China is obliged to play its cards with dexterity. Even in an adversarial atmosphere, it has shown a willingness to engage the US, conscious of both its strengths and vulnerabilities. This would explain the series of high-level visits of US officials to China after last year’s Biden-Xi summit in San Francisco. Beijing is confident that the US cannot decouple itself from China – the world’s second-largest economy, the biggest manufacturing power, as well as the biggest exporter. The Chinese market opportunities are far too big to be ignored by American corporations. China also controls many critical technologies and raw materials that are critical, for instance, for the green transition. The US can reduce its dependence on China in a few important areas, but that is going to take time. Thus, the world’s two biggest economies will have to strike a new balance of interests – within a security paradigm.
At the same time though, China is aware that its economy is facing headwinds. It has a vested interest in globalisation so as to propel its own growth and prosperity. It would like to avoid a confrontation with the US even as it is willing to push back strongly through its aggressive moves in the Taiwan Strait and the South China Sea, as well as the anti-US verbal attacks by Chinese leaders and spokespersons.
China cannot ignore America’s repeated attempts to deny it access to the most advanced technologies, as well as to its market by imposing prohibitive tariffs on products like EVs that, in America’s view, can further damage its industrial base. The US is also developing its own capacities in various areas, such as semiconductors, to reduce its dependence on China, and aims to ultimately develop an industrial policy of its own.
Germany’s Dependence On Europe
China is also aware of the US’s pressure on Europe to follow its lead in technology denial measures against it. Europe cannot entirely reject such pressures given the tight security linkages with the US. But the two have a history of sharp differences on many economic issues.
Germany is highly dependent on the Chinese market, which explains the recent Beijing visit of Chancellor Olaf Scholz accompanied by CEOs of major German corporations. On the other hand, President Xi Jinping visited France most recently, followed by a trip to Hungary and Serbia, both of which are demonstrably pro-China and at odds with the EU over the Ukraine conflict as well as the union’s excessive liberalism. Already, the EU is concerned about China using the two nations to exploit the cracks in European unity.
China would like to capitalise on EU-US differences. It has been openly encouraging Europe to play an independent role in international affairs. During his visit to France, Xi, in brief televised comments, could be seen urging President Emmanuel Macron to join him in showing “independence”, “prevent a new Cold War” between blocs, “work together for an equal and orderly multi-polar world”, and oppose the “decoupling” of China’s supply chains and other economies.
Befriending The Dragon Independently
Scholz and Xi’s visits can be seen as Europe’s own parallel engagement with China, independent of that of the US. This gives China an opportunity to undercut a joint US-Europe front against it.
France is less dependent economically on China than Germany, but the Chinese market is the biggest one for its luxury goods, besides the valuable Sino-French cooperation in nuclear, aviation and agriculture areas. Germany is far too deeply tied to the Chinese market to follow a more aggressive approach towards China on trade and investment. Given that and the weakening of the French-German tandem within the EU, Macron, with his ambition to lead Europe, has chosen to take the lead and shape the course and discourse on EU-China ties.
With Scholz staying away from a joint Franco-German meeting with Xi Jinping – something the French President would have preferred – the message is that France and Germany are not unified in their approach towards China. Nonetheless, in order to add weight to his talks with Xi, Macron invited Ursula von der Leyan, the president of the EU Commission, to join him instead. This was intended to convey the message that he was speaking to Xi in tight coordination with Brussels. Macron, with his newly defined vision of the EU that he feels will alone ensure Europe’s survival, raised with Xi the issues of Europe’s deficit with China, unequal market access, China’s overcapacities in manufacturing and the consequential dumping of its products in Europe.
Ursula von der Leyan was blunter. She raised the issue of Chinese subsidised products, such as electric vehicles or steel, which are flooding the European market, and called on the Chinese government to address these structural overcapacities. She expanded these concerns by stating that the EU was closely coordinating with the G7 countries and emerging economies, which are also increasingly affected by China’s market distortions. She demanded real progress on market access and threatened to make full use of the EU’s trade defence instruments if necessary, as Europe could not accept market-distorting practices that could lead to de-industrialisation at home. She also spoke of improving the resilience of Europe’s supply chains by de-risking them.
That this tough talk did not impress Xi can be gauged from his reported claim that China’s over-capacity “does not exist either from the perspective of comparative advantage or in light of global demand”.
Fault Lines
Both the US and the EU have openly demanded that China cease supporting Russia militarily in the Ukraine conflict. The possibility of sanctions on Beijing has been evoked. The Atlantic partners see no contradiction between their continuing support to Ukraine, including the supply of lethal weapons, and their opposition to China selling some precursors for ammunition and dual-use technologies to Russia, its strategic partner.
Macron told the media that he discussed with Xi Russia’s war of aggression against Ukraine and conveyed to him that without security for Kyiv, there can be no security for Europe (the flaw in this argument is the view that the extension of Russian power to Ukraine threatens Europe, but the extension of US and European power through NATO to Ukraine will not threaten Russian security). Macron welcomed Xi’s assurance regarding Chinese commitment to refrain from selling any weapons or aid to Moscow, and to strictly control the export of dual-use goods. Macron added that he was comforted by the length and quality of the exchange on this subject.
A Rather Awkward Statement
Surprisingly, the French President thanked Xi for “this moment of coordination that you wished for before President Putin’s visit to China, which will also enable us to have a common agenda and to be able to identify whether or not there is a desire to move towards … lasting peace”. Whether Xi was embarrassed by these public remarks about coordinating with France before his own discussions with Putin, especially given the degradation of France-Russia relations, can be a matter of speculation. Macron also raised the issue of Chinese participation in the Switzerland peace conference on the Ukraine crisis, and reportedly received a non-committal response.
Macron’s statement was seen as a bid to commit China formally to a position Xi had taken privately on Ukraine. The Chinese President’s response to this, in turn, was a standard one. China, he said, did not start the Ukraine crisis, nor is it a party to or a participant in it. He emphasised that instead of being an onlooker, China has been playing an important role in peace, with its special representative on Eurasian affairs engaging in shuttle diplomacy. China, he said, opposes attempts to use the Ukraine crisis to scapegoat or smear a third country or to stoke a new Cold War. China supported holding, at a proper time, an international peace conference that is recognised by both Russia and Ukraine and ensures the equal participation of all parties and fair discussions on all peace plans. It batted for a balanced, effective and sustainable security architecture in Europe. This is not a position that is helpful for either France or the EU.
A Win-Win
All in all, Xi Jinping gained enough from his European visit by sending a message of China’s willingness to further open up its economy, encouraging Europe to be more independent of the US, knowing also that American protectionism was hurting Europe economically. He also projected himself as a peacemaker and put out a strong joint declaration with France on the Gaza situation. Additionally, the agreement to set up an EV factory in Hungary stands in sharp contrast to the talk within the EU to follow the US in imposing high tariffs on Chinese EV imports, something that German car giants have been opposing.
France and the EU have also gained by engaging China independently of the US, sending a strong message to the country about its unfair trade practices, and pressing it on its military support to Russia.
The irony is that a Europe divided from the US externally and over economic ties internally can hardly be expected to deal credibly with the China challenge.
(Kanwal Sibal was Foreign Secretary and Ambassador to Turkey, Egypt, France, and Russia, and Deputy Chief Of Mission in Washington.)
Disclaimer: These are the personal opinions of the author
