In recent years we have witnessed a shift in the global balance of economic power from the West to the East (Allen & Smith 2011: 211). This shift has been underway for many years but has increased in pace due the financial crisis and the following debt crisis. While the European Union (EU) still struggles to recover from the economic landslide which hit the world in 2008, the fast-growing economies in Asia have touched down on the feet. This paper takes a comparative perspective by inquiring into how, if any, the tectonic shift in global balance of economic power impacts the political economic relationship between China and the EU. Policy analysts split over the question of whether there is a spillover from asymmetrical economic performance of China to the EU to EU-China trade relations. One line of reasoning suggests that, the increased economic power of China will make it capable of establishing more favourable trade treatments with the EU in return for economic support (quid pro quo) such as buying European bonds and companies (Godement 2011). Another train of thoughts implies that this spillover does not exist due to mutual interdependence between China and the EU (Kirkegaard 2012). In order to transform the different accounts of the EU-China relationship in the economic sphere, provided by policy analysts, into theoretical underpinned falsifiable hypotheses, we distinguish between two logics of explanation derived from international political economy theory – Liberal (interdependency) / Realist (dependency) - and three units of analysis – EU / member states / firms. A mixed method approach is used to test the hypotheses via statistical multi-level techniques supplemented by in depth case studies based on systematic process tracing.
