28 April, 2022
Dependence in Europe’s Relations with China: Weighing Perceptions and Reality
For the eighth report since its inception in 2014, the European Think-tank Network on China (ETNC) brings together analysis on 18 countries plus the European Union to examine how dependencies on China are presented in European public and policy-level debates, and how the notion shapes policymaking in each case.
ETNC is a gathering of China experts from a selection of European policy research institutes. It is devoted to the study of Chinese foreign policy and EU-China relations and facilitates regular exchanges among participating researchers.
Viking Bohman and Frida Lindberg contribute with a chapter about Sweden (below). They describe how the Swedish government tends to present its reliance on China as an unavoidable fact rather than a problem that can be addressed. Although there is a growing recognition of the security risks associated with economic flows, Sweden does not seem to have a full understanding of its dependence on China.
Sweden: Free trader with growing security concerns
Summary
The Swedish government is of the view that it needs China in order to create jobs and maintain economic growth, and that China is an “indispensable partner” in addressing global challenges such as climate change. The government believes that it has few alternatives to engaging with China in these areas. This perceived state of economic and political reliance is not presented as a problem per se, but rather as an unavoidable fact. There are no indications that Sweden will abandon its pro-free trade positions or its resolute opposition to any tendency toward protectionism in the European Union. Nonetheless, this approach is increasingly being coupled with a recognition of the security risks associated with economic flows, especially inward investment, but also with the supply of critical raw materials such as minerals and rare earth metals. Sweden’s nascent interest in its potential economic vulnerabilities does not necessarily mean that it has a full understanding of its dependence on China. We provide guidance on a study that could provide such knowledge.
Why dependence matters
This chapter reviews the Swedish government’s perception of its dependence on China as presented in official documents and media content. Perceived dependence is important because it can condition policy decisions. For example, a policymaker who believes that Sweden is highly dependent on China, and that the costs of opposing Beijing would be high, is likely to be more prone to adapt, avoid, or self-censor decisions that could lead to a reaction from China. On the other hand, a policymaker who underestimates or is unaware of a dependence could engage in overly daring decision-making on issues related to China. In the latter case, the decision-maker might also fail to address or alleviate a dependence with a bearing on national security.
Therefore, to make sound policy decisions, it is important to have an accurate understanding of a country’s dependence that is as free as possible of over- or underestimations. We cannot make such detailed estimations in this limited study. Instead, we explore the government’s perceptions of its dependence in order to identify knowledge gaps and lay the groundwork for future studies. We also present questions that could guide an in-depth study of Sweden’s dependence on China.
What is dependence?
Our understanding of dependence draws on the work of James A. Caporaso.[1] We posit that three conditions must be met for state A to be dependent on state B.
- A needs something that B has. This could be goods such as oil, rare earth metals, or semiconductors that can be transferred from B’s possession to A. It might also be something more abstract, such as A’s access to B’s markets, or a desired behavior such as a reduction in B’s greenhouse gas emissions.
- A’s ability to access alternatives is limited or costly. A may need a specific type of product controlled by B to carry on its economic activity. If alternative suppliers—C and D—are easy to access, however, A may reroute its supply chains in cases of disruption at little cost. By contrast, in situations where there are no alternative suppliers or products, or where the switching costs in both time and resources are high, a state of dependence exists. The same principle is applicable to more abstract objects, such as market access and greenhouse gas emissions.
- B exercises some level of control over the object. For example, if B owns oil reserves, raw materials, or leading semiconductor manufacturers—or controls the territory on which these goods are produced—then B will in most cases be able to restrict A’s access to these goods. Similarly, if B has a strong governance system, it will in most cases be able to restrict the access of A’s companies to its market and the greenhouse gas emissions of its industries through legislation or policy guidance.
The purpose of this definition is merely to provide a starting point to guide and structure our investigation of the Swedish government’s view of its dependence on China. We have intentionally excluded a direct analysis of aspects related to “interdependence”. In other words, we do not discuss China’s dependence on Sweden, although this would be an important topic for a study that seeks to fully understand Sweden’s dependence on China.
