The Committee says that recent developments like the Copenhagen climate change conference underline the need for "an effective relationship between the EU and China, based on trust and mutual respect".
The Committee states that the new Lisbon Treaty arrangements alone will not be sufficient to enhance EU solidarity in this area, and that Member States should now identify key issues on which in they will stand firm on a united approach to ensure China cannot play one Member State off against another.
The Committee is concerned that the credibility of the EU as a strategic partner is regularly undermined by Member States failing to uphold EU solidarity on issues ranging from meetings with the Dalai Lama to bilateral commercial deals.
It points out that the Chinese government perceived the EU as weak and dependent on the United States following its failed attempt to lift the "arms embargo" on China, introduced after the suppression of the 1989 Tiananmen Square demonstrations.
The Committee regrets that the EU, despite being united, was marginalised at Copenhagen. They observe that China’s influence and assertiveness is growing and that the EU must re-enter the climate negotiations as a player rather than as a spectator or risk losing its place at the top table.
The report raises concerns over the lack of results from the EU/China dialogue on human rights. It stresses that the EU should continue to assert its core values in a consistent way through a frank and confidential dialogue with China.
The Committee praises the EU’s successful, if low profile, projects promoting civil society and the rule of law in China. They say that the UK and the EU engagement strategy towards China must be “robust and focused”, including on human rights.
It welcomes the EU’s rapid support for the Government’s position on British citizen Akmal Shaikh, but express great disappointment that the UK and EU requests for clemency were ignored by the Chinese authorities.
The Committee argues that the vast trade imbalances between China and the West are not sustainable. They say this contributed to the current economic crises and state that, together with the US, the EU should tackle the issue of undervaluation of the Renmimbi through the G20.
The Committee points out that China is not meeting many of its existing WTO obligations, and call on China to address non-tariff barriers and protect intellectual property rights. They insist that the EU should take firm action when dialogue does not produce results, including use of the WTO dispute resolution mechanism.
The report raises some concerns about the influence of Chinese investment in Africa, arguing that "in some cases Chinese loan and investments agreements are neither contributing to poverty reduction nor respecting internationally-recognised principles of sustainable development, good governance and human rights." The Chinese focus is mainly based on securing access to natural resources, and there is a lack of transparency on aid associated with that investment.
Commenting Lord Teverson, Chairman of the Lords EU Sub-Committee on Foreign Affairs, Defence and Development Policy, said:
"China is clearly going to be a major economic and political force in the 21st century. The EU needs to act now to raise its game substantially to improve its relationship with Beijing.
"EU Member States must take a more collaborative approach to dealing with the Chinese and not allow China to play Member States off against each other.
"It is also important that the EU sticks to its principles on Human Rights when dealing with China, but we feel more progress will be made in this area by pursuing a frank and detailed private dialogue rather than EU leaders grand-standing with public condemnations.
"The EU and China should now recognise that the vast trade imbalances between China and the West are a danger for everyone. It contributed to the current economic crises from which the whole world, including the Chinese, is suffering.
"An important step to rectifying that will be for the EU to encourage the Chinese to reduce the deliberate undervaluing of their currency and to hold more Euro reserves."