1 Xi’s Europe tour reveals CCP ambitions and troubles
Xi Jinping traveled to Europe from May 5 to May 10, making visits to France, Serbia, and Hungary. Xi was accompanied by his wife Peng Liyuan, Politburo Standing Committee member and CCP General Office director Cai Qi, PRC foreign minister Wang Yi, and other officials.
Noteworthy activities and agreements made during Xi’s Europe trip include:
France
Activities
May 5
- French prime minister Gabriel Attal welcomed Xi Jinping at the airport and greeted him in Chinese (“nihao”). Members of France’s Republican Guard were also lined up on both sides of a long red carpet meant for Xi and his entourage.
- French newspaper Le Figaro published a signed article by Xi titled, “Carrying Forward the Spirit that Guided the Establishment of China-France Diplomatic Relations, Working Together for Global Peace and Development.”
May 6
- French president Emmanuel Macron and EU Commission president Ursula von der Leyen held closed-door talks with Xi Jinping 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.”
- Macron held a welcoming ceremony for Xi outside the Hôtel National des Invalide. PRC state media said that the two heads of state inspected the French Republican Guard, as well as the honor guard of the French army, navy, and air force. Xi and his wife were later escorted by a ceremonial cavalcade made up of 148 cavalrymen from the Republican Guard and motorcycles to the Élysée Palace.
- Xi and Macron attended the closing ceremony of the sixth meeting of the China-France Business Council in Paris. The PRC foreign ministry said that Xi delivered important remarks entitled, “Building on Past Achievements to Jointly Usher in a New Era in China-France Cooperation.”
- Xi and Peng Liyuan attended a welcome banquet at the Élysée Palace hosted by Emmanuel Macron and his wife Brigitte Macron.
May 7
- Xi and Macron had a private meeting in France’s southwestern Pyrenees region. The two presidential couples watched a traditional dance performance and ate locally grown ham, lamb, cheese, and blueberry pie for lunch. Macron and his wife later sent off Xi and Peng at the airport.
- The Xi-Macron private meeting in the Pyrenees appeared to be a reciprocal gesture by Macron. When the pair met in April 2023, Xi brought Macron to Pine Garden in Guangzhou and treated Macron to a tea ceremony and a guqin performance. A source close to the French presidency told Reuters that the private meeting allowed for “friendly and very frank talks” for Macron to pass on messages on Ukraine and create opportunities for more open talks in the future.
Agreements and statements
According to PRC state media:
- China and France agreed to “consolidate the strategic stability of bilateral relations,” and continuously “enhance political mutual trust, eliminate various interferences, and jointly oppose the politicization, ideologicalization, and over-securitization” of economic and trade issues. Both also agreed to “address global challenges” and “oppose any logic of bloc confrontation.”
- The two sides issued a joint statement on the situation in the Middle East, agricultural exchanges and cooperation, artificial intelligence and global governance, and strengthening cooperation on biodiversity and oceans. Eighteen interdepartmental cooperation agreements were signed, covering areas such as aviation, agriculture, the humanities, green development, and cooperation between small and medium-sized enterprises.
- The China Aerospace Science and Technology Corporation and Airbus signed a memorandum of understanding on deepening aviation cooperation.
- While the PRC has historically coincided large jet orders with state visits, people familiar with the matter told Reuters that negotiations between the CASC and Airbus are “likely to go down to the wire and are not guaranteed to result in a deal.”
- China will autonomously expand the opening up of its service industries such as telecommunications and healthcare, and further open up its market. China is also planning and implementing major initiatives to comprehensively deepen reform.
- China and France will accelerate cultural exchanges. Both sides aim to double the number of French students studying in China to over 10,000 in the next three years and double the scale of youth exchanges between Europe and China. The visa-free policy for short-term visits to China by citizens of France and 11 other countries would be extended until the end of 2025.
- China and France called for a truce in the world during the Paris Olympic games.
- China expressed understanding of the impact of the Ukraine crisis on the people of Europe. The PRC added that it is “neither the creator of the crisis, nor a party to it or a participant,” and nuclear weapons should neither be used nor a nuclear war be waged.
- The PRC said that the fundamental solution to the Palestinian-Israeli issues lies in the establishment of an independent Palestinian state.
Serbia
Activities
May 7
- The PRC foreign ministry said Xi Jinping arrived in Belgrade by a special aircraft escorted by two Serbian fighter jets after it entered the country’s airspace. Serbian president Aleksandar Vučić also rolled out the red carpet for Xi and gave him a warm welcome.
