Peter Rough testifies before the House Foreign Affairs Committee.
Written Testimony
View PDFChairman Kean, Ranking Member Keating, and distinguished members of the Subcommittee: thank you for the honor to testify before you today.
My name is Peter Rough. I am the director of the Center on Europe and Eurasia at Hudson Institute, where I serve as a senior fellow. The views I express in this testimony are my own and should not be construed as representing those of Hudson Institute.
Why Europe Matters
Today’s hearing addresses a matter of vital importance to the United States. Over a century ago, Halford Mackinder, the father of modern geopolitics, coined a term to describe the interlocking continents we call Eurasia. He described the Eurasian landmass as the World Island. “Who rules the World Island,” Mackinder posited, “commands the world.”
On that World Island, Europe is the United States’ forward operating base and a significant source of our wealth and prosperity. The U.S. has tens of thousands of permanently deployed forces in Europe across a network of bases that safeguards the most significant economic relationship in the world.
In 2023, the volume of goods that crisscrossed the North Atlantic was more than double what the United States exchanged with the People’s Republic of China (PRC). In that same year American firms sold nearly a half-trillion U.S. dollars in goods to Europe. Europe is also the top destination for U.S. crude oil and liquefied natural gas (LNG). The U.S. sends twice as much gas to Europe as it does to Asia.
Most important, the United States and Europe are integrated through foreign direct investment (FDI). Over 60 percent of U.S. FDI, $4 trillion, is in Europe; in fact, the U.S. has between two to four times as much FDI in Europe as it does in Asia. For its part, Europe has $3.4 trillion in investments in the U.S., more than three times what Asian investors hold in the United States.
As these numbers illustrate, Europe is a significant prize in the unfolding competition between the United States and the People’s Republic of China. But to tip the balance of power in its favor, the PRC does not need to win over European hearts and minds. Beijing needs only to neutralize European influence on matters essential to its interests, like the status of Taiwan and the international political economy. It is for this reason that the PRC is supporting Russia’s war on Ukraine, adding proxy war to the mix of economic mercantilism and mercenary politics that Beijing has long employed against Europe.
Instead of following the mantra of “hide your capabilities, bide your time,” the philosophy behind Chinese foreign policy for many decades, Chinese Communist Party (CCP) Chairman Xi Jinping now states his hostility to the West publicly. “Anyone who dares [challenge the PRC] will have their heads bashed bloody against the Great Wall of Steel forged by over 1.4 billion Chinese people,” he warned at the centenary of the CCP’s founding.
Europe must fully wake up or fall prey to Chinese aggression.
The Sino-Russian Alliance
China’s primary military lever for weakening Europe is its relationship with Russia, which leaders of both countries have described as a “no-limits partnership.” This alliance has “become a decisive enabler of Russia’s war against Ukraine,” according to the North Atlantic Treaty Organization (NATO) Washington Summit Declaration in July, “through ... its large-scale support for Russia’s defence industrial base.”
Today, it is widely acknowledged that the PRC provides Russia with 70 to 90 percent of its computer numeric control (CNC) machine tools, which automate the production of precision-guided munitions and aircraft parts, and 90 percent of the microelectronics critical for its production of missiles, tanks, and aircraft. Throughout the war in Ukraine, the PRC has supplied Russia with dual-use items—products that have both civil and military applications—from ball bearings and drone engines to optics and spare parts.
The PRC has also helped the Russian Federation withstand the impact of transatlantic sanctions. The PRC’s facility with censorship and opacity have helped it evade Western sanctions. Beijing has also served as an economic backstop for Russia. In 2023, Sino-Russian trade reached $240 billion, a 26.3 percent increase over 2022. Based on the first quarter of 2024, Sino-Russian trade is on pace to grow yet again this year. Today, the PRC is Russia’s largest trading partner, and accounts for one-third of Russia’s overall foreign trade. Absent Chinese support, Russia could not continue its war effort at present levels.
