China vs USA: battle for Europe

The Chinese President's visit to European countries took place against the backdrop of a sharp increase in Washington's pressure on Beijing. China would like to secure the pragmatic cooperation of sovereign European elites and defend its economic interests.

The first visit of Chinese President Xi Jinping to Europe in the last five years was planned even before the recent deterioration in relations between Washington and Beijing. Its objective was to reinforce European-Chinese political and economic ties, which for China have become more important than trade relations with the United States, even in actual terms. It is important to note that, contrary to the established myth about "Chimerica," China’s trade turnover with the EU in 2023 amounted to $783 billion, and with the United States — $664 billion.
Following Washington's recent ultimatum demanding that China reduce its production capacity and stop trading with Russia in goods that the Americans classify as "dual-use", Xi's visit to Europe has become even more important. Should the United States follow through on its threats to impose significant economic sanctions against China, it will be crucial for Beijing that the European Union does not join them.
It is likely that Washington will continue to impose restrictions on high-tech Chinese products, regardless of whether Beijing accepts the latest American ultimatum. In the event of non-compliance, sanctions will be implemented more rapidly, while in the case of submission to American demands, they will only be extended over time. This represents the entire "reward" for obedience. Furthermore, by submitting to the United States, the Chinese authorities will disappoint many countries in the global South, which are beginning to view Beijing as an alternative pole of influence. These geopolitical losses will ultimately cost China an order of magnitude more than any American trade restrictions.
The political support received from European leaders during Xi's visit is crucial. If, for instance, France declines to join the US in imposing sanctions on China, the United States will find it difficult to persuade Brazil or South Africa to follow suit.
Furthermore, the EU is of interest to China not only as a sales market, but also as a gateway to advanced technologies.

Finally, Beijing is concerned about the fate of its investments already made in European countries, in particular in the infrastructure of Eastern European countries. China is seeking guarantees that even in the event of a possible military conflict over Taiwan, they will not be seized or frozen. This is in line with the example set by Russian sovereign and private investments in the European economy.

Beijing believes that, unlike the issue of introducing anti-Russian sanctions, on which the US and the EU showed unity, it can easily split the anti-Chinese coalition. Most European countries have no objections to the further economic and technological development of China. Unlike the United States, they do not have the fear of losing the title of world hegemon. A potential conflict over Taiwan, involving the United States, does not present the same risk to Europe as the Ukrainian conflict. Unlike the latter, it does not pose a threat of an influx of refugees or the possibility of hostilities spreading to Europe.
The selection of European countries visited by Xi Jinping – France, Hungary and Serbia – was not arbitrary. Each of these countries has a distinct foreign policy approach that differs from the programmes of the Washington and Brussels "regional committees".

Paris has traditionally held a high opinion of its historical destiny, and is proud of the ideas of French philosophers from the Enlightenment, the Great French Revolution and the Napoleonic Wars, which continue to influence Western thought. Prior to his visit to France, Xi Jinping diplomatically noted in his article for Le Figaro that "this country has given the world a galaxy of world-famous philosophers, writers and artists who have inspired all of humanity."

In the latter half of the 20th century, Paris occasionally pursued a foreign policy independent of Washington. French President Charles de Gaulle moved towards rapprochement with the USSR, declaring "Europe from the Atlantic to the Urals." He declined to utilise the US dollar in international transactions and, in 1966, withdrew his country from the military component of the NATO alliance. In a further example of French defiance, in 2003, President Jacques Chirac publicly opposed the US invasion of Iraq. However, he was not the only European leader to take this stance; many others could afford to condemn their overseas partner.

As for the current French President, Emmanuel Macron, he is known to be a controversial figure. It seems that he is attempting to emulate the strategies of both Napoleon Bonaparte and Charles de Gaulle. Initially, he called for Russia’s security interests to be taken into account when resolving the Ukrainian crisis. He then declared his willingness to send troops to Ukraine. However, he subsequently reverted to the idea of fostering good neighbourly relations with Moscow.
Macron has consistently pursued a friendly policy towards China in recent years. One possible explanation for this is the insult that was casually inflicted on France by the United States in September 2021. In response, Washington hastily put together an anti-Chinese military bloc, AUKUS, consisting of Australia, Great Britain and the United States. Furthermore, he committed to transferring technology for the construction of nuclear submarines to the Australians. Consequently, Canberra terminated its contract with Paris for the construction of 12 submarines worth $66 billion.

