China’s Leader Going to Europe to Talk over Trade and Ukraine

Beijing will have to pay a price for failure to stop supplying Russia’s defense industry

The President of the People's Republic of China, Xi Jinping on Sunday, May 5, left for an official visit to Europe, the first such visit in five years.

President Xi’s European tour will include visits to France, Serbia, and Hungary, focused primarily on issues of economy, trade and investment.

Ukraine will be another highlight of Xi's talks with the leaders of European countries, primarily in the context of China's close ties with Russia.

A VISIT TO FRANCE WITH THE EU IN THOUGHT

Xi's trip to Paris comes at a time when the European Union has decisively set out to streamline its trade and economic ties with China. First of all, this is about restrictions on cheap Chinese imports into the EU and securing European manufacturers from discrimination in China.

Last year, the European Commission launched several investigations in connection with the Chinese government illicitly subsidizing manufacturers of electric vehicles, solar panels and other elements of green energy to allow them to trade at significantly lower prices, thus muscling European manufacturers out of their own market. It’s not that other governments do not help their manufacturers or give them subsidies or some kind of economic preferences, but, as argued by Western analysts, the amount of subsidies China allocates to its businesses is three to nine times that of other major economies.

It’s for a long time that European companies have been complaining about restrictions on access to the Chinese market and about unfair competition. The European Commission, in late April, even had to open an investigation into the rules and practices of government procurements of healthcare equipment in China, thus responding to complaints from EU healthcare equipment manufacturers and suppliers about being subject to discriminative treatment in the Chinese market.

Although Brussels has repeatedly lashed out criticism against Beijing for this kind of non-market practices, it had refused to the last to take drastic action. But the Chinese authorities, seeking to support economic growth in own country, were ignoring the criticism and continued to do what they thought was appropriate, expanding further production capacities and establishing all kinds of preferences for local manufacturers.

If the European Commission's investigation, which has been under way for almost a year now, confirms suspicions of excessive government subsidies, which seems highly likely, higher tariffs will be imposed on Chinese imports to match their price with similar products made in Europe. This is going to cause major  economic losses for Chinese businesses, and it is a matter of growing concern for Beijing.

Therefore, President Xi will obviously be more concerned about the future of relations with the EU than with France, where everything is good more or less, and one of the principal aims this trip is supposed to achieve will be to lobby against the European Union’s economic security strategy. In this matter, Beijing places great expectations on Paris as a leader of the EU and on its ability to influence the bloc's leadership.

Last week, China's Foreign Minister, Wang Yi said this explicitly to Emmanuel Bonne, a diplomatic adviser to the Presidnet of France. According to China’s top diplomat, Beijing is expecting that the French side will be able to encourage European Union to proceed with a "positive and pragmatic policy" towards China.

China’s expectations on France are not accidental. In early April a year ago, French President Emmanuel Macron visited China and spent several days in Xi's company; he held official talks first in Beijing, then, in a less formal setting, in Guangzhou, a city in southern China. After that visit, which, according to official reports by the Ministry of Foreign Affairs of the People's Republic of China, took place "in a warm and friendly atmosphere", and, as believed by analysts, “according to Beijing's scenario”, it appeared that the visit had brought Macron and Xi closer to each other, and so such expectations are only reasonable for the Chinese party.

Furthermore, among the 27 member states of the European Union there are both strong opponents of China and those who are pushing for closer ties with Beijing. With this in mind, China seeks to use the long-known divide-and-conquer approach in an attempt to drive a wedge into the unity of the EU's China policy.

Such expectations, however, seem to be futile. A few days before the Chinese leader's visit to France, it became known that Macron had invited the European Commission President Ursula von der Leyen, one of the biggest critics of China within the EU, and German Chancellor Olaf Scholz, who recently visited China, to attend talks with Xi in Paris.

It remains unknown whether or not such a format of negotiations had been agreed upon between the Elysée Palace and Beijing, but it will definitely be not to the liking of the Chinese party. Therefore, the talks on issues of both trade and Ukraine, which will be discussed below, are promising to be hard and uncomfortable for the Chinese leader.

A TRIP TO FRIENDS

The planned visits by the leader of the People's Republic of China to Serbia and Hungary will have a completely different agenda from what it was with respect to France. Those two countries, China’s only "sincere friends" left in Europe,  will do their best to make Xi feel happy. Belgrade and Budapest have stated it will be a "great honor" for them to host the Chinese leader in their countries, and the more so as the two capitals are placing great expectations on major Chinese investments.