In addition to its defense-industrial and economic support, the PRC continues to back Russia diplomatically. Although Xi wrote of the Ukraine war in Le Figaro in May that “China is neither at the origin of the crisis, nor a party to it,” he practices a pseudo-neutrality that in effect favors Moscow. The PRC’s major position paper on the war parrots Russia’s talking points on NATO enlargement and Western sanctions and refrains from calling on Russia to leave Ukraine’s occupied territory.
Xi and Russian President Vladimir Putin have personalized Sino-Russian relations. “President Putin is the foreign colleague that I have interacted with most extensively. He is my best friend, and I greatly treasure our friendship,” Xi told Russian media in 2019. The two leaders have met over 40 times, more than twice as often as Xi has met with any other foreign leader, and their two militaries have conducted joint exercises around the world, including in the Mediterranean, Black, and Baltic Seas. Xi has yet to sit down with Ukrainian President Volodymyr Zelensky.
In March 2023, Xi told Putin upon departing Moscow, “Right now, there are changes the likes of which we haven’t seen for 100 years. And we are the ones driving these changes together.” What this might mean is anyone’s guess. But if the U.S. loses its nerve in Ukraine, the PRC will approach the United States’ European partners and allies with a simple offer: we will use our influence in Moscow to address your concerns if you support the birth of a new Sinocentric world order.
Leninist Mercantilism
The PRC’s primary economic lever for weakening Europe is a form of Leninist mercantilism. As the Sinologist Aaron Friedberg has written, “Neither market-loving capitalists nor true-believing Marxists, [Xi and his CCP colleagues] can best be understood as mercantilist Leninists whose top priority is to acquire and exercise political power.”
The CCP has built an export-led manufacturing economy to strengthen its grip on power. Rather than follow the liberalizing obligations of the World Trade Organization, Chinese leaders aim to control global supply chains and manufacturing chokepoints. Beijing has stoked production in key export sectors and depressed domestic consumption, creating a highly imbalanced economy suited more for great-power war than its citizens’ well-being.
By now, the methods that the PRC has used to establish dominant positions in key manufacturing areas are well-known: state subsidies, intellectual property theft, market restrictions, regulatory interventions, and currency manipulation. Since 2022, it has also benefited from discounted Russian energy.
The U.S. first felt the shock of Chinese overcapacity during the 2000s. Now Europe is feeling the pain of Chinese dumping. The example of solar technology, which European firms helped pioneer, illustrates Europe’s predicament. As Politico reported in February, “EU solar manufacturers say they face an existential crisis due to Chinese subsidies, which they blame for flooding the EU with dirt-cheap solar panels and creating a supply glut that is causing a wave of bankruptcies.” The PRC now controls 80 percent of the world’s solar manufacturing capacity and dominates the production of silicon wafers for solar panels.
What Beijing has accomplished in solar technology, it is also pursuing in lithium ore batteries and electric vehicles. The PRC now exports more cars than Germany and outpaces Berlin in the production of cheap electric vehicles. It is not content with merely dominating its own market, but is making inroads across Europe, too. This month, Volkswagen weighed shuttering a factory in Germany for the first time in its 87-year history.
The breakdown of the largest industry in Europe’s largest economy would invite social disruption in the heart of the continent, with all the attendant risks to regional stability that would accompany such de-industrialization. The recent elections in the German state of Thuringia, which strengthened the anti-American extremes there, may be a harbinger that the PRC would welcome.
Of course, Berlin is not blind to these risks, but the PRC leverages its relationship with Germany’s multinationals to protect its predatory model. So dependent are Germany’s automakers on the Chinese market, for example, that they lobbied against the European Commission’s countervailing duties on Chinese electric vehicles.
Moreover, the PRC has pulled few punches in threatening politically important industries. In response to Europe’s electric vehicles probe, Beijing launched anti-dumping investigations into European pork, brandy, cognac, and dairy. These trade tensions have spurred some German multinationals to relocate facilities into the PRC.
Thus, Europe’s economic dependency on Beijing only grows.
Europe’s Balkan Underbelly
Germany may be the PRC’s primary target, but Beijing has charted two other vectors into the European heartland.
