Introduction
It took President Xi Jinping five years to come back to Europe - he last visited the continent in 2019 and since then, a lot has changed. The post-Cold War security architecture of the continent has been unilaterally challenged by Russia’s decision to attack Ukraine. Italy, the only G7 nation to join the BRI, has officially opted out of the initiative and the EU-China relationship, particularly the trade ties, remains strained as Brussels prepares for a major trade reset with Beijing. At the same time, there have been allegations of China having flooded the continent with its spies. The European Union sees China as a “partner for cooperation, an economic competitor, and a systemic rival” and remains concerned about Beijing’s “assertive posturing, economic coercion, boycott of EU goods, and export controls on critical raw materials.”[i]
Xi’s visit was carefully planned, as his arrival in Europe after five years came at a symbolic time for Beijing’s ties with the three countries he visited. The year 2024 marks the 60th and 75th anniversaries of the establishment of diplomatic relations of China with France and Hungary, respectively. Besides, this year is also the 25th anniversary of the Chinese embassy in Belgrade being hit by NATO airstrikes during the Kosovo war.
The choice of countries for his first post-COVID-19 visit to Europe clearly demonstrates the Chinese strategy for Europe, which is based on the idea that a strong and united Europe closer to the US is not in its interest. The trip ideally suited this strategy. France, under President Macron, has been charting its own notion of “strategic autonomy” for a sovereign Europe which, as per Macron, “must reduce its dependency on the US and avoid getting dragged into a confrontation between the US and China” over issues like Taiwan.[ii] Serbia, the second destination, and a country which enjoys cordial ties with Russia, remains inherently against NATO, the organisation that bombed the country in a 78-day air strike campaign without UN approval. Hungary, despite being an EU and NATO member, has been a cause of concern for Western leaders on the issue of the Ukraine War and has also blocked EU resolutions criticising China. Thus, the visit to the three states was designed to suit the troika of Chinese goals in Europe: preventing EU’s closeness with the US, avoiding a trade tension with the European Union, and improving Beijing’s status on the continent.[iii]
Europe-China relations on the eve of Xi’s Visit
President Xi’s visit to the continent came at a time when Europe is facing its biggest security crisis since the Second World War. At the centre of this crisis is the Russian decision to attack Ukraine in February 2022, a war that still continues in the absence of any successful negotiation process involving both parties. The US has accused China of helping Russia ramp up its defence industrial base by making significant supplies of machine tools, drone and turbojet engines, technology for cruise missiles and microelectronics, along with nitrocellulose, which is used to make propellant for weapons.[iv] The EU has expressed similar concerns and has accused China of supplying dual-use items to Russia.[v]
The EU has also expressed concerns about China’s trade practices and has launched a series of investigations on issues of trade subsidies and imports to protect European manufacturers.[vi] Since October 2023, the European Union has launched a series of anti-subsidy investigations into Chinese EVs, clean tech, public procurement of medical devices, etc. as part of its broader action to prevent unfair competition and market distortions by Chinese companies.[vii] The European Commission claims to have come across “sufficient evidence” that proves that China provided subsidies, including direct cash transfers, tax breaks or public provision of goods or services below market price, to its EV makers, which have flooded European markets.[viii]
Besides the ongoing trade investigation that may prompt the EU to launch trade restrictions against China and the discord over Beijing’s alleged support of the Kremlin in the Ukraine war, the EU-China relations have been disturbed lately by the cases of suspected Chinese espionage in Europe.[ix] The presence of Chinese students and Confucious institutions in many European universities has alarmed policymakers in Europe about the “emerging tech risk” in the continent. Many European universities have taken measures such as cutting ties with the Chinese state-funded Confucius Institutes and increasing coordination with the intelligence agencies to protect critical research in sensitive technologies, such as microchips, quantum, biotech and Artificial Intelligence.[x] Besides, there have also been cases of arrests of German and British citizens for indulging in “especially severe” espionage for China.[xi] There have also been concerns of the members of far-right parties collaborating with the Chinese intelligence in what is now dubbed as “Chinagate” by Members of European Parliament (MEPs).[xii] As Europe progressed towards election of the new Parliament in the last few months concerns about Chinese intelligence agencies trying to influence the EU democratic process were expressed by many.[xiii]
Overall, the EU-China relations have changed a lot since the last visit of Xi in 2019. Today, the relationship is largely in a state of flux because of genuine concerns in Brussels on several issues, such as unfair trade practices, lack of a level playing field for European companies in China, Beijing’s growing assertive behaviour, human rights abuses in Xinjiang and Hong Kong, and its attempt to undermine international institutions and the current world order. The rise of China’s aggressive posture in the Taiwan Strait and the South China Sea has also impacted the relationship.