This American action against the French military-industrial complex was not a coincidence. Earlier, according to Western media reports, Macron at the G7 summit in the UK expressed strong reservations about President Joe Biden's proposal for all G7 countries to join the anti-Chinese military-economic coalition.

Ultimately, France received $585 million in compensation from Australia for breaking the contract, but the matter was not entirely resolved.

In April of last year, Emmanuel Macron and European Commission President Ursula von der Leyen made a joint visit to China. Von der Leyen, who had indicated the possibility of the EU introducing tariffs on Chinese goods, was met with a cool reception. Furthermore, Chinese leader Xi Jinping extended a lavish welcome to Macron and even extended an invitation for him to visit his father’s former residence in Guangzhou.
Upon returning from China, the French leader stated the necessity for Europe to pursue strategic autonomy in order to become a third superpower. "The paradox is that, in our panic, we consider ourselves simply followers of the United States," Macron said at the time.

Furthermore, the French President questioned whether it was in the European interest to accelerate the crisis in Taiwan. He then proceeded to provide the answer himself: "No. The worst thing would be to assume that we Europeans should simply follow suit on this issue and adopt the American agenda."

European Council President Charles Michel has indicated that many European leaders are supportive of Macron's vision of autonomy from the United States.

In the run-up to Xi Jinping's visit to France, Macron, playing the role of a European leader, continued to cause concern. Speaking at the Sorbonne, he stated that "Europe can survive independently." "We are not simply the vassals of the United States. We are a balancing force that rejects a bipolar world." We are not just a small part of the West. We are not like the rest. It is crucial to never forget this. "It's not just a piece of land; it's a concept of humanity."
The Wall Street Journal has stated that the Chinese leader's visit will "test the continent's readiness to stand up to Beijing." Despite the best efforts of Ursula von der Leyen to disrupt the visit, the test was unsuccessful.

Beijing was pleased to hear the statements by the French president, but they indicated that it was time to move from words to deeds. In the run-up to Xi Jinping’s visit to Europe, it was revealed that the Chinese authorities had initiated an anti-dumping investigation into brandy supplies from the EU. The main victims could be French cognac producers.

Previously, a similar investigation into Australian wine (AUKUS participants) led to the introduction of a 218% duty on it, resulting in Australia losing more than a billion dollars a year in lost export earnings.

The implication was duly noted. Mr. Macron also extended a lavish welcome to Mr. Xi Jinping. The dinner in honour of the distinguished guest was attended by the president of the Louis Vuitton Moët Hennessy group of companies, Bernard Arnault. Among other gifts to the Chinese leader, there was French cognac.

Emmanuel Macron and his wife Brigitte Macron then extended an invitation to Xi Jinping and his wife Peng Liyuan to dine at L'Etape du Berger, a restaurant located in the Pyrenees on the Col du Tourmalet. According to People's Daily, the leaders of China and France "discussed a number of important global issues in a relaxed and cordial atmosphere."
During the discussion, Xi Jinping highlighted that Chinese civilisation is the only one that has existed continuously for more than five thousand years. In other words, while considering the distinctive qualities of France, Macron should not overlook the remarkable achievements of China. And most importantly, it is to be expected that two representatives of such great civilisations will be able to agree, even if overseas upstarts who are less than a quarter of a millennium old are trying to interfere with them.

As a result of the visit, the parties signed 18 agreements covering various sectors, including aviation, agriculture, the humanitarian sector, green development and cooperation between small and medium-sized enterprises.

Furthermore, French Finance Minister Bruno Le Maire has welcomed the construction of a Chinese plant for the production of electric vehicles BYD. The Chinese are interested in supplying finished cars to the EU, but if the EU authorities impede the Chinese auto industry, it may become formally French.

In response, the Chinese authorities will offer French businesses more favourable conditions for investing in China.

