China Issues Latest Warning
China's President Xi Jinping visited Europe for the first time in the last five years, with scheduled stops in France, Serbia, and Hungary. The most interesting aspect of this high-level diplomatic tour is the list of countries visited by President Xi. Europe now has the opportunity to position itself as a third pole between the US and China. What agreements were reached? There are no quick results because we are witnessing a potential reconfiguration of the global trade setup and centres of influence.
Amidst stiff warnings from the European Union about the unacceptable dumping of Chinese electric vehicles on the European market, Chinese President Xi Jinping travelled to France, Serbia, and Hungary.
There is an increasingly clear threat of the EU imposing protective tariffs on goods produced by the Chinese industry. This concerns not only electric vehicles and goods for green energy, which the Chinese government supports with colossal subsidies, that, according to EU leaders, provide Chinese manufacturers with unfair advantages in external markets.
The EU also regularly expresses dissatisfaction with the support Beijing provides to Moscow, which is waging an aggressive war in Ukraine. This has also shaped the atmosphere around Xi's tour.
Three Capitals, Each One Interesting
The geography of Xi Jinping's European tour in May 2024 was not only highly interesting but also instructive. France? Its President Emmanuel Macron is seeking to assert greater leadership in European affairs. He plays an increasingly significant role in consolidating efforts by the EU and NATO to support Ukraine in its struggle against Russian aggression.
Serbia? This country is currently oscillating between aspirations towards the EU on one hand and very close ties with Moscow on the other.
Hungary? Budapest has repeatedly and quite successfully played the role of enfant terrible in European affairs, especially concerning EU relations with Ukraine. Hungary for some time staunchly blocked the provision of financial assistance to Ukraine and only relented after its personal demands to Brussels regarding financial support were met.
Moreover, Hungarian Prime Minister Viktor Orban has repeatedly made pro-Moscow statements regarding the war in Ukraine. And from July 1, Hungary will begin its six-month presidency of the EU Council. While the EU Council has a somewhat limited influence, this factor should not be underestimated.
And What About Moscow and Washington?
What about other centres of influence that China actively communicates with? Beijing does not forget about them, although Western Europe is currently becoming a sphere of special attention.
Russia is now trying to play a significant role in European affairs and is seeking increasing support from China for this purpose. Russian "tsar" Vladimir Putin will visit Beijing and several cities in China on May 15-16, his first trip abroad since the so-called inauguration. Putin's previous visit to China took place in October 2023, and Xi Jinping's visit to Moscow occurred in March of the same year. Thus, high-level communications between China and Russia are very active.
Meetings between top US and Chinese officials also occur quite frequently. The previous high-level meeting took place in November 2023 in San Francisco. The most significant agreements at that time were regarding measures against drug trafficking and operational contacts between the military forces of both countries to reduce tensions, particularly in the South China Sea. Discussions were also held on restrictions on China's access to advanced technologies and limitations on China's export of critical rare earth metals from the country. So, sensitive issues surrounding trade were the focus, above all.
EU Strongly Implies
With China's economy facing significant slowdown risks and the US increasingly closing its markets to overly aggressive Chinese firm expansions, the European Union becomes a highly desirable market for Chinese exports. As a result, Brussels gains additional leverage over Beijing. However, there's a problem - the EU lacks a clearly coordinated policy towards China. This prevents the EU from being too effective in its relations with China.
The biggest sore points for the EU concern not only the influx of cheap Chinese goods, some of which are subsidised by the Chinese government. The EU is deeply concerned about China's support for the Russian economy during the war against Ukraine. And this has been going on for over two years now. It's not just that China buys Russian oil in circumvention of sanctions or supplies its own products to Russia. Judging by the announced sanctions against Chinese companies, China may now even be seen as a logistical and financial hub responsible for supplying high-tech products from the EU and the US to Russia.
But Beijing is not making concessions to EU countries, at least not for now. During his two-day visit to France, Chinese President Xi Jinping did not offer significant concessions in trade or foreign policy, despite the strong pressure from French President Emmanuel Macron for balanced market access and Beijing's support for Russia in the war against Ukraine.