The first is the clunkily named Cooperation between China and Central and Eastern European Countries (CEE), an initiative promoted by Beijing to promote economic integration between China and the nations of Central and Eastern Europe. The coronavirus pandemic and the war in Ukraine have badly damaged the PRC’s reputation in these countries, leading the Baltic states to leave the CEE-China forum altogether. Today the forum no longer meets at the leadership level. Czech foreign minister Jan Lipavský summarized his disappointment with the PRC last year when he said, “The 14-plus-1 has neither substance nor future.” The PRC’s path from Russia through the CEE states into Western Europe is more constricted today than at any point in recent years.
Beijing’s second vector into Europe has been through the Balkans. This region has become the PRC’s preferred route into the continent after Italy’s departure from the Belt & Road Initiative last year.[28] In May, Xi embarked on his first tour of Europe in five years, and the countries he visited were telling: France, Serbia, and Hungary. In both Belgrade and Budapest, Xi described a “comprehensive strategic partnership” with each country for “a new era” of cooperation. The centerpiece of that partnership is the Chinese-financed Budapest-Belgrade railway, designed, once it is completed in 2026, to facilitate trade from the Chinese-owned port of Piraeus in Greece into the heart of the European Union (EU). Beijing has reinforced that project with a bevy of investments in strategic industries across Hungary and Serbia, from electric vehicles and battery plants to copper mining and steel mills. Because Serbia is not a member of the EU, the PRC has a free trade agreement with Belgrade, too.
These economic ties have paid political dividends. Serbia’s president, Aleksandar Vučić, speaks of an “ironclad” friendship with Xi, while Hungary’s prime minister, Viktor Orbán, describes the PRC as “one of the pillars” of the multipolar world. The PRC’s inroads in the Balkans and Central Europe reflect its ambition of dividing, neutralizing, and ultimately weakening the continent.
Exploiting Strategic Autonomy
The PRC has cultivated skepticism of America in Europe, too. During his visit to France in May, Xi played on French President Emmanuel Macron’s susceptibility to flattery to promote Macron’s vision of European strategic autonomy from the United States. This has been a long time coming. In 2019, the French president described NATO as “brain dead”; last year, during a visit to the PRC, he criticized American policy on Taiwan, cautioned Europe against getting “caught up in crises that are not ours,” and questioned the “extraterritoriality of the U.S. dollar.” This is music to Xi’s ears. Hours after Macron’s departure from the PRC last year, Xi launched major exercises targeting Taiwan.
The PRC welcomes Macron’s argument that Europe “must never be a vassal of the United States,” as the French leader put it in an address to the Sorbonne in April. Beijing has sought to leverage that attitude to disrupt transatlantic policy coordination, especially in advanced fields like semiconductors.
To that end, the PRC harshly criticized the Dutch government for working with Washington on the restriction of advanced lithography equipment. The PRC’s Global Times warned just last week that Beijing will take “corresponding counter-measures, such as imposing trade restrictions or seeking alternative suppliers, and reevaluating its cooperation with the Netherlands in more global areas.” Over the past year, the PRC has curbed the shipment of gallium and germanium to Europe, leading to a surge in prices on the continent. It has also taken other steps to limit and ban the export of technologies essential for the exploitation of rare earth minerals.
When possible, the PRC has encouraged companies in strategic sectors to bypass Western regulatory hurdles by moving to mainland China. After Berlin blocked the sale of a semiconductor factory in the German city of Dortmund to the Swedish subsidiary of China’s Sai Microelectronics, the PRC persuaded the company to open a facility in Shanghai.
The PRC’s appetite for European capabilities remains voracious, especially in the military domain. By penetrating Europe’s defense industries, Beijing hopes to amplify the calls for strategic autonomy and undermine from within what it cannot subvert from abroad.
Espionage, Cyberwarfare, and Subterfuge
Additionally, PRC intelligence and influence operations in Europe are far more advanced than commonly appreciated. Beijing has worked to insinuate its products, instruments, and institutions into Europe’s critical infrastructure.
