Commentary on Political Economy

Monday 6 May 2024

OF NAZIS AND COMMIES

 

China’s Xi Shouldn’t Expect an Easy Ride in Europe This Time

Updated  ET

French President Emmanuel Macron welcomed Chinese leader Xi Jinping at the Élysée Palace in Paris on Monday. Photo: Gonzalo Fuentes/Press Pool

Chinese leader Xi Jinping’s first visit to Europe in nearly five years is shaping up as a test of the continent’s willingness to confront Beijing over its support of Russia’s invasion of Ukraine and for Chinese trade policies that have eviscerated critical European industries.

European leaders tend to tread lightly with Beijing, not wanting to jeopardize ties with the major trade partner. But French President Emmanuel Macron, who met with Xi on Monday on the first leg of the six-day trip, has cast the Ukraine war and China’s trade practices as an existential threat to Europe.

China has served as an economic lifeline to Russia since the start of the war, providing Moscow with critical support as it seeks to rebuild its military capacity. Beijing hasn’t supplied arms to Moscow, but U.S. officials say it has provided satellite imagery to Russian forces and sold the country microchips, jet-fighter parts, machine tools and other dual-use equipment to bolster its armed forces. Beijing is also a prodigious buyer of Russian fossil fuels.

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Chinese manufacturers, meanwhile, are flooding Europe with electric vehicles, solar panels and other goods stemming from a manufacturing glut and lagging consumption at home. The Chinese economy has been slow to emerge from the pandemic, with falling property prices, high youth unemployment and deflation stirring fears that the country will seek to export its way out of the slump.

French President Emmanuel Macron hosted European Commission President Ursula von der Leyen and Chinese President Xi Jinping in Paris. Photo: Gonzalo Fuentes/Press Pool

Any attempt to stand up to Beijing, however, will require unity among European leaders, and China has a long record of playing divide-and-conquer with capitals across the continent.

Macron tried to show a united front by inviting European Commission President Ursula von der Leyen to join him in Paris at the start of his meetings with Xi. Von der Leyen has been a thorn in Beijing’s side, accusing China of seeking global hegemony.

“The future of our continent will clearly also depend on our ability to continue developing a balanced relationship with China,” Macron said at the beginning of the meeting with Xi and von der Leyen.

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Von der Leyen pressed Xi to rein in Chinese subsidies and manufacturing overcapacity and urged him to give European companies more access to the Chinese market, she said after the meeting.

Von der Leyen said she was counting “on China to use all its influence on Russia to end Russia’s war of aggression against Ukraine,” and urged Beijing to stem the supply of dual-use goods helping Russia’s military.

“Given the existential nature of the threats stemming from this war for both Ukraine and Europe, this does affect the EU-China relations,” she said.

Xi brushed off concerns about Chinese goods overwhelming European markets. Xi told Macron and von der Leyen that China’s production of renewables is helping the global energy transition, adding: “There is no so-called problem of Chinese overcapacity,” according to China’s foreign ministry.

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Xi told Macron and von der Leyen that China would closely monitor the export of dual-use goods, though Beijing has made similar promises before, French officials said.

“China is not at the origin of this crisis, nor is it a participant,” Xi said on Monday, adopting Russia’s policy of not calling the conflict a war. The crisis, Xi said, should not be used to tarnish China’s image or start a new Cold War.

In February, the European Union agreed to impose trade restrictions on three technology and electronics companies from mainland China for the first time since the war started, because of what Brussels says is their sale of militarily usable goods. More may follow, EU officials say.

The EU has also used a new antisubsidy law to launch an investigation into electric-vehicle imports from China. Last month, it deployed the same instrument to conduct dawn raids on offices of Chinese security-equipment company Nuctech. There are also growing concerns about alleged Chinese spying, cyber espionage and other forms of interference. Last month, British and German authorities made arrests over alleged Chinese espionage.

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“I think that Europe has a degree of leverage with China. The Chinese economy is weak,” said Noah Barkin, a senior adviser with research firm Rhodium’s China practice. “The Chinese need access to European investment, European technology but that leverage only works if Europe is united and sending the same message.”

European divisions have been visible as the EV investigation has proceeded. German auto firms and suppliers remain entrenched in the Chinese market. Any EU tariffs on EV imports from China would risk Beijing’s retaliation against the German auto industry. French automakers, which produce lower-priced vehicles more vulnerable to competition from Chinese imports, are cheering on the EU probe.