Following the negotiations in France, it became known that Xi would welcome the continuation of high-level negotiations on trade disputes but firmly denied the existence of the so-called Chinese "overcapacity problem." This refers to China's attempts to retain excess production capacity through increasingly aggressive exports to EU countries against the backdrop of significant internal economic problems and trade restrictions by the US.
It was also revealed that French and Chinese companies signed some agreements on May 6 in the fields of energy, finance, and transport, but most of these agreements were framework cooperation agreements or renewed commitments to joint work on previously concluded programmes.
How tense were the negotiations? For instance, for the sake of a joint statement by the two leaders on resolving the Iranian nuclear issue, which was published by Chinese state media, a mention of the decision to create two states in Israel had to be added to the document, along with "condemnation" of Israeli settlement construction policy on the West Bank of the Jordan River.
Photo: Vucic heavily relies on Xi's support. Source: predsednik-rs
Celebrations in Belgrade and Budapest
In Belgrade, Serbia, Xi Jinping's visit unfolded like a national holiday. "Today we are making history," said Serbian President Aleksandar Vucic to a large crowd gathered outside the Serbian Presidential Palace to welcome Xi, applauding and chanting "China, China."
The timing of the visit to Serbia was highly symbolic - it marked the 25th anniversary of the accidental NATO bombing of the Chinese embassy in Belgrade in 1999. It was the NATO bombing campaign that forced the late Serbian leader Slobodan Milosevic to halt the repression of ethnic Albanians in Kosovo. Therefore, the visit of the Chinese leader to Belgrade took place against the backdrop of some resentment in Serbian society over events from a quarter-century ago, when NATO's actions put an end to Serbia's attempts to forcefully restore the former Yugoslavia.
China and Serbia signed 29 agreements on legal, regulatory, and economic cooperation. And on July 1, last year's agreement between Serbia and the People's Republic of China on free trade will come into force. It's worth recalling Vucic's words that since 2020, China has been Serbia's largest investor, with its investments growing 30-fold over the past decade. Chinese investments have been directed towards mines and factories across Serbia, as well as loans for road construction, bridges, and other infrastructure projects.
Xi announced that China is ready to import more high-quality agricultural products from Serbia. This comes against the backdrop of trade disputes with EU countries over the supply of similar products to China.
Serbia is the most enthusiastic supporter of China's massive infrastructure project, the "Belt and Road Initiative," through which China seeks to connect its supporters with logistical chains, primarily countries in Central Asia and Russia. "Serbia became China's first strategic partner in Central and Eastern Europe eight years ago, and it becomes the first European country with which we will build a community with a shared future," said Xi during the visit.
If this isn't the creation of a Chinese outpost in the heart of Western Europe, then what is it?
On May 9, Hungary and China signed a series of new agreements as the outcome of negotiations between Xi Jinping and Prime Minister Viktor Orban. While agreements on strategic partnership and 18 memorandums of understanding were concluded, no announcement was made about new significant investments.
"I would like to assure the president that Hungary will continue to provide fair conditions for Chinese companies investing in our country, and that we will create opportunities for the most advanced Western and Eastern technologies to meet and cooperate in Hungary," said Orban.
Photo: Orban is ready to support China's trade expansion into the EU. Source: X PM Viktor Orban
Beijing has already invested billions of dollars in Hungary, an EU member state, and seems to view the country as a kind of gateway to the European Union.
It is worth recalling that at the end of 2023, it was announced that the Chinese corporation BYD, one of the largest EV manufacturers, would open its first EV production plant in the EU in the south of the country. Some analysts already consider this enterprise as a key gateway to the European EV market. Several Chinese battery production plants for electric vehicles are already operating in Hungary. So, everything is ready for expansion through the Hungarian gateway.
Like Serbia, Hungary strongly supports Xi's "Belt and Road Initiative," from which "old" EU members have recently demonstratively withdrawn. Budapest, as announced during the visit, plans to expand economic cooperation with China in the field of nuclear energy. Therefore, Hungary seems to be planning to phase out cooperation with Russia in this area, although a new Russian power unit is scheduled to be completed at the Paks Nuclear Power Plant within the next five years.