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Xi Jinping hopes to Drive a Wedge between Europe and US

The Geopolitical Stakes of the Xi visit to Europe

President Xi Jinping’s recent trip to Europe reveals a shift in dynamics since his last visit five years ago. European leaders are now focused on “de-risking” by moving investments and supply chains away from China. Despite Xi’s charm offensive, warnings were issued against Europe’s trade protectionism. The trip aimed at damage control to prevent worsening ties with Europe and exploit divisions within European countries amid the war in Ukraine.

French President Emmanuel Macron’s efforts to enhance France’s relationship with China have been ongoing since 2018, with a focus on strengthening Franco-Chinese ties and promoting European values. Macron’s recent interactions with Chinese President Xi Jinping have involved discussions on topics such as the war in Ukraine, global issues, and bilateral trade relations. Despite Macron’s charm offensive and attempts to foster a closer personal relationship with Xi, there are concerns about potential divisions within Europe regarding relations with China.

Mixed messages are being sent by the EU concerning China. For example, position of the European Commission is concern about Chinese economic competition, thus the unveiling by Present von der Leyen of the Economic Security Strategy. Positions between France and Germany are not unified as German Chancellor Olaf Scholz had visited China twice and had turned down Macron’s offer to join him. The meeting of Xi with both von der Leyen and Macron in Paris did not include Scholz as he had turned this down. On top of this we have countries such as Hungary and Serbia aligning closer to China. This plays well for Xi since the goal of China is to drive a wedge on trans-Atlantic policy on China. The question is will the US and EU overcome these divisions.

In the midst of these diplomatic efforts, Macron faces the challenge of navigating the complex dynamics between China and the European Union. The EU has been seeking to assert its interests and values in its relationship with China, particularly in areas such as trade, human rights, and security.

Macron’s approach to China reflects France’s broader strategy of balancing its economic interests with its commitment to upholding European values and principles. By engaging with China on a range of issues while also working within the framework of the EU, Macron aims to promote a more unified European stance towards China.

As Macron continues to pursue closer ties with China, he must also address domestic concerns about Chinese investments in key sectors of the French economy and potential security risks. Balancing economic opportunities with national security considerations remains a delicate task for Macron as he seeks to advance France’s position on the global stage.

On the US side, tariffs are being discussed on EV automobiles and strategic sectors and may be enacted by next week. For the Europeans, we also expects tariffs on EVs but Europe needs to walk a finer line geopolitically. On trade, the EU has a bigger stake in China and any retaliation by the Chinese would impact European especially German companies to a greater extent than the US.

The Xi visit plays into Mr. Orbans’s goal to make Hungary an EVs and battery hub. China has invested over $10 billion mostly into the EV sector Hungary. This has resulted in growing worries in the European Union on unfair subsidies on Chinese EV manufacturers. Any tariffs by the EU apply across all member countries and would probably impact intermediate parts sourced from China into Hungary.

The geopolitical aim of China to split European countries on policy started off when Chinese President Xi Jinping visited Serbia and Hungary, highlighting the strong economic ties and investments between China and these Eastern European countries. Both Serbia and Hungary are members of Beijing’s Belt and Road Initiative (BRI), with substantial Chinese funding in various sectors, including a new free trade agreement between China and Serbia. These countries have shown alignment with China on various international issues, such as not recognizing Taiwan’s sovereignty and supporting each other’s territorial claims. Despite the economic benefits, human rights abuses in China and Beijing’s support for Russia are not publicly criticized by Serbia and Hungary.

Key Points:
• European countries are shifting investments away from China, moving towards “de-risking.”
• Xi Jinping’s charm offensive was accompanied by warnings against Europe’s trade protectionism.
• China is transitioning its economy towards high-end manufacturing and aims to lead in exports of electric vehicles, lithium batteries, and solar panels to Europe.
• Diplomatic relations remain at a stalemate, with China’s non-interference policy affecting its stance on the war in Ukraine.
• China seeks to exploit divisions within Europe and reduce European reliance on the US through diplomatic maneuvers and economic partnerships.

Future Implications:
• The strained relations between China and Europe may lead to further economic decoupling and diversification of supply chains.
• Europe’s focus on “de-risking” could impact China’s long-term economic growth and influence in the region.
• China’s ambitions to lead in key industries such as electric vehicles and renewable energy may face challenges if European countries continue to reduce their reliance on Chinese products.
• Geopolitical tensions, particularly regarding the war in Ukraine, could further complicate diplomatic relations and trade partnerships between China and Europe.
• Both China and Europe will need to navigate these challenges carefully to maintain a balance between economic interests and geopolitical considerations.