Xi's European tour: a strategic bid to loosen EU‑US ties

The European Union has changed its stance towards China. The approach is getting tougher, and the Middle Kingdom can no longer count on an "open arms" policy. Brussels increasingly speaks with one voice with Washington and introduces further restrictions designed to protect the internal market from Chinese domination.

For Beijing, Europe's rapprochement with the USA is the realization of nightmares in the international power game. In the Chinese strategy, if it is not favorable to them, it must at least remain neutral. Therefore, Chairman Xi Jinping is embarking on a mission to the Old Continent. During a five-day visit, he will visit France, Serbia, and Hungary. The goal will be to drive a wedge between America and Europe.

"The visit of the Chinese leader to Europe is the first visit since the full-scale invasion of Europe. Xi will try to soften the mood: since the pandemic, the European Union has felt threatened by China, and in recent years this has been clearly reinforced by China's support for Russia," assesses Jan Strzelecki, deputy manager of the World Economy Team at PIE.

The Chinese leader will therefore seek not only to warm up his image but also to convince the leaders of these countries that he has much more to offer, cooperation will bring mutual benefits.

"China is trying to present potential benefits of economic cooperation to European countries: we saw this during the recent visit of the German Chancellor to Beijing. Cooperation with selected countries for China is to soften European policy towards China, and thus also counteract the rapprochement of positions between the EU and the USA," states a PIE expert.

A week ago, Chin Wang Yi, the Chinese Foreign Minister, expressed hope that Paris would be able to persuade Brussels to pursue a more pragmatic policy towards Beijing.

Over the past years, Europe has significantly revised its policy towards Chinese investments. Already in 2021, the European Parliament issued a report on the new EU-China strategy. Beijing was directly named in it as an "economic competitor" and a "systemic rival". The Russian invasion of Ukraine in 2022 and the support it receives from Beijing further increased the distance between the EU and China.

Even Germany, which until recently pursued a very open economic policy towards China, changed its attitude. When in July 2023 the government in Berlin adopted a strategy to reduce "Chinese risk", it irritated Beijing so much that the next day after its publication, China sent a sharp diplomatic note -  you can read more about it in our article.

Since then, Brussels has also started to pay more attention to Chinese investments in Europe, the activities of Chinese companies, and introduce further defensive mechanisms for its own market.

It also announced the strengthening of economic sovereignty - reducing the import of semiconductors and rare earth materials from the Middle Kingdom. New regulations on the control of foreign investments in the EU have also appeared. The so-called screening mechanism, modeled on the American one, has already been used to block strategic investments in Bulgaria and Romania (including the construction of a nuclear power plant) that are important from China's perspective.

"In many areas, there are serious concerns about the use of Chinese capital influence to exert pressure, but also outright concerns about security in the face of deep cooperation between Beijing and Moscow. This is the case, for example, in the maritime transport sector, where China through the state-owned and Beijing's interest-serving giant conglomerate COSCO could potentially disrupt supply chains," admits Strzelecki.

In recent times, much attention has also been devoted to the issue of energy security in connection with the expansion of Chinese companies in leading renewable energy technologies - solar panels and wind turbines and their components. The technological race and the expansion of Chinese suppliers have become a serious problem for Europe, which has an ambitious energy transformation program. Solar power plants and wind farms are to be the main sources of energy.

Brussels does not want to allow a situation where dependence on Russian materials is replaced by dependence on Chinese producers. Additionally, wind farms and solar plants are already critical infrastructure potentially endangered by attacks, including cyber attacks. That's why the European Commission is already working on further legal solutions that will not only secure the market but will counteract potential threats.

The EC has initiated proceedings against Chinese wind turbine suppliers in Spain, Greece, France, Romania, and Bulgaria, which was met with criticism from the Chinese authorities. The issue concerned whether subsidies obtained by the consortia allowed Chinese companies to submit unfair bids.

"China is an economic rival. There would be nothing wrong with that if not for unfair competition in many areas. EU countries have repeatedly accused China of violating WTO rules, technology theft, dumping, protectionism towards EU goods, subsidizing production to the detriment of EU producers. France, which Xi will visit, for example, strongly supported the EC's actions concerning unfair competition in the automotive sector, especially electric car production," notes Jan Strzelecki.

Europe is important for China. They have invested heavily in building trade routes, infrastructure projects, and logistic centers.

At the end of February, hosting in Spain, the head of Chinese diplomacy Wang Yi emphasized the need to develop free trade between the Middle Kingdom and the European Union, which he described as an "important force" in the world.

As the PIE expert emphasizes, China benefits from economic cooperation with Europe, as it was one of the most open markets for China.

"Beijing cares, among other things, for the next European Commission, which will be constituted in the fall of this year, to be less assertive towards China. But strategic interests are also important. From China's perspective, maintaining relations with European countries in the face of competition with the USA is very important. Therefore, they strive to soften the EU policy. Xi will visit both France, which in the EU expresses a more "hawkish" stance, and Hungary, which cooperates with Beijing politically and economically," assesses Strzelecki.

Macron and the President of the European Commission, Ursula von der Leyen, will have a trilateral meeting with Xi Jinping, and the USA will certainly be closely watching the Chinese leader's visit to Europe.

The Union is developing its own direction, balancing between two hegemons.

The PIE expert highlights that "The European Union must take into account China while pursuing its interests related to economic security: strengthening instruments, countering unfair competition, or the economic blackmail that took place from China towards Lithuania."

"Cooperation with China is necessary: however, it should not undermine the idea of de-risking, building economic resilience, which has been strengthened in the EU in recent years – we are still too dependent on China in many areas and exposed to threats," concludes Strzelecki.