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China's Diplomatic Strategies in Europe: Analysing Xi Jinping's Visits to France, Hungary, and Serbia; By Annunthra Rangan

Image courtesy: Mint

Article: 20/2024

Chinese President Xi Jinping's visit to Paris commemorates 60 years of diplomatic ties between France and China, while his stop in Belgrade coincides with the 25th anniversary of the tragic bombing of the Chinese embassy during NATO's air campaign in Kosovo. During these visits, Xi's primary objectives include lobbying against the EU's anti-subsidy investigations, particularly regarding electric vehicles, and seeking to stabilise diplomatic relations. There were no important advancements in trade negotiations or resolutions regarding conflicts such as the war in Ukraine, which have strained relations between China and Europe. Instead, the focus was on the announcement of numerous collaborative initiatives, with China pledging financial support for projects in Hungary and Serbia, among others. Additionally, French firms finalised agreements spanning energy, finance, and transportation sectors.

Despite the absence of breakthroughs, the warm reception accorded to Xi during his visits to these three countries served to improve the overall perception of Sino-European relations. This is particularly notable considering the deteriorating state of these relations since his previous visit five years ago. Amidst China's economic challenges and increasing US reluctance to engage with Chinese firms, the EU potentially holds leverage, although its 27 member states lack full alignment on China policy, undermining collective influence.

A look into the deals signed by China and the EU Countries:

France:

The recent collaboration between China and Europe reflects China's latest attempt to assert its diplomatic influence in a region where it holds substantial economic interests but relatively few established diplomatic relationships.

French President Emmanuel Macron's discussions with Xi primarily centred on trade disputes, including the potential removal of immediate tariff threats on Cognac exports, and diplomatic efforts related to Ukraine. Macron welcomed Chinese commitments to refrain from selling weapons or aid and to strictly control the sale of dual-use products and technologies. The two leaders signed 18 cooperation agreements spanning various sectors such as aviation, agriculture, cultural exchange, green development, and support for small and medium-sized enterprises.

Xi expressed China's support for France's hosting of the 2024 Paris Olympics and extended the visa-free policy for short-term visits for citizens of 12 countries, including France, until the end of 2025. He also proposed leveraging the Olympics to advocate for a global cease-fire and cessation of war during the Games.

On trade matters, Macron criticised China's trade practices for reinforcing protectionism and subsidies. Regarding the Ukraine crisis, Xi stressed China's opposition to scapegoating or initiating a new Cold War, affirming China's role in promoting peace.

Macron acknowledged Xi's receptiveness to provisional measures concerning French Cognac and hoped for continued exports of French products, including brandy and cosmetics, in the Chinese market. Xi reportedly agreed to withhold tariffs in the short term pending further investigation, indicating a potential resolution to the anti-dumping investigation into European brandy initiated by China earlier in the year.

Key highlights of economic and trade cooperation between China and France include collaboration in agriculture, artificial intelligence (AI), and green development. Specifically, China aims to bring quality agricultural products from France to Chinese households through the "French farm to Chinese dining table" mechanism. Additionally, both countries have agreed to enhance global governance of AI to address associated risks and promote AI for public benefit.

Moreover, agreements were signed to deepen collaboration in green development and aviation sectors. Experts note that these deals signify successful progress in traditional cooperation projects and offer new opportunities for growth in various sectors. The agreements reflect the expansion of cooperation beyond landmark projects like nuclear energy and aerospace, into new areas. Bilateral trade has significantly expanded over the years, with China being France's largest trading partner outside the EU, and France a major EU trading partner of China.

Critics argue that subsidies provided to Chinese manufacturers enable them to maintain artificially low costs, potentially disadvantageous to European competitors. This issue particularly affects industries such as electric vehicles, solar panels, and wind turbines. Prior to Xi Jinping's visit, President Macron highlighted the need for a recalibration of trade relations, citing China's significant overcapacity in various sectors and its substantial exports to Europe. European Union officials are concerned that measures targeting exports to Russia are being sidestepped through trade conducted by Chinese companies with the neighbouring nation.