Analysts believe China has chosen Serbia and Hungary, the two countries in Europe that are pro-Russia and big recipients of Chinese investment, to push for closer economic and diplomatic ties and keep the two in its geopolitical orbit. To achieve this, Beijing even committed to resume financing of a high-speed Budapest-Belgrade rail link construction project worth $1.9 billion, although the economic feasibility of the project is questioned by experts due to high investment payback risk.

The agenda for the Chinese leader’s visits to both Serbia and Hungary was not made public. But observers remind that his visit to Belgrade coincides with the 25th anniversary of the bombing of the Chinese embassy in Serbia, when all the Chinese diplomats who were in the premises died after a US strike accidentally hit the compound during Nato’s air campaign against Serb forces occupying Kosovo.  This incident later acquired a special place in Sino-Serbian relations.

The ruined embassy building has been reconstructed to host a Chinese cultural center, which is planned to become the largest such center in Europe. Reconstruction works were completed two years ago, but the center is yet to be opened officially. The delay is believed to be in anticipation of Xi's visit, during which the center will be inaugurated.

In Hungary, the emphasis will be on the economic and investment aspects of bilateral relations. The country's prime minister, Viktor Orbán is lobbying for greater Chinese investment and closer ties with Beijing amid growing disagreement with Brussels. The statements by the Hungarian Minister of Foreign Affairs, Peter Szijarto, regularly appear in the columns of major Chinese media outlets.

It is also worth a mention that Orbán was the only EU representative to attend the Third High-Level Forum of the Belt and Road Initiative (China's global infrastructure megaproject), which took place last November in Beijing. The Hungarian Prime Minister was seated in a seat of honor in the front row, along with Xi and Russian dictator Putin.

In Budapest, Xi and Orbán are expected to announce the start of a major construction project in Hungary -- a factory of one of China's largest auto manufacturers, Great Wall Motor. The Chinese automaker, in partnership with Mercedes-Benz, intends to invest about $7.6 billion in the project, which will be the largest foreign direct investment in Hungary's history and will create about 9,000 new jobs.

This complements last year's announcement by Chinese auto giant BYD, one of the world's largest electric vehicle manufacturers, of plans to build its first European factory in Hungary. Large Chinese corporations appear to be seeking to make the most of the favorable treatment given to them by the Hungarian authorities and locate their production facilities in the closest possible proximity to solvent European market.

Xi's visit to Budapest at this time is also important in view of Hungarian presidency the Council of the European Union in the second half of the year, which will provide it leverage to influence EU's China policy into making it softer. As stated by Wang Yi, China is expecting that Hungary, after it takes over the rotating presidency of the European Union, will contribute to the EU's "rational and benevolent view of China's development" and facilitate a more positive and pragmatic EU policy towards the PRC.

The trips by the Chinese leader to Serbia and Hungary are also important to Beijing in terms that these will demonstrate that it still maintains significant influence over Central and Eastern Europe (CEE) amid negative trends toward losing ground. Thus, the 17 + 1 Format, China’s tool to create a sphere of influence in Central and Eastern Europe using soft and hard power, has been degrading over the past few years. Lithuania, having become disappointed with this format, left it, and the other 16 countries lowered the level of their representation and the Format’s overall priority for themselves.

At the same time, the longer the Russian invasion of Ukraine continues and China’s neutrality, which is to say pro-Russian bias becomes more obvious, the pace at which Beijing is losing influence and positions within Europe will only accelerate. It therefore looks highly reasonable that Xi is seeking to keep and help his few friends left in Europe.

THE UKRAINIAN ISSUE

The ongoing Russo-Ukrainian war will be among the main topics of Xi's talks during his European tour. However, the war issue will probably be talked over in different terms first in France, then in Serbia or Hungary.

The President of France, like the Chancellor of Germany a month earlier, said just days before his trip to China, that he would call on the Chinese leader to influence Putin and encourage him to stop the war he is waging in Ukraine. Such a message from the European leaders will acquire an extremely powerful significance, and especially so with Von der Leyen and Scholz attending the Paris talks.

However, it would be futile to hope that Xi will heed to that message or at least be brave enough to say something of that kind to the Russian leader. China has decided on its stance regarding the war. It has chosen a wait-and-see position, allowing events to develop without its intervention, while at the same time intensively trading with Russia in products not covered by Western sanctions.