- Serbian newspaper Politika published a signed article by Xi titled, “May the Light of Our Ironclad Friendship Shine on the Path of China-Serbia Cooperation.”
May 8
- Serbia’s welcoming ceremony for Xi included a 10-gun salute and 15,000 Serbian people waving the national flags of both countries outside the Palace of Serbia.
Xi and Vučić announced the decision to deepen and elevate China-Serbia comprehensive strategic partnership and build a China-Serbia community with a shared future in the new era. Both leaders had a joint meeting with the press after their talks. - Xi and his wife Peng Liyuan attended a welcome banquet. Xi said that the Chinese people have always cherished a special bond of friendship with Serbia and the Yugoslav film The Bridge and the song Bella Ciao “evoke strong patriotic and anti-Fascist sentiments.”
- Vučić and his wife held a farewell ceremony for Xi and his wife at the Villa Peace in Belgrade before sending them off at the airport with several senior Serbian officials. Xi’s plane was again escorted by two Serbian air force jets after taking off.
Agreements and statements
According to PRC state media:
- Xinhua listed among Xi’s achievements in Serbia a joint statement on “deepening and elevating the comprehensive strategic partnership between China and Serbia and constructing a community with a shared future,” as well as 28 cooperation documents.
- Xi said that Serbia is China’s first comprehensive strategic partner in Central and Eastern Europe, and Serbia is the first European country to build with China a community with a shared future.
- Both sides will solidly promote cooperation in traditional areas such as transportation and energy infrastructure, make sure the entire Serbian section of the Belgrade-Budapest railway goes into operation as scheduled, jointly operate their major cooperation projects well, create more small and beautiful livelihood projects, and continue to generate positive economic and social impacts.
- The China-Serbia Free Trade Agreement will take effect on July 1, 2024.
- China will continue to expand imports of high-quality Serbian agricultural products.
- China will support 50 young Serbian scientists in taking part in scientific research exchanges in China and invite 300 young Serbians to China for study and exchange programs in the next three years.
- China is ready to work with Serbia to strengthen cooperation on artificial intelligence.
- China welcomes the opening of direct flights from Belgrade to Shanghai by the Serbian side to comprehensively deepen people-to-people exchanges.
- Both sides support international efforts to promote a political solution to the Ukraine crisis and to a ceasefire and cessation of conflict between Palestine and Israel.
- Both sides reject hegemonism and power politics, and oppose bloc politics or bloc confrontation.
- Vučić hailed Xi as a “great world leader.”
- Serbia reaffirmed its support of the “one-China principle” and opposes any form of “Taiwan independence.”
- Xi said that China supports Serbia in “upholding its policy of acting independently … (and) its efforts to safeguard national sovereignty and territorial integrity on the Kosovo issue.”
Hungary
Activities
May 8
- PRC state media said that Hungarian prime minister Viktor Orbán and his wife warmly welcomed Xi Jinping and his wife at the Budapest Airport. The Hungarian air force sent fighter jets to escort Xi’s plane after it entered the country’s airspace, and a red carpet was rolled out for Xi.
- Hungarian newspaper Magyar Nemzet published a signed article by Xi titled, “Embarking on a Golden Voyage in China-Hungary Relations.”
May 9
- Xi Jinping attended a welcome ceremony held by Hungarian president Tamás Sulyok and prime minister Viktor Orbán at the Buda Castle in Budapest. Sulyok accompanied Xi in reviewing the honor guard.
- Xi and Sulyok held talks at the Sandor Palace in Budapest.
- Xi said that Hungary was one of the first countries to recognize the PRC.
- Sulyok said that he looks forward to closer exchanges with China, strengthening the synergy of development strategies, and promoting key cooperation projects such as the Hungary-Serbia railway.
- Xi and Orbán held talks at the Hungarian prime minister’s office.
- Both sides announced the establishment of an all-weather comprehensive strategic partnership for the new era.
- Xi said that Europe is an important pole in a multipolar world and a key partner in China’s bid to advance Chinese modernization. He expressed the hope that Hungary, which is due to take over the rotating EU Presidency in July 2024, will play an active role in promoting the healthy and stable development of China-EU relations.
- According to PRC state media, Orbán said that Hungary will not forget China’s timely and valuable support for the country during difficult times. He added that Hungary will continue to be a steadfast friend of China, and support China in safeguarding its core interests and legitimate rights. Orbán said that Hungary does not agree with the so-called “overcapacity” or “de-risking” rhetoric, and that China’s development is an opportunity, not a risk, for Europe.
