Why Did the Chinese President Knock on Europe's Doors Again?

Murad Jandali | a month ago

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Geopolitical tensions and global economic turmoil in 2019, the date of Chinese President Xi Jinping's last visit to Europe, were not what they are now, which reflects the importance of that visit in terms of its timing, causes, and repercussions.

In 2019, the coronavirus pandemic had not yet strangled the world, Russia still had years to go before it launched its full-scale war on Ukraine, and Chinese electric vehicles and goods had not yet flooded European markets.

Chinese officials said that Xi's main goal during his recent visit to Europe, which included France, Serbia, and Hungary, was to limit the damage caused by these trade tensions, at a time when European leaders are adopting a different approach towards Beijing.

Xi's visit also came at a time when the European continent is cooperating with Washington to form a unified voice in opposition to China's cheap exports and the potential risks to national security.

It also came weeks after US Treasury Secretary Janet Yellen warned Communist Party leaders in Beijing that China's excess capacity represented a problem for the world, a message echoed by European leaders days later.

It is noteworthy that the Chinese President's visit to Europe came in response to a group of visits made by European leaders, including French President Emmanuel Macron and German Chancellor Olaf Scholz, as well as other visits to Beijing by other officials, such as European Council President Charles Michel and European Commission President Ursula von der Leyen.

Chinese–European Partnership

In an attempt to find a foothold in Europe, after Italy officially withdrew from the massive Belt and Road Initiative (BRI), China's President began a visit to three European countries, bringing with him a clear message that Beijing offers an economic opportunity to the European continent that is much greater than what the United States wants to acknowledge.

On May 5, French President Emmanuel Macron held talks with his Chinese counterpart Xi Jinping that emphasized the need for more balanced trade relations between Europe and China, with a focus on the course of the war in Ukraine.

China is France's third-largest trading partner, but French and other European companies are deeply concerned about the huge trade imbalance between China and the European Union and unclear Chinese legislation.

Macron told Xi that the international situation clearly means that we need to hold a European-Chinese dialogue more than ever, adding that Europe is going through a turning point in its history, which requires fair rules for all.

In turn, Xi praised the relations between the two countries, despite trade tension related to an EU investigation into Chinese electric car exports, in addition to an investigation conducted by Beijing into imports of French-made brandy.

Xi also denied there was industrial overcapacity in China flooding the European market.

China's leader urged France to help stave off a new cold war that could result from the EU increasingly siding with American concerns about security risks and trade tensions.

During Xi's visit, China and France signed 18 bilateral cooperation agreements in various fields, including green development, aviation, and people-to-people exchanges.

The trade partnership and economic relations between the EU and China is strong, with trade between the EU and China estimated at €2.3 billion per day.

However, economists say that European imports significantly exceed exports to China, with European accusations of unfair access to its markets.

After reaching a record €396 billion in 2022, the EU's trade deficit with China fell by 27% in 2023 to €291 billion, according to Eurostat, but it far exceeds the levels witnessed in the past decade.

In the past weeks alone, the EU has launched trade investigations into wind turbines in China and the purchase of medical equipment.

The Chinese medical devices market is the second largest after the United States, with a value of about $145 billion in 2022.

The EU also recently raided the offices of Chinese security equipment manufacturer Newtec as part of an investigation into subsidies.

Last month, the European Parliament approved a ban on products made using forced labor, aiming to limit goods and goods imported from China.

Germany and the United Kingdom also arrested at least six people during the recent period on charges of spying for China.

In September 2023, European Commission President Ursula von der Leyen announced the opening of an investigation into Chinese electric vehicles, which may result in the imposition of customs duties.

Other investigations have focused on Chinese subsidies for solar panels and trains, as Brussels seeks to move away from over-reliance on cheaper Chinese technology.

These points constitute part of the extent of trade tension between the two sides, in addition to a group of political files, including Europe's mounting concerns about Beijing's relations with Moscow.

Europe wants to encourage China to use the cards it has to put pressure on the Russian President and contribute to finding ways out of the Ukraine war.

On the other hand, Beijing asserts that it is neutral and seeks a peaceful solution whose plan was presented more than a year ago, which was rejected by the West as well as Kyiv.

However, many doubt the ability of Macron or the Europeans to get Xi to abandon Putin, who is expected to visit the Chinese capital before the end of this month.

Chinese–Serbian Agreement

During his first visit to Europe since 2019, Chinese President Xi Jinping also stopped in Serbia, which Beijing described earlier this week as a strong friend, where President Aleksandar Vucic received him with welcome and respect.

With the inking of a joint statement, Serbia's Vucic became the first European leader to commit to joining China in building a community with a shared future.

Under President Vucic, Serbia — which is not a member of the EU — has seen growing trade and investment relations with China.

China is emerging as Serbia's largest provider of foreign direct investment and its second-largest trading partner after the European Union itself.

Chinese investments in Serbia amounted to €10.3 billion between 2009 and 2021.

In January, Serbia announced a deal that could see Chinese investment of more than $2 billion in wind power plants, solar power, and a hydrogen production facility, Reuters reported.

Xi and Vucic met last October at the Belt and Road Forum in Beijing, where the Chinese leader described Serbia as a strong friend.

That month, the two countries eliminated customs fees on about 90% of tax items under the new free trade agreement.

Chinese–Hungarian Relations

After Paris and Belgrade, Chinese President Xi Jinping received a warm welcome in Hungary, the last stop of his European tour, with thriving economic relations and a convergence of views on the Russian invasion of Ukraine.

Hungarian Prime Minister Viktor Orban is a useful ally of China in the EU, having previously criticized EU efforts to hold China accountable on human rights issues.

Hungary has also emerged over the past period as an increasingly important production center in Europe for Chinese vehicle makers, including EV batteries, a situation that analysts say may help Chinese companies maneuver around current and potential EU customs fees.

It is noteworthy that China became the largest source of foreign investment for Hungary, and its largest trading partner outside the EU last year.

As the first European country to sign the BRI with China, Hungary has over the past decade been the freight train distribution center between China and Europe, and an important link in the logistics transportation corridor between them.

China is mainly financing the project to rebuild the railway line between Budapest, the capital of Hungary, and Belgrade, the capital of Serbia. The project aims to transport Chinese goods from the Greek port of Piraeus to Europe.

The Hungarian government recently said that the scope of the relationship with China has expanded in recent years, as the value of investment projects currently amounts to more than $16 billion in the country.

Hungary hosts Huawei's largest supply center outside China, despite US pressure to ban the tech giant.

Hungary and China recently signed some 18 cooperation agreements covering sectors such as railways, IT, and nuclear energy. 

In turn, Mahmoud Alloush, researcher in international relations, explained in a statement to Al-Estiklal that "Xi's visit to Europe comes at a very important time, as China challenges the EU in the areas of security and economics. Despite repeated communication from European leaders, no real progress has been made.

"China's leader is determined to rebuild and deepen relations with European leaders after they declined due to the Covid-19 pandemic and tensions with Washington," he added.

Mr. Alloush also noted that "Xi's latest visit confirms that even as views harden in some parts of Europe, others still welcome China."