers must position themselves as strategic advisers to their boards, translating shifting international relations into actionable risk and opportunity assessments. Those who succeed will be the ones who treat geopolitics as a core component of financial strategy rather than a background variable and who are able to navigate these complexities, providing financial flexibility to offer their businesses greater strategic commercial options.
To gain deeper insight into how these forces are unfolding, join us at the ACT's Treasury Forum on 12 November for the keynote presentation from Professor Kerry Brown, Director of the Lau China Institute and Professor of Chinese Studies at King’s College London. One of the UK’s leading authorities on China, Professor Brown will offer a forward-looking analysis of European-Chinese relations, and, crucially, what they mean for companies and their treasurers.
For more details and to register for the ACT’s Treasury Forum, click here.
Ibrahim Hakim