China and France’ joint statement on the Middle East Issues:

Beijing is actively engaged in facilitating reconciliation efforts in the Middle East. Additionally, it has been revealed that Hamas has sought the involvement of China, along with Russia and Turkey, to serve as co-guarantors in any potential peace agreement between Hamas and Israel. This request underscores Hamas's lack of confidence in the United States' capacity or willingness to ensure that Israel adheres to any ceasefire agreements.

In a joint statement, Xi Jinping and Macron, reiterated their dedication to advancing a political resolution to the Iran nuclear matter. They also stressed on the necessity for tangible progress toward a two-state solution in Israel and condemned Israel's policy of constructing settlements in the West Bank. They have also demonstrated a shared consensus on pressing regional matters such as the Iranian nuclear issue and the Red Sea crisis.

Hungary:

Reflecting China's substantial investment presence, it stands as the foremost foreign investor in Hungary, with approximately 16 billion euros ($17bn) directed towards various projects. Beijing has made substantial investments in Hungary, viewing the European Union member state as a crucial foothold within the 27-member trading bloc. In December, Hungary revealed that China's BYD, one of the world's leading electric vehicle (EV) manufacturers, will establish its inaugural European EV production facility in the southern region of the country. This development has the potential to significantly impact the competitiveness of the European continent's automotive industry.

During President Xi's visit to Hungary, a significant railway project worth two billion euros ($2.1bn) was unveiled, contributing to the expanding portfolio of large-scale industrial initiatives backed by China. Furthermore, in December, leading Chinese automaker BYD announced plans to establish a factory dedicated to electric vehicle (EV) production, while CATL, another prominent Chinese company, initiated a 7.3-billion-euro ($7.86bn) venture for a battery manufacturing facility. Additionally, agreements were reached on China's assistance in Hungary's development of electric vehicle charging station infrastructure and the construction of an oil pipeline connecting Hungary and Serbia.

Hungary is emerging as a key location for Chinese electric vehicle (EV) battery plants, aiming to establish itself as a global centre for lithium-ion battery manufacturing. Additionally, Hungary is involved in a railway project, aligned with President Xi's Belt and Road Initiative, aimed at linking the country with the Chinese-managed port of Piraeus in Greece. This railway connection serves as a gateway for Chinese goods to access Central and Eastern Europe.

Although Xi and Prime Minister Orbán did not publicly announce specific agreements following their meeting, Foreign Minister Péter Szijjártó later confirmed in a video statement that a deal had been reached regarding a joint Hungarian-Chinese railway bypass around Budapest, along with the establishment of a high-speed train connection between the capital and its international airport.

Hungarian and Chinese officials finalised a strategic partnership agreement and endorsed 18 additional agreements and memoranda of understanding. However, notable investment announcements were not made during the proceedings.

Serbia:

During Xi's recent visit to Serbia, he and President Vučić formalised an agreement aimed at forging a "shared future," marking the Balkan nation as the first in Europe to enter into such a pact with Beijing. According to Vuksanović, this agreement reflects China's vision of the international order, wherein China assumes a more dominant role, while Western powers, particularly the U.S., are perceived to have diminished influence in shaping global agendas.

China has made significant investments in Serbia, channelling billions of dollars into various sectors such as mining and infrastructure through both investments and loans. The bilateral relationship between the two nations was formalised through the signing of a strategic partnership agreement in 2016, followed by a free trade agreement in the subsequent year. Despite Serbia's formal aspiration to join the 27-nation European Union, its alignment with China has led to a divergence from this path. Certain agreements between Serbia and China deviate from the established rules and criteria for EU membership.

The Indian Factor:

France has consistently been regarded as one of India's most reliable Western allies, with a longstanding history of cooperation in various sectors, particularly defence. Dating back to the 1950s, France has been a key supplier of military aircraft such as the Ouragan (Toofani) and Mystere, followed by helicopters like the Aérospatiale Alouette III and carrier-based maritime aircraft such as the Alize.Over the years, this partnership has expanded to include advanced aircraft like the SEPECAT Jaguar, Dassault Mirage 2000, and the Rafale, which form crucial components of the Indian Air Force's fleet. Collaboration extends beyond aircraft to encompass areas like aero engines, radars, and weaponry, reflecting the depth of the defence ties between the two nations.