A note on methodology
Guided by this three-pronged definition, we have reviewed government policy documents to explore Sweden’s perception of its dependence on China. We selected documents published between 2017 and 2021 that address government policy related to China at the highest level, such as press releases, annual statements of foreign policy, and government reports.[2] While our primary concern is the government’s view, we have also studied items published in the media in 2020 and 2021 to briefly map out the general direction of public discourse.[3]
Sweden believes that it needs China to create jobs and growth, and to address global challenges
The government’s white paper on China published in 2019, which is sometimes described as Sweden’s “China strategy”, estimates that 25,000 people in Sweden work in Chinese-owned companies. It states that it is becoming “increasingly important” for Swedish companies to have access to China’s market, technology, and innovation, and that it is “essential” for Swedish companies to establish a presence in the education, research, and innovation environments there.[4]
In an interview in early 2021, Trade Minister Anna Hallberg said that “China is becoming increasingly important for Sweden’s growth and therefore for our welfare”. She stated that over 100,000 jobs in Sweden “depend” on the economic relationship with China due to trade and investment.[5]
The perceived need for cooperation with China is even clearer with regard to global challenges. The government’s 2021 annual “statement on foreign policy” notes that there are “global challenges that we can only address together with China—such as climate change, health, and a functioning and fair free trade order” (emphasis added).[6]
Sweden believes that it has few alternatives to China
The 2019 white paper states that China is an “indispensable partner in the response to global challenges” (emphasis added). China is seen as having a “key role” in addressing climate change. The document also points out that “without China’s participation the goals of the Paris Agreement will not be achievable”.[7]
On the economic side, there is no equivalent statement to the effect that China is “indispensable”. However, government statements describe how Swedish jobs depend on China, which is considered “increasingly important” to the Swedish economy and a “leading technological power”. This suggests that China is considered a partner that would be very hard to replace.[8]
Sweden does not view its reliance on China as a problem per se…
The government rarely portrays Sweden’s reliance on China as a problem. Instead, it is presented as a mere statement of fact and appears to be viewed as an unavoidable consequence of free trade. Occasionally, reliance on China is used to emphasize the benefits of economic openness. In December 2021, Foreign Minister Ann Linde argued that it is not feasible to end trade with China, and that Sweden has “a great amount of interest in having a functioning trade with China. Sweden is incredibly dependent on exports”.[9]
In April 2021, Hallberg was asked about the potential dangers associated with maintaining economic openness regarding China. She responded that “one must remember that Chinese investments in Sweden have contributed to so much good: innovation, jobs. We would perhaps not even have any Volvos rolling on the streets today if we did not have the Chinese owners”.[10] There has been no official articulation of the potential dangers associated with becoming “too dependent” on trade with China, or of how China might be able to exercise control over trade flows in a way that could be detrimental to Swedish interests.
… But there are concerns about dependence in some areas
Official statements suggest that Sweden is cautious when it comes to measures that could restrict free trade but is increasingly recognizing national security risks in some areas of economic exchange. In his 2021 annual statement on EU policy, EU Minister Hans Dahlgren recognized that Europe should strengthen its resilience in “areas that are vital to our security” but added that “the pursuit of strategic autonomy in some areas should take place without the EU […] turning inwards. Our open economy serves us well”.[11] A further indication of a shift in attitude was Linde’s statement to an annual security conference in January 2022. In laying out Sweden’s approach to China, she said that the benefits for national security should be “central”, while the benefits for society should be “taken into consideration”.[12]
Sweden has adopted new legislation to implement EU regulation 2019/452 on the screening of foreign direct investment (FDI). In a further step in this process, a government inquiry has proposed a Swedish system to screen FDI in businesses where their “activities or technology are essential for security or public order”.[13] Sweden has also excluded Huawei and ZTE from the rollout of the 5G telecommunications network, and the responsible security and military authorities have explicitly stated that “the Chinese party-state and intelligence agency can influence and exert pressure” on Huawei and ZTE in a way that could be harmful to Swedish security.[14]
