Xi cannot be said to have returned a “winner” from his trip to Europe given the lack of substantive diplomatic agreements and the continued impasse over the West’s concerns with the PRC’s export of excess capacity and support of Russia.
Chinese leader Xi Jinping embarked on his first trip to Europe in nearly five years in the second week of May. From May 5 to May 10, Xi visited France, Serbia, and Hungary with his wife and an entourage of senior officials.
Xi’s tour came amid worsening ties between the People’s Republic of China and the West. The European Union has joined the United States in calling out Beijing’s support for Russia in the Ukraine conflict. The EU is also concerned with the PRC’s flooding of Europe with electric vehicles, solar panels, and other goods as it strives to export its way out of an economic crisis.
During his trip, Xi made remarks and concluded deals that hint at the PRC’s economic troubles and the continuation of tensions with the EU and the United States.
No concessions
Xi Jinping was received with plenty of pomp in all three of the European countries he visited. France, Serbia, and Hungary rolled out the red carpet for Xi, and Xi was treated to welcoming parades and lavish banquets. French president Emmanuel Macron also reciprocated Xi’s reception of him during a state visit to China in April 2023 by organizing a private event for Xi in the Pyrenees. There, the two presidential couples watched a traditional dance performance and had locally grown ham, lamb, cheese, and blueberry pie for lunch.
Despite the special treatment, Xi’s time in France was likely his least pleasant. On May 6, Xi, Macron, and EU Commission president Ursula von der Leyen held closed-door talks at the Élysée Palace. According to a press statement, von der Leyen urged China to use “all its influence” to have Russia end its war against Ukraine, discussed China’s commitment to not send lethal equipment to Russia, and the need for more effort to “curtail delivery of dual-use goods to Russia that find their way to the battlefield.” She also called on the PRC government to address structural overcapacities and added that the EU will “closely coordinate” with G7 countries and emerging economies that are increasingly affected by China’s market distortions.”
Xi dismissed EU concerns that European markets were being swamped by Chinese goods. “There is no so-called problem of Chinese overcapacity,” he said, according to PRC state media. Xi also did not properly address Beijing’s support for Russia, and instead defaulted to the standard propaganda rhetoric of how the PRC is “neither the creator of the crisis, nor a party to it or a participant” to the Russia-Ukraine conflict. However, Xi backed Macron’s call for a truce in global conflicts during the Olympic Games that will be held in Paris in the summer.
Macron would later receive criticism for cozying up to Xi. Yet Macron’s willingness to confront Xi together with von der Leyen suggests that France and the EU will ultimately side with the U.S. and put pressure on the PRC should the situation in Ukraine grow more dire for Kyiv. Meanwhile, Xi stuck to the Chinese Communist Party’s usual rhetoric and offered no concessions on the key issues that are the source of worsening tensions between the PRC and the West.
Strategic foothold
The official PRC readouts suggested that Xi Jinping did not talk about electric cars with the leaders of the European countries he visited. However, the PRC took the opportunity to extend its new energy vehicle foothold in Europe when Xi was there. On May 9, Hungarian minister of foreign affairs and trade Péter Szijjártó wrote in a Facebook post that Chinese NEV maker BYD would locate its first electric car plant in the country, with construction and infrastructure work for the plant underway in Szeged and the first models set to roll off production lines in 2025. BYD’s European managing director Michael Shu also announced on the same day that the company is considering building a second assembly plant in Europe next year, and that BYD aspires to become a leading NEV maker in Europe by 2030.
The PRC seems to be playing the long game with electric vehicles in Europe. Beijing is likely betting that its NEV plants and cars in friendly European countries will become a hit and that the success of the PRC’s electric vehicle project will convince the continent to become more accepting of them and the CCP regime. The PRC is also likely looking to the European market to absorb its NEV production as the U.S. and the EU step up efforts to target China’s excess capacity.
Beijing’s plan, however, would be jeopardized if the EU follows the U.S. in slapping very high tariffs on Chinese NEV and other exports. On May 14, the Biden administration imposed new China tariffs targeting strategic sectors like electric vehicles, solar panels, critical minerals, steel, and medical devices. In particular, tariffs on NEVs rose from 25 percent to 100 percent, a move that is likely to block Chinese models from the U.S. market. Losing the European and U.S. markets would trap much of China’s auto production at home and further worsen the PRC’s growth prospects amid weakening domestic consumption. The China Passenger Car Association released data on May 10 showing that domestic sales in China fell by 5.8 percent in April from a year ago even as exports jumped 38 percent to 417,000 units.
Short on funds?
A less discussed aspect of Xi Jinping’s Europe trip was the PRC’s seeming unwillingness to buy goodwill by making purchases of big ticket items or funding infrastructure projects. For instance, the PRC only signed a memorandum of understanding on deepening aviation cooperation with Airbus when Xi was in France instead of reaching a deal to purchase airplanes as some media outlets had reported. Also, the PRC’s infrastructure cooperation announcements with Serbia and Hungary did not include any cash amounts. In contrast, Xi signed a Belt and Road Initiative agreement with Italy worth between 5 to 7 billion euros and the PRC ordered 300 Airbus planes worth about 30 billion euros when Xi visited Europe in March 2019.
The PRC’s lack of “big spending” during Xi’s recent Europe trip suggests that the CCP regime is facing substantial financial constraints at home and is trying to save costs. Beijing could find it even harder to tap the PRC’s coffers as a diplomatic tool with the continued worsening of the Chinese economy, relocation of supply chains, and capital outflows from mainland China.
Xi could also believe that spending money to win over countries is facing diminishing returns amid worsening Sino-U.S. tensions, growing international awareness about the CCP threat, and increasing international wariness towards China over its support of Russia.
Finally, ordering more planes from France runs against the grain of what Xi is doing to grow China’s manufacturing and technology capacity as the PRC looks to circumvent Western tech restrictions and become more self-sufficient.
All in all, Xi Jinping cannot be said to have returned a “winner” from his trip to Europe given the lack of substantive diplomatic agreements and the continued impasse over the West’s concerns with the PRC’s export of excess capacity and support of Russia.