The launch of initiatives like the India-Middle East-Europe Corridor (IMEC) further underscores the shared strategic vision, aiming to enhance commerce and energy flow between the regions. Industrial collaborations, such as the joint production of C-295 Transport Aircraft in Gujarat by Tata and Airbus, exemplify the commitment to fostering indigenous manufacturing capabilities. Additionally, efforts to intensify cooperation in the Southwest Indian Ocean, including joint surveillance missions from the French territory of La Reunion, demonstrate a shared commitment to regional stability and security.

However, Europe's response to its geopolitical challenges will significantly impact India's relations with the United States, Russia, and China. Europe perceives Russia as the primary threat and views China as an opportunity, while facing pressure from the United States to increase defence spending in Europe against Russia and contribute to Asian security by supporting US efforts to counterbalance China. For India, China represents the primary challenge, while Moscow presents part of the solution. Additionally, US domestic politics now play a role in shaping relations among major powers.

In recent years, India has shifted away from its traditional neglect of Europe. It has intensified engagement with individual European countries like France, sub-regional entities such as the Nordics, smaller economic groups like EFTA, and the European Union as a whole. However, India has only begun to explore its strategic potential in Europe.

However, France maintains a perspective that regards India as a dependable, enduring global partner. India's demand for French technology aligns with France's interest in establishing robust ties in the Indo-Pacific region and tapping into the expanding Indian market. This strategic alignment of interests creates a mutually beneficial scenario for both nations, resulting in a win-win situation.

Conclusion:

Yun Sun, Director of the China Program at the Stimson Center in Washington, outlined President Xi's objective for his European tour as showcasing and reinforcing China's capacity to maintain amicable relations with Europe amid tensions involving NATO and Ukraine. Sun noted that France, Serbia, and Hungary stand out as among the most receptive to China within the European landscape. Hungary is poised to wield considerable influence as it assumes the presidency of the European Union's rotating leadership this year. While primarily administrative, this role affords Hungary the opportunity to shape the agenda for gatherings of the Council of the European Union, the principal decision-making body within the bloc.

Jean-Pierre Cabestan, a China specialist at the Asia Center in Paris, characterises Hungary as China's conduit within the European Union. While the Hungarian government strengthens its ties with Beijing, the broader European perspective largely views China as presenting significant strategic challenges. Whether it's the conflict in Ukraine, the proliferation of nuclear arms, global initiatives to combat climate change, or apprehensions regarding unfair trade practices, policymakers and strategic analysts in Brussels and influential member states closely monitor Beijing's involvement in global affairs with caution.

Europe seeks to engage China as a partner while also recognizing the potential dangers of excessive economic reliance, particularly in burgeoning sectors like green technology where Chinese entities hold a competitive advantage. In October of last year, the European Commission initiated an investigation into electric vehicles (EVs) manufactured in China and sold within the EU market, suspecting that they may be receiving unfair benefits from subsidies provided by the Chinese state.

It's crucial to highlight that the European Union is presently engaged in an anti-subsidy inquiry regarding Chinese EV, aimed at determining the necessity of imposing punitive tariffs. Initiated officially in October, this investigation holds a potential duration of up to 13 months. Following nine months from the probe's commencement, the Commission retains the authority to impose provisional anti-subsidy duties.

President von der Leyen stressed the importance of fair competition, underscoring concerns regarding China's substantial subsidisation of electric cars flooding the European market. During her meeting with Chinese President Xi Jinping, she reiterated the imperative to address this issue in order to safeguard European industries.

As domestic demand shows signs of deceleration and access to the US market becomes increasingly challenging for Chinese EV manufacturers, Europe emerges as a pivotal market for Beijing, representing a significant strategic objective for Xi Jinping. To effectively advance its economic and foreign policy interests vis-à-vis Beijing, Europe must demonstrate heightened unity and determination, drawing inspiration from China's assertive tactics and being prepared to adopt similarly assertive measures.

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