This vigilance regarding foreign investment is partly reflected at the trade level. In line with the European Commission’s Communication on critical raw materials resilience, the FDI screening system is set to include businesses where their operations concern “critical raw materials” such as metals and minerals.[15] In January 2022, Minister for Business, Industry, and Innovation Karl-Petter Thorwaldsson expressed clear concerns regarding Sweden’s and Europe’s dependence on China for minerals. He said that “geopolitically, we give China as much power over minerals as we have given Russia over natural gas, so this is in every way dangerous and bad for Europe”. When asked about whether China’s dominance in this area could be harmful, he suggested that China’s control over rare earths could put Sweden “in the hands of a foreign interest that we in Sweden and the EU do not want to be”.[16]
More critical views appear in the public discourse
Concerns about the risks of becoming dependent on China or specific Chinese operators are more salient in the media than in government statements. To give just two examples, concerns have been raised about Volvo Cars’ dependence on its Chinese owner, Geely, and about the extensive Chinese investment in Swedish wind power.[17] Sweden’s leading pro-business newspaper, Dagens Industri, wrote in September 2021 that Volvo needed to “come home” due to security concerns and “the political climate we are entering” as a result of the rivalry between the US and China. Commenting on the wind power issue, one expert noted that China could “use the influence to exert pressure on Sweden” if its share of electricity production in Sweden increased further.[18]
Going forward
Sweden has been reluctant to accept the notion of “strategic autonomy” and insists that the concept should not alter the EU’s approach to economic openness.[19] There are no indications that Sweden will abandon its pro-free trade positions or its resolute opposition to any signs of protectionism. In January 2022, EU Minister Dahlgren said that “there are now tendencies in the union […] toward […] protectionism. This is the wrong way to go. The government is clear in its pursuit to defend the EU’s openness to the world”.[20] However, this approach is increasingly coupled with a recognition of the security risks associated with economic flows, especially regarding inward investment.
This nascent interest in potential economic vulnerabilities does not mean that Sweden has a full understanding of its dependence on China. For instance, Sweden has not to our knowledge conducted any comprehensive stocktaking of its reliance on China for critical raw materials or other strategically important goods. Based on our three-pronged definition of dependence, we recommend a study on Sweden’s dependence to answer the following questions:
- In which areas, sectors, or industries of critical importance to Swedish interests is there a reliance on or need for China? Why are these areas of critical importance to Swedish interests?
- What is the magnitude of the reliance on China in these areas of critical importance to Swedish interests? For example, what percentage of Sweden’s imports of a certain good comes from China?
- To what extent does China control the products, commodities, or other goods or objects that Sweden needs or desires?
- How likely is it that China would use this control in a way that could harm Swedish interests?
- What would be the specific consequences for Swedish interests if China used this control in such a way?
- How could these consequences be mitigated by Sweden’s access to alternative partners or substitutes?
References
[1] James A. Caporaso, “Dependence, Dependency, and Power in the Global System: A Structural and Behavioral Analysis”, International Organization 32, no. 1, 1978, pp. 19–22.
[2] The review included 14 items.
[3] To identify relevant items, we used the Swedish database Mediearkivet (Retriever). Searches included variations of the terms “China” and “dependence”, together with the names of the prime minister, the foreign minister, and the trade minister.
[4] Ministry for Foreign Affairs, Approach to Matters Relating to China, Government Communication 2019/20:18, pp. 11, 18–19, https://www.government.se/4adb19/contentassets/e597d50630fa4eaba140d28fb252c29f/government-communication-approach-to-matters-relating-to-china.pdf (Accessed: 2021-08-30).
[5] Hallberg om investeringsavtalet med Kina: Bättre för företagen (di.se)Fredrik Öjemar, “Ministern: EU-avtalet gynnar svenska bolag”, Dagens Industri, February 12, 2021, https://www.di.se/nyheter/regeringen-driver-pa-for-nytt-kina-avtal-betydligt-battre-villkor-for-foretagen/. (Accessed: 2021-09-08).
[6] Ministry for Foreign Affairs, Statement of Foreign Policy by Foreign Minister Ann Linde, February 24, 2021, p. 5, https://www.regeringen.se/493bcc/contentassets/3b925dd737454936b5afe36498f08664/utrikesdeklarationen_2021.pdf (Accessed: 2021-09-10).
[7] Ministry for Foreign Affairs, Approach to Matters Relating to China, Government Communication 2019/20:18, pp. 17, 6.