Should the rapprochement between Paris and Beijing continue, there is a possibility of cooperation in the field of weapons production. France has the capacity to manufacture a comprehensive range of modern weapons. In this scenario, the loss of $66 billion on the Australian contract could result in a significant increase in sales of French weapons and technology to China. In the USA, there will undoubtedly be a great deal of concern about this, but it’s nothing personal; it’s simply business.

China therefore sought to enlist the support of France in order to protect itself from possible trade and political sanctions from the EU. Paris will not support them because it is defending its own interests first and foremost.
The only challenge that Xi Jinping faced during his visit to France was negotiating with the President of the European Commission, Ursula von der Leyen. She joined the conversation between the French and Chinese leaders and worked out the American foreign policy line in a meticulous manner.

The President of the European Commission requested that the Chinese leader voluntarily reduce exports, particularly of electric vehicles and steel, or face sanctions. The content of Xi's response is unknown. However, the assistants to the head of the European Commission appeared visibly displeased and unhappy after the negotiations.

It was no coincidence that Xi Jinping’s visit to Serbia coincided with a sad date: a quarter of a century ago, during the war against Yugoslavia, the United States allegedly mistakenly dropped a bomb on the Chinese Embassy in Belgrade. As a result, three Chinese citizens were killed. In an article for the Serbian publication Politika, the Chinese leader wrote: “We must never forget this.” The Chinese people value peace, and we will do everything in our power to ensure that such a tragic story is never repeated.

Xi Jinping's visit to Serbia was not only an opportunity to reiterate China's stance on the US's role in the Yugoslavia conflict, but also to reinforce the country's support for Belgrade's stance on Kosovo's status. Despite the EU's efforts to encourage Belgrade to recognise Kosovo's independence, the city-state has yet to do so, in exchange for potential EU membership.
"As a small country, we face pressure from various quarters due to the independent policies we pursue. We request your support," Serbian President Aleksandar Vucic addressed the Chinese leader. "Together, we will build a Sino-Serbian community with a shared future in a new era," Xi Jinping promised.
As a result of the negotiations in Belgrade, 30 documents, memorandums of cooperation and mutual understanding were signed in the fields of infrastructure, trade, science, ecology, technology, culture, sports and information. In particular, an agreement on a free trade zone between the two countries was signed, which will come into force from 1 July of this year.

From Belgrade, Xi Jinping proceeded to Budapest, where he was met by the construction of a railway between the two cities, financed by the PRC as part of the Belt and Road initiative. Hungary has emerged as a key opponent of the EU on issues of illegal migration and anti-Russian sanctions, while also welcoming the President of the People's Republic of China. "China is one of the pillars of the new world order," Prime Minister Viktor Orban complimented his guest.
As a result of the negotiations, Xi and Orban signed an agreement on a strategic partnership and a number of other documents on strengthening cooperation in the field of economics and culture. Despite the heroic efforts made by Ursula von der Leyen to disrupt the visit, the “readiness test” was unsuccessful.
During the first thirty years of the existence of the PRC, so many events occurred in its domestic and foreign policy that other countries would have had enough of them for several centuries. At first, China became the closest ally of the USSR and with its help began to carry out the industrial revolution. Then Chinese leader Mao Zedong fell out with Moscow, proclaiming himself the true leader of the international communist movement. What followed was the Great Leap Forward - an attempt at intensive development relying on one's own strength, and the Cultural Revolution as a way to combat the opposition within the leadership of the CPC and find those responsible among the people for the failure of the infallible Mao's development program. Three military conflicts - with India over part of Kashmir, with the USSR over Damansky Island and the invasion of Vietnam. And finally, a sharp turn in Mao’s foreign policy: China began a sharp rapprochement with the main fighter against communism in the world - the United States.

Although Beijing subsequently behaved with extreme restraint, there was no doubt that China viewed economic cooperation with the United States as a temporary policy, similar to the NEP that the authorities of Soviet Russia had to agree to after the economically destructive policy of war communism.