May 10
Xi Jinping and Peng Liyuan attended a farewell event held by Viktor Orbán and his wife. Orbán and his wife later saw Xi and his wife off at the airport, and Xi’s plan was escorted by Hungarian fighter jets.
Agreements and statements
According to PRC state media:
- Xinhua listed among Xi’s achievements in Hungary a joint statement on establishing an “all-weather comprehensive strategic partnership,” as well as 18 cooperation documents.
- The Hungarian side highly appreciates the major achievements made by China in its economic and social development.
- The Hungarian government firmly adheres to the “one-China principle” and opposes any form of separatist behavior that undermines China’s national unity.
- Both sides are committed to strengthening their strategic alignment within the framework of jointly building the Belt and Road Initiative and Hungary’s “Opening to the East” policy.
- Both sides unanimously believe that Hungary has advantageous conditions to become a hub for economic and technological convergence between East and West.
- ]The Hungary-Serbia Railway is a landmark project for jointly building the Belt and Road Initiative and a flagship project for cooperation between China and central and eastern European countries. China and Hungary are willing to actively promote the construction of the Hungarian section of the Hungary-Serbia Railway.
- China welcomes the entry of more high-quality Hungarian products and eligible enterprises into the Chinese market.
- Hungary appreciates the valuable support provided by China in financial and other fields.
- China and Hungary will strive to expand cultural and people-to-people exchanges and cooperation between the two countries.
- Hungary attaches importance to China’s Global Development Initiative, the Global Security Initiative and the Global Civilization Initiative.
Protesting Xi
Xi Jinping was met with various protesters during his Europe trip.
In France, more than 1,000 demonstrators gathered at the Place de la République, as well as in various other public places, to protest Xi, according to Radio Free Asia. Among the protestors include Chinese dissidents, Uyghurs, Tibetans, and Falun Gong practitioners. Minghui.org reported that Falun Gong practitioners did not receive approval from the French authorities to hold activities to clarify the truth about the CCP’s persecution of Falun Gong outside the PRC embassy, and ended up carrying out those activities at the Place de la République instead.
In Hungary, pro-CCP activists harassed Tibetan protesters during Xi’s visit, including ripping a big “Free Tibet” flag, according to Radio Free Asia. Tibetan protesters said that the Hungarian police did not intervene.
Biden prepares tariffs
May 9 – May 10
Various Western media outlets reported that the Biden administration is planning to announce new China tariffs as soon as May 14 targeting strategic sectors like new energy vehicles, solar panels, critical minerals, and steel. Reuters also reported that the administration could also impose tariffs on Chinese-made medical devices like syringes and personal protective equipment.
People familiar with the matter told The Wall Street Journal that Biden officials are particularly focused on electric vehicles and are expected to raise the tariff rate to about 100 percent from 25 percent. All automobiles imported into the U.S. are subjected to an additional 2.5 percent duty. The Journal said that the current 25 percent tariff on NEVs have so far effectively blocked those models from the U.S. market, but Biden administration officials, automakers, and some lawmakers are concerned that would not be enough with the scale of Chinese manufacturing.
Big picture
The United States and its allies, including the EU, have been warning the PRC to stop supporting Russia and its war effort in Ukraine. The Biden administration has also made known to Beijing that its strategic interest or “red line” is the maintenance of peace and stability in Europe.
The U.S. and the EU have also raised concerns about the PRC exporting excess capital, particularly NEVs.
Our take
1. Xi Jinping and the CCP are adopting a fragmentation/“divide and conquer” strategy in Europe to weaken the Western alliance and limit the pressure and damage that the U.S. and its allies can inflict upon the PRC amid rising geopolitical tensions. Xi sought to advance that strategy during this recent European tour, albeit with mixed results.
Xi took the opportunity to deepen the PRC’s relations with Serbia and Hungary, both of whom are already friendly with Beijing. However, it is unclear how much PRC-Serbia and PRC-Hungary ties were actually strengthened by Xi’s charm offensive. For one, the agreements reached with Hungary and Serbia during Xi’s trip, including cooperation on various infrastructure projects, did not appear to be especially substantive. The statements of increased bilateral cooperation (“comprehensive strategic partnership,” “all-weather comprehensive strategic partnership,” etc.) also seemed vague and geared towards propaganda.