Xi’s visit to France, Serbia and Hungary
France was Xi’s first destination where he met with his French counterpart to discuss issues such as the Russia-Ukraine war and trade disputes. For the Chinese leader, the visit was meant to bring “strategic convergence” between the two capitals along with shaping the bilateral ties in a way to contribute to “stability and positive energy in a turbulent world.”[xiv] In a joint press conference, President Xi, said that the two sides agreed on “consolidating the strategic stability of their bilateral relations, exploring great potential for mutually beneficial cooperation, accelerating people-to-people exchange and building greater consensus on global cooperation.”[xv] The two sides signed a total of 18 bilateral cooperation agreements.
President Xi also advocated the cessation of hostilities around the world during the Paris Olympics, which are scheduled to take place from July 26 to August 11 this year. On the question of Ukraine, Xi reiterated his country’s position that only engagement and dialogue can build mutual trust and lead to a “balanced, effective and sustainable security architecture in Europe.”[xvi] Analysts believe that Macron could not get anything significant on the issue of the Ukraine crisis and the ongoing trade dispute except that Xi agreed to suspend Chinese customs duties on French cognac, which are under investigation in China, as a response to the EU’s ongoing investigations against Chinese goods, particularly EVs, on the charges of state-backed subsidies and overcapacity. Xi not only rejected the European accusations of overcapacity and state-backed subsidies but also advocated, instead, dialogue and strategic coordination to address economic and trade frictions.
Xi and Macron were also joined by the President of the European Commission Ursula von der Leyan to discuss the broader issues of the EU-China relationship, such as the Chinese disruptive trade practices, the Ukraine War, and the volatile situation in the Middle East. Though other topics, such as climate change, biodiversity protection and removing poverty were also discussed, the talk between the three leaders mainly focused on the trade aspect of the relationship.[xvii] Leyan’s presence at the table was an attempt by Macron to signal European unity on the trade issue with China and address broader EU concerns pertaining to trade disputes, deficits and greater access to the Chinese market.[xviii] However, nothing concrete came out of the dialogue as Xi denied his country’s overcapacity problem and suggested that the EU should develop the right perception of China and adopt a positive China policy.
Contrary to his visit to France, Xi’s trip to the other two European countries — Serbia and Hungary — were more productive, from a Chinese perspective, as the two sides signed trade and investment deals and made commitments to strengthen and expand their cooperation. Serbia, which enjoys EU candidate status, not only signed 29 agreements promoting legal, regulatory and economic cooperation, but it also became the first European country to sign the “shared future” document as the Serbian President announced his decision to “deepen and elevate the comprehensive strategic partnership between China and Serbia.”[xix] Unlike his visit to France, Xi did not have to face discussions on his country’s trade practices in Europe or his role in the Ukraine War. Rather, he was accorded a very warm and enthusiastic welcome amidst a wave of crowds chanting “China, China,” signalling the depth of the relationship. The Free Trade Agreement, signed between the two countries last year, will also operationalise this year, guaranteeing a free tariff export of 95% of Serbian products to China over the next 10 years.[xx] As the Serbian President, Aleksandar Vucic, declared China to be the “iron-clad partner,” the two sides reiterated their positions on the need for supporting each other’s sovereignty.[xxi] This means that Serbia will continue to follow the One China Policy in exchange for China recognising Kosovo, which had declared independence from Serbia in 2008, as an integral part of Serbia.
