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Alicia García Herrero (Natixis) | Chinese President Xi Jinping’s European tour, his first in five years, was a real test of truth for Europeans. Not only did Xi take his time to visit the continent, but his selection of destinations (Serbia, Hungary and France) was eye-opening.
French President Emmanuel Macron was Xi’s top target due to his recent tougher stance on Russia’s war in Ukraine and his strong support for the European Union’s economic security strategy, which aims to reduce dependence on China. . The high degrees of official industry between China and Russia have only exacerbated the situation. China’s economic and monetary policy is now essential for Russian aggression in Ukraine. This includes loading oil and fuel from Russia and providing essential military devices such as trucks, chips and drones.
Macron’s warning to Xi during his stopover about possible sanctions against Chinese exporters of “dual-use” technologies was clear. Following this, the European Union included nine more Chinese corporations that export to Russia in its fourteenth package of sanctions against Russia announced on June 24, 2024.
European Commission President Ursula von der Leyen further voiced the EU’s concerns about China’s economic style and its major trade policies that distort the holding of fairs in export markets and the European single market. EU officials have stopped gaining access to the Chinese market, after decades of failed attempts, to focus on protecting the European market from Chinese trade policies. But the European Union’s protective measures, as opposed to China’s, for its own corporations may slightly protect the domestic market. In third markets, the European Union continues to suffer distortions and cost falls caused by Chinese trade policy.
Since the start of the COVID-19 pandemic in 2020, Chinese imports to the European Union have skyrocketed. This has been the case for pandemic-related items, such as personal protective equipment, but, more recently and more structurally, also for green technologies for the EU’s green transition. The European Union is facing a gigantic bilateral industrial deficit with China, due to the expansion of imports and the stagnation or decline in exports. President Xi Jinping talks about China’s “new productive forces” for expansion has increased the European Union’s considerations about holding fairs for European companies.
China’s economic knowledge confirms Xi’s aspirations as commercial production outpaces consumption and exports grow faster than in 2023, especially exports of green generation, adding solar panels, electric cars (EVs), batteries for electric vehicles and even wind turbines, which have long been governed by European companies.
Since Xi’s visit, the United States has erected new barriers against Chinese green technologies, with import duties higher than those imposed in the past by the Inflation Reduction Act. These measures discourage Chinese imports of green technologies or foreign direct investment in the United States.
China has shown little interest in resolving this issue, as evidenced by Xi’s stance at his stop in France and the United States’ even more difficult stance toward China. No one deserves to be surprised by the European Union Commission’s June 12 resolution to build compensatory duties on electric cars produced in China as part of its anti-subsidy investigation at the World Trade Organization.
Given that the European Union is China’s largest export market, China’s attention to the EU’s resolve to impose price lists has been largely rhetorical. This includes initiating an anti-dumping investigation on imported European red meat on 17 June, rather than applying import price lists. in European cars.
Despite retaliatory pressure, the reaction of EU member states to the Commission’s resolution shows less unity than expected. Germany and Sweden have expressed considerations about the move and China’s retaliation may influence more member states. But this is one of the many investigations that the Commission has opened against China thanks to its defensive instruments. The arguments against Chinese electric vehicles came first as the automotive sector is for Europe, but it will not be the last. The European Union Commission has replaced its strategy of protecting the loose market and multilateralism with a geopolitical and interventionist approach.
It is difficult to imagine a renewal of focus on the European Union component for two reasons. The first is that the block replacement is a reaction to the fact that the global was replaced first. China’s extensive trade policy, combined with the expansion of its economy, has had enormous consequences for the rest of the world, in particular pushing the United States towards its own trade policy and protectionism. The current explanation is the developing populism influencing European governments. Populist governments are expected to push the European Union inward rather than outward, especially when it comes to its strategy toward China.
Xi’s stopover in Europe was an eye-opener for the continent, which concluded that rivalry with China is developing and that protective measures are needed to safeguard the EU’s trading base and the factor of China’s aid to Russia. It is not transparent that a replacement by China is expected, but Xi Jinping’s tone in Europe and his promotion of new productive forces do not bode well for such a replacement.
Chirp