To date, fewer than half of the EU’s 27 member states have actively restricted the PRC’s telecom giants Huawei and ZTE from their 5G network infrastructure, although the operating environment for these companies is steadily deteriorating in most countries in Europe. The PRC is also uniquely positioned to surveil European populations through closed-circuit television, especially as cities adopt smart technologies. As a Radio Free Europe / Radio Liberty investigation revealed, “Dahua and Hikvision – two partially state-owned Chinese companies that are among the world's leading providers of closed-circuit television and surveillance systems – [dominate] markets in Hungary, Serbia, Romania, Moldova, Ukraine, Bosnia-Herzegovina, Kosovo, Bulgaria, and Georgia.”
The PRC has also taken stakes in ports that handle one-tenth of Europe’s total shipping container capacity, including recently the port of Hamburg. This poses risks for NATO. Last year, the Chinese-owned Gdynia Container Terminal blocked the unloading of U.S. Army equipment at Gdynia, Poland. The presence of Chinese-developed software in European ports increases the likelihood that the PRC will surveil NATO infrastructure and other assets, too.
The PRC has also used hacking operations to attack European politicians and institutions, gaining access to personal data before earning official rebukes from several European governments. In July, Germany summoned the Chinese ambassador over the PRC’s 2021 cyberattack on Germany’s Federal Agency for Cartography and Geodesy.
To spread its influence, the PRC has built intelligence networks across Europe. As Richard Moore, chief of the United Kingdom’s Secret Intelligence Service, said in November 2021, the PRC “monitor[s] and exercise[s] undue influence over the Chinese diaspora.” According to one tally by the NGO Safeguard Defender, Beijing may have established three dozen police stations across Europe to monitor its diaspora. As for Europeans, the PRC has co-opted elites through friendship groups, sister city programs, university-based organizations like its Confucius Institutes, and other associations that advance narratives that promote its interests. The PRC uses a network of broadcast, print, and social media to amplify these narratives.
Beijing’s theft of European intellectual property and its recruitment of Western talent also remain a problem. Ken McCallum, the head of the UK’s Security Service, estimated that Chinese agents have used networking websites to approach over 20,000 targets in the UK alone. European universities have partnered with entities affiliated with the Chinese military on thousands of research projects.
In all these efforts, Beijing manipulates the tools and traditions the West has long valorized—openness, innovation, and an entrepreneurial spirit—in the service of its own interests. Since the PRC’s intelligence and influence operations in Europe are more deeply entrenched than many realize, undoing them will take more work than many are currently planning to undertake.
The Path Ahead
Yet there is a path forward to reclaiming Europe from the PRC’s grasp. The first step is to recognize the threat Beijing poses to the Western way of life. Europe cannot rebuff China’s influence if its leaders cannot be honest with their citizens about its scope.
Some recent developments reflect a growing awareness of the problem. The Summit Communiqué of the June 2024 G-7 meeting in Apulia, Italy, and the Summit Declaration of NATO’s recent gathering in Washington, D.C., make clear that there is growing aware in the West of the threat that Beijing poses.
Yet even a fuller awareness of the PRC’s malign influence is only the beginning. U.S. policymakers should encourage Europeans to reverse their economic dependency on Beijing before the political straitjacket it has left them in tightens even further. This involves further de-risking and de-linking European supply chains from the PRC, combating Chinese dumping practices by forging separate trading arrangements, and rebuffing Chinese-led infrastructure proposals. The strong political and security relationships that the U.S. has built with most European states should make it easier to urge allies to resist the false promise of PRC markets.
Leaders in Washington should also urge Europeans to rebuke Beijing for its extensive espionage and cyberwarfare efforts on the continent and restrict the PRC’s acquisition of European ports, factories, and defense concerns. Beijing must face consequences for its actions that go beyond the summoning of its ambassadors.
Too many in Europe still cling to the hope that the PRC can act as a “cooperation partner,” as the European Union still officially defines it. This only suggests to Xi that Europe is complacent and exploitable. If Europeans take steps to strengthen their independence they are sure to experience harsh pushback from Beijing. But for every moment of delay, the risks to the transatlantic community grow. It is an urgent priority for us to take the threat of China’s influence in Europe seriously. We must act to counter this threat before combating it effectively is no longer possible.