Hungary marked the last stop where the two countries signed a strategic cooperation agreement.[xxii] It is the real Achilles heel in the EU’s attempt to counter China’s economic and strategic rise in the continent. Under the populist leader Victor Orban, Hungary has become an important trade and investment partner for Beijing and is seen by it as a strategic foothold inside the EU bloc. While many of the EU nations have prioritised “de-risking” their economic relation with Beijing, Hungary has embarked on a journey of greater political-economic integration with China. This was evident during the visit of Xi Jinping when the two countries elevated their relationship to an “all-weather comprehensive strategic partnership for the new era,”[xxiii] which made the country a member of Beijing’s “circle of friends” who supports China’s efforts to counter US hegemony and receive in return investments, trade and diplomatic support.[xxiv]
The two countries signed 18 agreements, which included decisions like expanding cooperation in the nuclear industry and construction of a $2.1 billion Budapest-Belgrade railway project, part of the BRI, financed by a loan from China.[xxv] Contrary to the hardened approach of the EU against Chinese EV sector, Hungary has facilitated the construction of Chinese EV battery plants worth 7.3 billion euros that could upend the competitiveness of the European auto industry.[xxvi] Hungary’s aspiration to emerge as a leading hub of lithium-ion battery manufacturing has appealed to China, as the country can serve as a manufacturing base for Chinese companies that could easily skirt the EU’s import tariffs and continue to be competitive on the continent.[xxvii]
Where is the relationship headed?
The relationship between Europe and China stands at a critical juncture. Since 2003, when the EU signed a comprehensive strategic partnership with China, the relations have prospered with regular exchanges, dialogues and an enhanced level of cooperation. However, as China has become more assertive and has begun to challenge the notions and beliefs considered dear to the West, the rift in the relationship is visible now. As Brussels prepares to de-risk, and in all probability, engage in a trade-war-like situation with Beijing, the path to a stable and predictable EU-China relationship remains thorny. In fact, the visit by President Xi was aimed at addressing this discomfort, however without giving much concessions, while the EU is looking towards reducing its vulnerabilities and enhancing its leverage over China.
The common perception in the EU is that China, which benefited from the post-Cold War multilateral order, is challenging the international order to seek dominance. It was widely believed that trade and economic ties would eventually lead to the democratisation of China. However, contrary to this, China chose a path of conflict and confrontation with the West rather than cooperation. Today, EU is more focussed on understanding China’s intentions and capabilities and matching them with realities and facts on the ground.[xxviii] The growing realisation in Brussels that China is difficult to cooperate with and hence it needs to be managed and balanced now guides policy decisions in European capitals. However, there is also a lack of unity and consensus among the EU members on this issue. This rift is particularly visible in the foreign policy choices of countries like Hungary, which are willing to derail EU efforts of de-risking for bilateral gains.
To address the multifaceted challenges and threats coming from China, the current European Commission President, Ursula von der Leyen, advocated a de-risking approach, which became the EU’s standard response to risks associated with commercial and technological ties with China. With the pro-European centrist parties winning majority seats in the recently concluded elections for the European Parliament, it is expected that Leyen will secure her second term who will then continue her de-risking strategy. Under her Presidency, the EU will continue to focus on economic security and managing risks against China through a number of defensive tools to challenge and counter Beijing’s market distortionary practices in Europe.
On the question of alleged Beijing support to Russia, the EU approach will continue to be critical of Beijing. As the United States has stepped up its diplomatic efforts to convince Europe of China’s direct support to the Kremlin, it is expected that the EU will further harden its stance on Beijing.[xxix]
Tariff wars may also add to the already-dwindling relations between the EU and China. The EU has already taken a hard stance and launched investigations against China’s overcapacity and distortive subsidy practices. Thus, the EU’s decision, after the upcoming elections, to put punitive tariffs on Chinese EV makers to protect its own automative industry should not come as a surprise.