For the European side, it would be more appropriate to warn Beijing about the consequences of Chinese companies supplying dual purpose goods to the aggressor country and thereby supporting the Russian Federation’s military-industrial capability. This is what US Secretary of State, Anthony Blinken bluntly warned Chinese leaders about during his visit to China last week.

Blinken said that Chinese-supplied machine tools and microelectronics are used in the production of missiles, drones, tanks and other weapons that Putin is using to continue his invasion of Ukraine, and emphasized that this causes growing concern among European allies. The U.S. Secretary of State urged the Chinese government to take action to end such supplies and threatened the U.S. will impose sanctions against companies from the PRC if there is no response from the Chinese authorities.

A similar message will probably come from Paris as well. EU leaders and, in particular, the French president have long been telling the Chinese side that the future of European-Chinese relations depends directly on how  Beijing considers this war, how it treats this war. If China is reluctant to condemn Moscow’s war in Ukraine or help Kyiv hold out and restore its sovereignty, then let it at least not supply Russia with anything that feeds this war.

Xi's explicit demonstration of solidarity for the EU and Ukraine will come for Beijing as an important message about the unity of democracies in confronting a country that violates international rules, as well as about the futility of hopes to divide them or wait until they become tired of war. For Beijing, who is considering own "special military operation" against Taiwan, this is extremely essential.

Regarding the trips by the Chinese leader to Serbia and Hungary, it is likely that the Ukrainian issue will be discussed there in different terms, probably more friendly towards Russia. In Belgrade and Budapest, the word "aggression" will definitely not be mentioned. They will instead accuse NATO and the United States of inciting the war, criticize anti-Russian sanctions and military aid to Ukraine. These pro-Russian flirtations, more targeted at their own audiences, are not going to come as a surprise to anyone in European capitals, and no one is going to take notice of them either.

One more important aspect in the context of Xi's European tour is related to the Global Peace Summit that is set to take place this June in Switzerland. Russia has not been invited to this forum, but China's attendance would be essential, and Ukraine, as the head of the Presidential Office, Andriy Yermak stated, is “making every effort to engage Chinese delegates in participating in the event”. The hope for China’s attendance, albeit little, is still there despite the frantic efforts being made by Moscow if not to thwart the forum in Switzerland altogether, then at least reduce to the minimum the number of attendees.

China has received an invitation to attend the summit, but is still silent on its plans. Western media outlets reported that China’s special envoy for Eurasian affairs, Li Hui, during his most recent  mission in March, allegedly told European partners that China would not attend the forum if Russia wasn’t invited, but this announcement was omitted in official reports.

Chinese leaders have instead been reiterating since March that China is pushing for an international peace conference in which both Ukraine and Russia would participate on equal footing and where all settlement options would be on the table.  He said China is ready to embrace any measures that would contribute to de-escalation and negotiations. Such a broad formulation allows much room for maneuver and interpretation depending on the situation.

For example, one can go to attend a meeting in Moscow while boycotting  the summit in Switzerland, or  send a representative to attend the summit under the pretext of the need to be aware of the discussions. The latter seems more likely because China, seeking a global leadership role, wants the creation of a hypothetical anti-Western coalition centered around the Global South.

Consequently, if most of the countries of the Global South are represented in Switzerland, which is very likely, and China is not, then what Beijing’s leading role in an anti-Western coalition can be talked about? And it is almost beyond doubt that Brazil, South Africa, India and the monarchies of the Middle East will send their representatives to Switzerland.

In this case, there can be talk only about an anti-Western coalition consisting of Russia, Iran, North Korea and several other small and weak economies allied to Moscow. Such a format would not meet China's ambitions and expectations of economic advancement.

Instead, China could use the rostrum of the Global Peace Summit to once again declare, among other things, loudly and for the whole world to hear, about its peace-making efforts amid the Russo-Ukrainian war and to call for peace negotiations. Such a speech in Switzerland could be delivered, say, by the special envoy Li Hui, who is most immersed in the topic of war.

As Lin Jian, the spokesperson for China’s Foreign Ministry said while announcing the Chinese President’s three-country European tour, the visit "will add stability to Sino-European relations and make a new contribution to global peace and stability." What the Chinese leader will hear during this visit, and especially during his meetings in Paris, will propably prompt him to reflect accordingly. So we really want to hope that China will act in a pragmatic and responsible manner, which it very often urges other countries to do.

Volodymyr Sydorenko, Beijing

Headline photo: Justin Chin / Getty Images