The annual State of the European Union speech (SOTEU), which Commission presidents deliver to the European Parliament in Strasbourg every September, had never been a particularly exciting occasion. That changed in 2020, when the EU was in the midst of a global race to develop and purchase vaccines against Covid-19, and continued through to last year, when the EU was responding to Putin’s invasion of Ukraine. From 2020 to 2022, Commission President Ursula von der Leyen’s speeches moved away from the technocratic verbiage of years past to grandstanding announcements that often surprised her own officials in Brussels.

 

With one important exception – the announcement of an investigation into Chinese subsidies for electric vehicles (EVs) – this year’s speech went back to being (relatively) boring. Perhaps the Commission thinks that the crisis is ending and that it can slowly return to its usual, more technical, self. Von der Leyen laid out a range of important but dull policy ideas. But she did not reveal whether she plans to be around to implement them after next year’s Parliamentary elections in June. EU capitals and the European institutions alike agree, however, that she will almost certainly win a second term if she runs for it.

 

It may not be easy to predict von der Leyen’s next career move. But it was not hard to guess the topics she would touch upon in her legacy speech. She has a strong record on devising the EU’s responses to the pandemic and to the war in Ukraine. She came to office promising to steer Europe through the socalled twin digital and green transitions, and she has stood her ground on both, sometimes against the wishes of her own conservative political family and her most important allies.

 

Those who were looking for cues on von der Leyen’s energy and climate agenda for a possible second term might have been disappointed, however. The energy crisis seemed to be almost a memory of the past. Von der Leyen was eager to portray Europe’s response to Russia’s weaponisation of gas supplies as a success story, without dwelling much on the energy challenges ahead. One topic she was keener to delve into was the thorny political tension between farming activity and nature conservation. By saying that Europe should find a balance between agriculture and nature conservation, she risked annoying her conservative European People’s Party (EPP), which has been campaigning to thwart nature restoration legislation by portraying it as pitted against the interests of farmers across the EU.

After abruptly abandoning its ‘zero-COVID’ approach in late 2022, China reopened its borders on 8th January 2023. This decision was a welcome surprise, as pandemic control measures were one of the main reasons European companies had had an extraordinarily difficult year in 2022, and the removal of the restrictions gave rise to a belief that a swift economic rebound would follow. International banks revised up their growth forecasts for China, and businesses were expecting a surge in new orders resulting from pent-up Chinese demand.

 

The political will in China also seemed to finally match businesses’ expectations for increased opening of the economy. At the 14th National People’s Congress, held in March 2023, China’s outgoing premier Li Keqiang delivered the government’s annual work report, reviewing the progress made on development plans from 2022, and setting out the key priorities for the coming year. The gross domestic product (GDP) target for 2023 was set at around five per cent, and Li’s presentation emphasised economic recovery and stability. The work report also outlined aims to encourage more foreign investment. The business community saw these as positive messages, as they suggested the Chinese Government would shift focus from ideological considerations—and an emphasis on self-reliance and national security concerns — to prioritising the economy and re-engagement with the world.

 

While economic indicators at the beginning of 2023 showed momentum was gathering, as the year progressed, China’s recovery began to wane, with many areas of the economy not performing as expected. A key factor in this was that the much-anticipated release of pent-up demand simply did not take place, resulting in an extended contraction of manufacturing activity, producer prices and industrial profits. While services fared somewhat better than manufacturing, growth in this sector showed signs of slowing after an initial strong rebound. On top of this, a host of serious challenges that China’s economy had already been facing—including mounting government debt and the unravelling of the real estate sector—are yet to be resolved. China’s demographic dividend is also fading, and urban youth unemployment broke historic records for several months in a row in 2023, adding more pressure to the country’s recovery. Official statistics, published until July 2023, suggested that one in five people between the ages of 16 and 24 were out of a job in China’s big cities. This data also highlighted the need for targeted policies in order for domestic consumption to live up to its potential as a key driver for the Chinese economy. Rebuilding consumer confidence will also require measures that can improve the outlook for the real estate sector, in which over 70 per cent of Chinese household wealth is tied up.