Overall, Europe will continue to adopt a firmer stance against China on the issues of increasing trade deficit, unfair trade practices, support for Russia and human rights concern.
Conclusion
Xi Jinping’s visit to Europe was keenly watched across the world, as the relationship between the two stands at its lowest level today. The fact that Xi Jinping refused to make any significant concessions on the EU’s allegations of China’s unfair trade practices and its continued support for Russia will guide the future of China-EU relations. As the Europeans elect a new Parliament and European Commission President Ursula von der Leyen looks at another term, the relations between the EU and China will remain troubled. Leyen has been known for taking a tough stand on the issue of China’s unfair trade practices and trade deficits. As China struggles on its own domestic economic front, a new trade war is the least it would prefer.
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*Aman Kumar, Research Associate, Indian Council of World Affairs, New Delhi.
Disclaimer: Views expressed are personal.
Endnotes
[i]DSEU. “EU-China relations factsheet”, The Diplomatic Service of European Union, 07 December 2023, https://www.eeas.europa.eu/eeas/eu-china-relations-factsheet_en (Accessed 26 May 2024).
[ii] Jamil Anderlini & Clea Caulcutt. “Europe must resist pressure to be become ‘America’s followers’, says Macron”, Politico, 09 April 2023,https://www.politico.eu/article/emmanuel-macron-china-america-pressure-interview/ (Accessed 26 May 2024).
[iii] Manoj Joshi. ”A visit to preserve China’s interests in Europe”, The Hindu, May 24, 2024, https://www.thehindu.com/opinion/op-ed/a-visit-to-preserve-chinas-interests-in-europe/article68208651.ece (Accessed May 26, 2024).
[iv] Kylie Atwood. “China is giving Russia significant support to expand weapons manufacturing as Ukraine war continues, US officials say”, CNN, April 12, 2024, https://edition.cnn.com/2024/04/12/politics/china-russia-support-weapons-manufacturing/index.html (Accessed May 26, 2024).
[v] Andrea Shalal. “EU sees signs China supplying dual-use components to Russia, Dombrovskis says”, Reuters, 08 April 2024, https://www.reuters.com/world/eu-sees-signs-china-supplying-dual-use-components-russia-dombrovskis-says-2024-04-18/ (Accessed May 26, 2024).
[vi] Reuters. “EU probes into Chinese subsidies and imports”, Reuters, May 17, 2024, https://www.reuters.com/business/eu-probes-chinese-subsidies-imports-2024-04-19/ (Accessed 26 May 2024)
[vii] Ibid
[viii] Jorge Valero and Alberto Nardelli. “EU moves towards hitting China with tariffs on electric vehicles”, Bloomberg, March 06, 2024, EU Moves Toward Hitting China With Tariffs on Electric Vehicles - Bloomberg,(Accessed May 26, 2024).
[ix] Reuters. “Cases of suspected Chinese espionage in Europe”, Reuters, April 23, 2024, https://www.reuters.com/world/europe/cases-suspected-chinese-espionage-europe-2024-04-23/
(Accessed May 26, 2024).
[x] Pieter Haeck. “EU wants spies on university campuses to fight Chinese tech espionage”, Politico, May 23, 2024, https://www.politico.eu/article/academic-research-campus-eu-universities-intelligence-services-china-spying-technology/ (Accessed May 26, 2024).
[xi] Reuters. “Cases of suspected Chinese espionage in Europe”, Reuters, April 23, 2024, https://www.reuters.com/world/europe/cases-suspected-chinese-espionage-europe-2024-04-23/
(Accessed May 26, 2024).
[xii] Jorge Liboreiro. “After Russiagate, MEPs rush to denounce emerging Chinagate”, Euronews, April 23, 2024, https://www.euronews.com/my-europe/2024/04/23/after-russiagate-meps-rush-to-denounce-emerging-chinagate (Accessed May 26, 2024).
[xiii] Ibid
[xiv] AP. “Chinese president arrives in Europe to reinvigorate ties at the times of global tension” AP News, May 05, 2024, https://apnews.com/article/china-xi-jinping-europe-france-8561c3ae65caf2cdd8338b887a3a8df1
(Accessed May 26, 2024).