The actions of the Chinese leadership over the entire period of the existence of the PRC, despite the seeming contradictions, were subordinated to one goal - to return China to its former greatness (which the West is not even aware of). In Chinese philosophy there is no concept of God, the closest, from a European point of view, to this concept is heaven. And the Celestial Empire is the country closest to the divine principle, chosen by him. Having such ideas about its purpose, it is difficult to be content with the title of “world factory” for the production of consumer goods.
It is inaccurate to suggest that the Chinese leadership is solely focused on surpassing the United States in terms of nominal GDP or catching up with it in terms of GDP per capita. While economics is undoubtedly a key factor in future success, it is not the ultimate goal.

The intention was for interaction with the United States to propel China into a new orbit, rather than to drag it down. If access to the American market for Chinese goods comes at the cost of refusing to develop China as a superpower, Beijing will not accept this access.

When will China decide to move on from the current stage of economic cooperation with the United States in order to pursue its own independent growth strategy? Only Xi Jinping can provide the answer. However, a number of indicators suggest that this may be imminent.

China has reached the limits of its economic potential, which has been based on the mass production of consumer goods using cheap labour. China's GDP growth is contingent upon the development of advanced and high-tech sectors. However, the US sanctions policy is specifically designed to impede this growth. Firstly, the United States and a number of European countries banned Chinese 5G communication equipment. Subsequently, restrictions were placed on the supply of advanced processors and equipment for its production to China. Now, according to Reuters, the United States is planning to ban the export of advanced AI models to China, such as ChatGPT. Furthermore, the United States has long been providing subsidies to support the production of processors, electric vehicles, batteries and solar panels, thereby reducing its reliance on Chinese imports.
However, this was not deemed sufficient by the United States. Ahead of her visit to Beijing, US Treasury Secretary Janet Yellen made a statement last month. "We have previously discussed the issue of excess capacity with China, and I intend to make this a key topic on my next visit to China..." "We are now seeing a build-up of excess capacity in new industries such as solar energy, electric vehicles and lithium-ion batteries," said Yellen. She added that this harms American firms. If American firms are not assisted by subsidies, then Chinese manufacturers should consider a voluntary-compulsory approach to committing suicide.

Then US Secretary of State Antony Blinken arrived in Beijing with a political ultimatum: to stop supplying Russia with machine tools, microelectronics, nitrocellulose and similar "dual-use" products. He warned that Washington would impose sanctions against China "due to the situation in Ukraine". He also stated that the US had already imposed sanctions on more than 100 Chinese businesses. "We are prepared to take additional measures," Blinken said after talks with Chinese President Xi Jinping and Chinese Foreign Minister Wang Yi.
The public nature of the American threats was a significant embarrassment for Beijing. Furthermore, it deprived the Chinese authorities of the opportunity to negotiate, given that China does not supply weapons to Russia and has already stopped servicing Russian commercial payments in its banks. In addition to political considerations, trade with Russia has become a significant economic factor, with growth of 26% in 2023, reaching a value of $240 billion. It is important to note that this figure is almost three times less than the trade turnover with the United States. However, at the end of 2023, there was a 10.6% decrease, and in the first four months of this year, there was another 2.3% decline. Given the current appetite of the United States, it is likely that this figure will continue to decrease.

Most importantly, meeting the US demand will undo all the progress that China has made over the past half century. China is being offered the role of a colony, which not only deprives it of geopolitical subjectivity but also prevents it from exercising control over the economic potential it has created through hard work.

The day after Blinken’s visit to Beijing, China’s representative to the UN, Geng Shuang, called for an international investigation into the terrorist attack on Nord Stream at a meeting of the Security Council.
It is evident that this is a gesture of goodwill towards Washington, but it is also clear that China is prepared to continue the dialogue. China believes that it has the capacity to challenge the United States in ways that are beyond the realm of possibility.
For instance, US Commerce Secretary Gina Raimondo recently stated that a potential Chinese incursion into Taiwan would have a catastrophic impact on the American economy, given that the United States relies on Taiwan's TSMC for 92% of its advanced chips. The United States is seeking to reduce its dependence on foreign suppliers by providing subsidies for the construction of processor factories on its territory. In April of this year, it was announced that the American division of TSMC would receive $6.6 billion in subsidies and $5 billion in loans for the construction of factories in Arizona. TSMC's own investment in these businesses will amount to $65 billion. However, the construction of these enterprises is not expected to be completed until 2030.

