First glance

Xi’s visit underlines the hard choices the European Union faces on China

The EU cannot separate policy on China from its goals of containing Russia and ensuring economic security

Publishing date
10 May 2024
A picture of XI Jinping and Emmanuel Macron meeting in Paris

President Xi Jinping’s European tour, which started on 6 May in Paris, is his first for five years. That is a long time considering that the European Union is China’s largest market and that Xi has been on many other foreign visits – not least to Russia – since November 2022, when China started its post-pandemic reopening. The choice of European destinations (France, Serbia and Hungary) is also telling as a demonstration that Xi is happy to visit the heart of the EU but has other options.

Still, Xi’s stop in Paris, was important for several reasons. French President Emmanuel Macron has become the staunchest supporter of a stronger European Union. He is clear that a strong EU needs Russia to be defeated in Ukraine, and that the EU must also safeguard its own strategic autonomy, now encapsulated in the EU economic security strategy. Both objectives are very much related to China. 

In terms of Russia, official exchanges between Putin and Xi are at record high and China has repeatedly abstained from United Nations resolutions condemning Russia’s aggression against Ukraine. Meanwhile, Chinese economic and financial support for Russia is not limited to imports of oil and gas at very appealing prices (as is the case for other emerging economies, notably India). Most importantly, China (with North Korea and Iran) is reportedly the main provider of everything Russia needs to keep its war machine going: from trucks to chips to drones.

Such Chinese exports risk being classified officially as dual-use or as weapons components, as US Secretary of State Antony Blinken warned during a trip to Beijing in April. So far the EU has imposed fines on only a small number of Chinese companies delivering dual technology to Russia, compared to a much longer list of companies sanctioned by the US. A warning to Xi from Macron on this issue might have been more strident than previously, but Xi knows that Hungarian Prime Minister Viktor Orban (who Xi will meet last in his European trip) can block such sanctions because EU external action requires unanimity.

On EU economic security, Macron had European Commission President Ursula von der Leyen at his side when he met Xi at the Elysée. She was able to spell out the full list of EU economic concerns – if not grievances – with China’s economic model, namely that China’s industrial policy is creating ever-growing excess capacity with devastating consequences for foreign competitors, including  European firms.

The focus of the conversation has clearly shifted from market access (after decades of unsuccessful attempts to give EU companies more access to the Chinese market) to China’s flood of exports into the EU, at increasingly low (and according to the EU mostly subsidised) prices, stemming from overcapacity in China, though Xi’s response has been that China just has a huge comparative advantage arising from innovation and economies of scale.

It seems difficult – if not impossible – to see China making any concessions to reduce the flood of Chinese imports into the EU. Meanwhile, President Xi has offered to support the EU green transition even more by having Chinese electric vehicle manufacturers establish additional factories in the EU. Such factories are mushrooming, with good access to EU funding, as they become part of the EU plan for domestic production of green tech. Beyond the subsidies, by setting up factories in the EU, China avoids the countervailing duties that would be imposed on imported Chinese EVs if the EU’s ongoing anti-subsidy investigation warrants it. 

Once Xi’s visit to Europe is done, the next steps will be much tougher for the EU. On Russia, the United States is reportedly working on sanctions on Chinese banks that finance exports of dual technology to Russia. This would create heavy pressure for the EU to follow. On economic security, Xi’s denial of the problem leaves the European Commission no choice but to continue ongoing investigations into EVs and wind turbines. The moment of truth will come when the EU needs to take real action on either of these two fronts and the differences between EU members become unavoidable.

About the authors

  • Alicia García-Herrero

    Alicia García Herrero is a Senior fellow at Bruegel.

    She is the Chief Economist for Asia Pacific at French investment bank Natixis, based in Hong Kong and is an independent Board Member of AGEAS insurance group. Alicia also serves as a non-resident Senior fellow at the East Asian Institute (EAI) of the National University Singapore (NUS). Alicia is also Adjunct Professor at the Hong Kong University of Science and Technology (HKUST). Finally, Alicia is a Member of the Council of the Focused Ultrasound Foundation (FUF), a Member of the Board of the Center for Asia-Pacific Resilience and Innovation (CAPRI), a member of the Council of Advisors on Economic Affairs to the Spanish Government, a member of the Advisory Board of the Berlin-based Mercator Institute for China Studies (MERICS) and an advisor to the Hong Kong Monetary Authority’s research arm (HKIMR).

    In previous years, Alicia held the following positions: Chief Economist for Emerging Markets at Banco Bilbao Vizcaya Argentaria (BBVA), Member of the Asian Research Program at the Bank of International Settlements (BIS), Head of the International Economy Division of the Bank of Spain, Member of the Counsel to the Executive Board of the European Central Bank, Head of Emerging Economies at the Research Department at Banco Santander, and Economist at the International Monetary Fund. As regards her academic career, Alicia has served as visiting Professor at John Hopkins University (SAIS program), China Europe International Business School (CEIBS) and Carlos III University. 

    Alicia holds a PhD in Economics from George Washington University and has published extensively in refereed journals and books (see her publications in ResearchGate, Google Scholar, SSRN or REPEC). Alicia is very active in international media (such as BBC, Bloomberg, CNBC  and CNN) as well as social media (LinkedIn and Twitter). As a recognition of her thought leadership, Alicia was included in the TOP Voices in Economy and Finance by LinkedIn in 2017 and #6 Top Social Media leader by Refinitiv in 2020.

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Alessia Amighini, Alicia García-Herrero, Michal Krystyanczuk, Robin Schindowski and Jianwei Xu