[8] Ibid., p. 13.
[9] Therese Larsson Hultin, “Ann Linde: Omöjligt att sluta handla med Kina”, Svenska Dagbladet, December 24, 2021, https://www.svd.se/linde-omojligt-att-vi-slutar-handla-med-kina (Accessed: 2022-01-16).
[10] Arne Larsson, “Tuff start för Sveriges handelsminister Anna Hallberg”, Göteborgs-Posten, April 17, 2021, https://www.gp.se/livsstil/tv%C3%A5-dagar/tuff-start-f%C3%B6r-v%C3%A4stsvenska-ministern-anna-hallberg-1.44653733 (Accessed: 2021-09-10).
[11] Prime Minister’s Office, Statement on Government EU Policy 2021 by the Minister for EU Affairs Hans Dahlgren, January 20, 2021, https://www.regeringen.se/tal/2021/01/eu-deklarationen-2021/ (Accessed: 2022-02-10).
[12] Ministry for Foreign Affairs, Speech by Minister for Foreign Affairs Ann Linde at the 2022 Folk och Försvar (Society and Defence) Annual National Conference, January 17, 2022,
https://www.regeringen.se/tal/2022/01/tal-av-utrikesminister-ann-linde-vid-folk-och-forsvars-rikskonferens-2022/ (Accessed: 2022-02-10).
[13] Ministry of Justice, SOU: 2021:87. Granskning av utländska direktinvesteringar [Investigation of foreign direct investment], November 1, 2021, https://www.regeringen.se/rattsliga-dokument/statens-offentliga-utredningar/2021/11/sou-202187/ (Accessed: 2022-02-10).
[14] Post- och telestyrelsen, “Beslut om godkännande av sökande samt tillkommande villkor i auktion av frekvensbanden 3,5 GHz och 2,3 GHz”, October 20, 2020, https://pts.se/sv/dokument/beslut/radio/2020/godkannande-av-sokande-samt-tillkommande-villkor-i-auktion-av-frekvensbanden-35-ghz-och-23-ghz/ (Accessed: 2021-09-10).
[15] Ministry of Justice, SOU: 2021:87. Granskning av utländska direktinvesteringar, November 1, 2021, p. 348, https://www.regeringen.se/4aaa4c/contentassets/ce5bb47ea46f4ea4b61bfb0c2cdb241e/granskning-av-utlandska-direktinvesteringar-sou-202187-utan-omslag.pdf (Accessed: 2022-02-10); European Commission, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the Regions, “Critical Raw Materials Resilience: Charting a Path towards Greater Security and Sustainability”, Brussels, September 3, 2020, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52020DC0474 (Accessed:2022-02-10).
[16] Agenda. Älska gruvor, SVT, January 23, 2022. 09:15 pm, https://www.svtplay.se/video/33701190/agenda/agenda-23-jan-21-15 (Accessed: 2022-02-10).
[17] Karin Pihl, “Karin Pihl: Farligt att Kina äger svenska vindkraftverk”, Göteborgs-Posten, November 16, 2021, https://www.gp.se/ledare/farligt-att-kina-%C3%A4ger-svenska-vindkraftverk-1.59281257 (Accessed: 2022-02-10).
[18] Lina Lund and Daniel Costantini, “Så blev ett statsägt kinesiskt bolag storägare av svensk vindkraft”, Dagens Nyheter, November 17, 2021, https://www.dn.se/sverige/sa-blev-ett-statsagt-kinesiskt-bolag-storagare-av-svensk-vindkraft/ (Accessed: 2022-02-10).
[19] Calle Håkansson, “European Strategic Autonomy: Engaged, Drawing Red Lines. A View from Stockholm”, in Jakob Lewander (ed.), Strategic Autonomy: Views from the North, Swedish Institute for European Policy Studies, 2021, https://www.sieps.se/en/publications/2021/strategic-autonomy--views-from-the-north/.
[20] Prime Minister’s Office, Statement on Government EU Policy 2022 by the Minister for EU Affairs Hans Dahlgren, January 26, 2022, https://www.regeringen.se/tal/2022/01/eu-deklarationen-2022/ (Accessed: 2022-02-10).