Previously, China and the United States have engaged in a series of intense exchanges and threats, but have consistently found a way to reach a compromise. It has always been challenging for the United States to meet its demands, and such "cunning tactics" have been a key factor in driving China into a corner.
When will China decide to move on from the current stage of economic cooperation with the United States in order to pursue independent growth? Only Xi Jinping can provide an answer to this question. However, a number of indicators suggest that this may be imminent.
There is no clear point at which the cessation of negotiations and the onset of confrontation can be identified, at least not through the use of economic indicators. For some, this understanding comes suddenly, like an insight. For others, it does not come at all, regardless of the level of discrimination. China maintains that the parties have not yet reached such a point, but are clearly very close to it.

In addition to reiterating the United States' economic demands on China, European Commission President Ursula von der Leyen issued a political ultimatum in Paris. She urged Xi Jinping to persuade Russia to find a solution to the situation in Ukraine.

Mr. Xi Jinping has publicly stated that exerting pressure on China regarding the Ukrainian issue is misguided, given that China is not a party to the conflict. The Chinese leader stated, "We are against the crisis being used to place responsibility on a third country, worsen its image, and provoke a new Cold War."

At the same time, China endorsed France’s proposal for an “Olympic Truce”. "As a permanent member of the UN Security Council and a responsible major power, China is prepared to collaborate with France to utilise the Paris Olympic Games as an opportunity to advocate for a global ceasefire and cessation of hostilities during the Games," the Chinese leader said.
However, Xi’s statement was likely driven by a desire to support Macron, rather than a hope for the implementation of the French initiative. Russia, despite significant effort and losses, achieved a breakthrough in the Ukrainian defence on several sectors of the front and went on the offensive. Agreeing to a truce in such conditions would allow the Ukrainian army to restore its order and build a new line of defence.
It is noteworthy that the Chinese statement did not mention the countries to which it was addressed. This suggests that the Chinese may have been directing their call for the Olympic Truce to Israel.

The primary focus of Xi Jinping's European tour regarding the Ukraine crisis was whether China would attend the conference in Switzerland. This event was proposed by Ukraine and its Western allies as a means of exerting psychological pressure on Russia. The meeting will address the "peace formula" of Ukrainian President Vladimir Zelensky, which outlines demands for unconditional surrender, reparations, and the prosecution of Russian leaders.

Chinese President Xi Jinping said that Beijing supports holding an international peace conference at an appropriate time, with equal participation of all parties and fair discussion of all peace plans.

In plain language, this means that Ukraine, the United States and the EU can discuss Zelensky’s “peace formula” as much as they like, but without Russia’s participation, it is meaningless.
Why did Xi Jinping not explicitly decline the participation of the Chinese delegation in the Swiss summit? Firstly, he was keen to avoid any potential upset with France, which is likely to be involved in this performance. Secondly, what if Washington decides to resume negotiations with China? For this reason, you are welcome to send your delegation to Switzerland.

At the same time, Xi Jinping is aware that Moscow’s position will not be affected by the summit in Switzerland, or even by Zelensky’s consent to negotiations. Moscow has consistently stated that it will not repeat the mistakes of the Minsk agreements and is prepared to engage in discussions with the US and the EU about a comprehensive security agreement, rather than pursuing a course of action that serves the interests of Kyiv.

In terms of the tangible outcomes of the rapprochement between Beijing and Paris, it has so far benefited Moscow. France was one of only a few EU countries (with the exception of Hungary, Slovakia, Greece, Malta and Cyprus) to have an ambassador present at the inauguration of Russian President Vladimir Putin.

Furthermore, it is important to note that China was not significantly affected by the West’s conflict with Russia prior to Blinken’s ultimatum. Conversely, Chinese manufacturers have gained a significant share of the Russian market, following the departure of Western companies. China received a significant quantity of raw materials at reduced prices (gas, oil, timber, coal, food, etc.). Furthermore, Beijing initially managed to "trade" its neutrality, seeking to ease American pressure on its economy.
But China is strategically interested in Russia’s victory, expressed in the West’s recognition of Ukraine’s neutral status—this will open the way for Beijing to a diplomatic settlement of the Taiwan issue.