[xv] MFAPRC. “Remarks by H.E Xi Jinping, President of the People’s Republic of China at the joint meeting with the press with H.E Emmanuel Macron, President of the French Republic”, Ministry of Foreign Affairs of the People’s Republic of China, May 07, 2024, https://www.mfa.gov.cn/eng/zxxx_662805/202405/t20240507_11293718.html (Accessed May 26, 2024).
[xvi] Ibid
[xvii] Tara Varma. “Xi’s visit exposes fault lines in European unity”, Brookings, May 08, 2024, https://www.brookings.edu/articles/xis-visit-exposes-fault-lines-in-european-unity/ (Accessed May 26, 2024).
[xviii] Aljazeera. “Key takeaways from China’s Xi European tour to France, Serbia and Hungary”, Aljazeera, 10 May 2024, https://www.aljazeera.com/news/2024/5/10/key-takeaways-from-xi-jinpings-european-tour-to-france-serbia-and-hungary (Accessed May 26, 2024).
[xix] The Hindu. “China and EU-candidate Serbia sign an agreement to build a ‘shared future’,” The Hindu, 09 May 2024 https://www.thehindu.com/news/international/china-and-eu-candidate-serbia-sign-an-agreement-to-build-a-shared-future/article68154326.ece (Accessed May 26, 2024).
[xx]Branko Filipovic and Daria Sito-sucic. “China, Serbia chart ‘shared future’ as Xi Jinping visits Europe”, Reuters, 09 May 2024, https://www.reuters.com/world/chinas-xi-jinping-visit-serbia-anniversary-1999-nato-bombing-2024-05-07/#:~:text=BELGRADE%2C%20May%208%20(Reuters),edge%20of%20the%20European%20Union
. (Accessed May 26, 2024).
[xxi] Ibid
[xxii] Bela Szandelszky. “ Hungary and China sign strategic cooperation agreement during visit by Chinese President Xi”, AP News, 10 May 2024, https://apnews.com/article/chinas-xi-welcomed-hungary-talks-orban-0719880a351a5ef0763ae6a623a7798b (Accessed May 26, 2024).
[xxiii] Marton Dunai and James Kynge. ” Xi Jinping upgrades China’s ties with Hungary to al-weather partnership”, Financial Times, 10 May 2024 lhttps://www.ft.com/content/563be6d0-ab62-47cc-9076-5dd20cac8cbd (Accessed May 26, 2024).
[xxiv] James Kynge. “China makes Hungary a model for diplomatic ties in Europe”, Financial Times, 11 May 2024, https://www.ft.com/content/5b55ef85-b884-449a-8ccc-c9273cc5e9ff (Accessed May 26, 2024).
[xxv]Anita Komuves and Boldizsar Gyori. “China’s Xi Jinping says China-Hungary relations an all weather strategic partnership”, Reuters, 09 May 2024 https://www.reuters.com/world/europe/chinas-xi-jinping-hungary-discuss-ukraine-infrastructure-2024-05-09/ (Accessed May 26, 2024).
[xxvi] Bela Szandelszky. “ Hungary and China sign strategic cooperation agreement during visit by Chinese President Xi”, AP News, 10 May 2024, https://apnews.com/article/chinas-xi-welcomed-hungary-talks-orban-0719880a351a5ef0763ae6a623a7798b (Accessed May 26, 2024).
[xxvii] James Kynge. “China makes Hungary a model for diplomatic ties in Europe”, Financial Times, 11 May 2024, https://www.ft.com/content/5b55ef85-b884-449a-8ccc-c9273cc5e9ff (Accessed May 26, 2024).
[xxix]Stuart Lau. “US warns Europe to get serious about China’s aid to Russia”, Politico, 29 May 2024, https://www.politico.eu/article/us-europe-china-aid-russia-trade-tariffs-kurt-campbell/ (Accessed June 01, 2024).