Meanwhile, neither France and the EU nor Beijing appeared to have swayed the other party to their side on key matters. Despite Macron and von der Leyen’s urgings, Xi continued to stick with the PRC’s stance on industrial production and product dumping, the Russia-Ukraine conflict, and other international matters of concern. Separately, Macron appeared to reciprocate Xi’s reception of him in China in 2023 by treating the PRC leader to a similar reception in France, and left room in his talks with Xi for European “strategic autonomy” that he earlier advocated.
We believe that France and the EU will ultimately side with the U.S. and apply more pressure on the PRC should the situation in Ukraine become even more dire for Kyiv. That being said, Xi and the CCP will still continue to court the EU and countries whom they believe are likely to be swayed by the PRC for as long as possible as part of its strategy to survive and dominate the “new cold war” against the U.S. and its allies.
2. While not part of Xi’s trip, the PRC took the opportunity to extend its NEV foothold in Europe during the period. On May 9, Hungarian minister of foreign affairs and trade Péter Szijjártó announced 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 wants to become a leading NEV maker in Europe by 2030.
The PRC is likely playing the long game in the hopes that its NEV plants and cars in Hungary and other friendly European countries will turn out to be a success, and that the development will convince the continent to become more accepting of the CCP and therefore less inclined to be hostile to China. If the PRC is set on this route, then it will be inclined to double down on achieving “reunification” with Taiwan via peaceful means as opposed to an invasion, which would immediately undo the goodwill that Beijing is currently building up in Europe.
The PRC is also likely looking to the European market to absorb its NEV production as the U.S. steps up efforts to target China’s excess capacity. Beijing’s plan, however, would be in jeopardy if the EU follows the U.S. in slapping very high tariffs on Chinese NEV and other exports. Losing the European and U.S. markets traps much of China’s auto production at home and further worsens the PRC’s growth prospects given weakening domestic consumption; the China Passenger Car Association recently released data 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.
3. It is noteworthy that Xi Jinping did not open up the PRC’s coffers in courting the countries he visited during his Europe trip. For instance, the PRC only signed a memorandum of understanding on deepening aviation cooperation with Airbus instead of reaching a deal to purchase airplanes as some media outlets had reported. Also, the 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. The continued deterioration of the Chinese economy, relocation of supply chains, and capital outflows from mainland China will leave Beijing even less able to roll out the dough to influence Western countries.
Further, the PRC could believe that there are diminishing returns to throwing money at Western countries to win them over amid worsening Sino-U.S. tensions, growing international awareness about the CCP threat, and increasing international wariness towards China over its support of Russia. Therefore, Beijing could have become less confident and more hesitant to resort to “big spending” as it seeks to survive the “new cold war” and advance its domination agenda.
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. This year, Chinese airlines have already ordered 240 domestically produced C919 passenger airplanes while the PRC authorities are allocating (likely limited) funds to the development of large passenger planes.
4. 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 regard to Russia and the PRC’s export of excess capacity. At the same time, Xi does appear to have secured some propaganda gains to pad his “quan wei” from the PRC state media’s high-profile reporting of his Europe tour.
2 China’s trade remained weak in April
PRC releases trade data for April
May 9
The PRC General Administration of Customs released trade data for April and the first four months of the year:
April
- Total exports and imports increased by 4.4 percent year-on-year to $512.56 billion (the growth rate was 2.4 percent when compared with official PRC data from 2023).
- Exports increased by 1.5 percent year-on-year to $292.45 billion (the growth rate was negative 1 percent when compared with official PRC data from 2023).
- Imports increased by 8.4 percent year-on-year to $220.10 billion (the growth rate was 7.3 percent when compared with official PRC data from 2023).
- The trade surplus was $72.35 billion, and state media did not provide a year-on-year growth rate (the growth rate was negative 19.8 percent when compared with official PRC data [$90.21 billion] from 2023).
January to April
- Total exports and imports increased by 2.2 percent year-on-year to $1.9 trillion (the growth rate was 0.2 percent when compared with official PRC data from 2023).
- Exports increased by 1.5 percent year-on-year to $1.1 trillion (the growth rate was negative 1.6 percent when compared with official PRC data from 2023).
- Imports increased by 3.2 percent year-on-year to $843.91 billion (the growth rate was 2.6 percent when compared with official PRC data from 2023).
- The trade surplus decreased by 3.9 percent to $255.66 billion (the growth rate was negative 13.1 percent when compared with official PRC data from 2023).