German auto firms such as Volkswagen remain entrenched in the Chinese market. Photo: Bloomberg News

China responded in January to the EV probe by opening an antidumping investigation into brandy imported from the EU. That measure is widely seen as targeting France and cognac, its national brandy.

On Monday, Macron presented Xi a bottle of cognac as a gift, saying later that Xi agreed to not take immediate action against the brandy.

European divisions were on full display when German Chancellor Olaf Scholz went to China last month. He offered no public support to the European Commission’s antisubsidy investigations and remained silent on China’s tariffs on brandy. Scholz refrained from directly rebuking Beijing in public about its continued support for Russia’s war in Ukraine.

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Macron asked Scholz over a recent dinner to join this week’s talks with Xi. The German chancellor declined, citing his plans to travel to the Baltics on Monday.

Abigaël Vasselier, former deputy head of division for China at the EU foreign-service unit, said that she expected Macron to take a more confrontational approach to Xi, in part because Beijing sees Paris as the driving force behind the commission’s antisubsidy drive.

Macron has described a paradigm shift unfolding in global trade rules as China and the U.S. channel billions of dollars in subsidies toward homegrown industries. In late April, Macron delivered a two-hour speech warning that the European project of economic cooperation “can die” if the continent doesn’t wake up to the new state of affairs.

German Chancellor Olaf Scholz visited a Bosch facility in Chongqing, China, last month. Photo: Michael Kappeler/dpa/ZUMA PRESS

Xi will have plenty of opportunities to sow division during his trip. In Belgrade, Serbia, he will mark the 25th anniversary of the North Atlantic Treaty Organization bombing of the Chinese Embassy there. The 1999 bombing, which killed three people, set off protests in China and badly damaged Sino-U.S. ties. The U.S. apologized for it, saying it was an accident caused by outdated maps.

Beijing has long used the incident as Exhibit A in its case against U.S.-led security partnerships. China has criticized NATO and opposed its expansion, a point Xi made with Russian President Vladimir Putin in a 2022 joint statement shortly before the start of the Ukraine war.

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Xi will then travel to Hungary to meet with Prime Minister Viktor Orban, the bête noire of EU politics. Orban has pushed back on EU efforts to aid Ukraine and was the first EU leader to sign a contract as part of China’s massive Belt and Road infrastructure initiative. The scope of the relationship has ballooned in recent years, with currently more than $16 billion in investment projects in Hungary, the Hungarian government said recently. Hungary hosts Huawei Technologies’ largest supply center outside China, despite U.S. pressure to ban the tech company.

Orban has also embraced the Chinese auto industry. China-based Contemporary Amperex Technology is building a $7.8 billion EV battery plant in Hungary. BYD, China’s top-selling EV maker, is building a manufacturing plant in the southern Hungarian city of Szeged. China watchers say another plant may be on the table for Xi’s visit.

“Orban is putting his bets on China; it has been very clear that the government wants to turn the country into a logistical hub,” said Tamas Matura, a senior fellow at the Center for European Policy Analysis and associate professor at Corvinus University in Budapest.

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Macron also has a history of playing into Xi’s hands. Last year, during a visit to China, the French president riled allies by saying Europe should step back from tensions between China and Taiwan. The remarks were in line with Macron’s longstanding call for Europe to develop “strategic autonomy” from military superpowers, a doctrine that suits Xi’s goal of driving a wedge between Washington and Europe.

Hungary hosts Huawei’s largest supply center outside China. Photo: Attila Volgyi/Xinhua/Getty Images

“This is something that China can try to use to its advantage,” said Marc Julienne, the lead China analyst at the French Institute of International Relations.

This year, Xi is marking the 60th anniversary of the establishment of diplomatic relations between France and China, an occasion the leaders will mark with a state dinner and a visit to the Pyrénées mountains.

“I think Xi Jinping expects a warm reception from these countries and will only go there if he thinks he can come out with some good announcements and it looks like these countries understand China’s concerns,” said Olivia Cheung, a research fellow at the SOAS China Institute in London.

Thomas Grove, Bertrand Benoit and Stacy Meichtry contributed to this article.

Write to Noemie Bisserbe at noemie.bisserbe@wsj.com, Laurence Norman at laurence.norman@wsj.com and Austin Ramzy at austin.ramzy@wsj.com

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Appeared in the May 6, 2024, print edition as 'Xi Arrives In Europe As Global Tensions Intensify'.

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