China’s exports to major trading partners
- European Union: Down 3.6 percent in April and down 6.1 percent during the January-April period.
- United States: Down 2.8 percent in April and down 4.0 percent during the January-April period.
- ASEAN: Up 8.1 percent in April and up 0.2 percent during the January to April period.
- Russia: Down 13.6 percent in April and down 2.8 percent during the January to April period.
State mouthpiece Xinhua reported that the growth rate of China’s exports and imports in the first four months of the year accelerated as compared to the first quarter, and reached a historical high for the period. Also, China’s foreign trade “further consolidated its positive momentum.”
Lü Daliang, director of the statistics and analysis department of the GAC, said that China’s exports and imports to emerging markets continued to improve in April, while exports and imports to traditional markets such as Europe and the U.S. shifted from decline to growth. He added that the two extra working days this April as compared to the previous year boosted China’s overall trade growth rate from negative to positive.
April CPI and PPI data
May 11
The National Bureau of Statistics released China’s consumer price index and producer price index data for April and the first four months of the year:
- The national CPI rose by 0.3 percent in April from a year earlier, and was up 0.1 percent during the January-April period from the previous year.
- Categories that contributed significantly to CPI growth in April include tourism services, transportation fuel, other goods and services, and traditional Chinese medicine.
- The national PPI fell by 2.5 percent in April from a year ago while industrial purchase prices declined by 3.0 percent. Industrial producer prices fell by 2.7 percent during the January-April period from a year earlier, with industrial purchase prices falling by 3.3 percent.
- Of 30 major industries, 22 saw a drop in factory prices in April while 21 saw a decrease during the January-April period. The automaker industry, a main economic pillar, saw factory prices declining 2 percent in April and 1.6 percent during the January-April period. Meanwhile, the paper and paper products industry, which reflects production and business activity, saw a 4.1 percent drop in factor prices in April and a 5 percent decline during the January-April period.
- Industries with significant price increases include petroleum and natural gas extraction, ferrous metal mining and processing, non-ferrous metal mining and processing, and tobacco products manufacturing. The production and supply of water saw a 0.7 percent increase in prices in April and a 0.8 percent increase during the January-April period, likely due to rising water prices in various regions this year.
Our take
1. Calculating the PRC’s official trade data for April and the first four months of the year with its own data from the same period in 2023 shows clear discrepancies. Notably, China’s exports fell in both of the aforementioned periods.
Geopolitical pressures appear to be behind China’s declining exports to its major trade partners Europe and the United States. China’s falling exports to Russia in April could also be a result of increased U.S. pressure on Beijing to cease its support for Moscow’s war effort in Ukraine.
Meanwhile, some of China’s key export commodities that saw double-digit export growth during the period saw varying degrees of price declines. For example:
- Household appliances saw exports increase by 10.9 percent and an average price drop of 7.1 percent.
- Integrated circuits saw exports increase by 17.8 percent and an average price drop of 4.8 percent.
- Liquid crystal panel display modules saw exports increase by 11.9 percent and an average price drop of 3.3 percent.
- Automobiles (including chassis) saw exports increase by 28.8 percent and an average price drop of 1.6 percent.
China’s trade surplus also contracted further, including a nearly 20 percent decline in April. This could be due to a sharp increase in China’s imports in April, including:
- Refined oil: Up 33.7 percent from a year ago.
- Machinery and electrical products: Up 11.5 percent from a year ago.
- Automatic data processing equipment and its components: Up 47.1 percent from a year ago.
- High-tech products: Up 15.1 percent from a year ago.
- Integrated circuits: Up 15.8 percent from a year ago.
- Liquid crystal panel display modules: Up 23 percent from a year ago.
- Crude oil: Up 14.1 percent from a year ago.
- Iron ore and its concentrates: Up 5.7 percent from a year ago.
China mainly increased imports of energy and mineral products, as well as chips and electronic components; this is in line with the Xi leadership’s push to boost manufacturing and work around chip restrictions. The increase in the import value of those goods could be due to the depreciation of the renminbi and increased costs associated with U.S. export restrictions.
2. China’s sluggish exports in April and the January-April period correspond to the absolute decrease in China’s industrial profits in the first quarter of the year, the PMI slowing in April, and the PPI continuing to decline.
China’s import costs are likely to go up and its export capacity weakened if the Biden administration imposes significant tariffs on Chinese products. This means that the Chinese economy will face even greater challenges in its recovery and the CCP regime’s crises will worsen.
