French President Emmanuel Macron, Chinese President Xi Jinping and German Chancellor Angela Merkel hold a news conference at the Elysee presidential palace in Paris, March 26, 2019.
French President Emmanuel Macron, Chinese President Xi Jinping and German Chancellor Angela Merkel hold a news conference at the Elysee presidential palace in Paris, March 26, 2019.

Chinese President Xi Jinping met with the leaders of France and Germany this week and signed lucrative deals in an attempt to cozy up to the European Union. Analysts say the efforts were aimed at softening restrictions on Chinese trade and investments in Europe, but it is unlikely that his trip will weaken the EU’s resolve.

Xi’s European tour included stops in Italy, Monaco and France. But German Chancellor Angela Merkel and European Commission head Jean-Claude Juncker came to Paris to meet the Chinese leader.

Overall, analysts said, the visit has improved the general atmosphere of relations between the EU and China, but the European backlash and increased scrutiny of Chinese companies and their investments is not likely to change.

French President Emmanuel Macron, German Chancello
French President Emmanuel Macron, German Chancellor Angela Merkel and European Commission President Jean-Claude Juncker, left, welcome Chinese President Xi Jinping, not pictured, at the Elysee Palace in Paris, March 26, 2019.

Billions in deals

The “EU will not be softening its posture on its core demands (fair and reciprocal economic ties, including elimination of coerced technology transfers and respect from the EU’s community-based standards) in spite of the breakout of amity and huge deals during President Xi’s swing through the continent,” said Sourabh Gupta, senior fellow at the Institute of China-America Studies in Washington.

During the visit, Xi signed 29 deals worth $2.8 billion with Italy and placed orders for 300 jets with Airbus worth $34 billion in France, the same number of Boeing planes that he bought from the U.S. during President Donald Trump’s 2017 visit to Beijing.

In turn, Italy became the first Group of Seven country to sign up for the Belt and Road Initiative despite Washington’s criticism of the BRI and China’s “vanity project.”

Chinese President Xi Jinping, left, and Italian Pr
Chinese President Xi Jinping, left, and Italian Prime Minister Giuseppe Conte shake their hands following the signing of a memorandum in support of Beijing's "Belt and Road" initiative, at Rome's Villa Madama, March 23, 2019.

“The buying binge may grab the headlines but that’s mostly just water under the bridge,” Gupta said adding, “and Italy’s formal BRI entry is a nice, shiny medal that will keep Beijing attentive and incentivized to adhere to European practices.”

Xi’s motivation

What motivated Xi’s visit is the lurking danger of dual pressures from the U.S. and EU to change some of the internal systems like state subsidy and financing of Chinese companies.

Many of the issues raised by Brussels and Washington are similar, but some additional demands from Europe are adding to Beijing’s headaches.

Ana Andrade, research analyst in the Europe team of The Economist Intelligence Unit, said there is a distinct difference in the way the European Union and United States approach China.

“EU and U.S. demands on China are not fully identical. The EU is very aware of the importance of China as a trading partner,” she said adding, “the EU is not interested in decoupling from China or creating a bilateral conflict as the U.S. has done.”

China is the biggest market for European luxury goods and the biggest single-country market for Airbus.

Chinese Vice Premier Liu He, center, accompanied b
Chinese Vice Premier Liu He, center, accompanied by other Chinese officials, begins talks with U.S. Trade Representative Robert Lighthizer at the Executive Office Building, Jan. 30, 2019.

?Competitive edge

EU’s demands for reforms in China intensified since the U.S. launched a series of aggressive trade actions raising duties on Chinese goods leading to a trade war nearly nine months ago.

“The EU’s strategy is to piggy-back on the momentum for action generated by the Trump administration’s pressure on Beijing and engage and press China to make these market-leveling (allow fair competition) and market-opening reforms,” Gupta said.

Chinese analysts argue, however, that the EU’s demands are not necessarily additional pressure on Beijing and instead that the demands dovetail with reforms the U.S. is demanding.

“If China would make a deal with the U.S. on some of the issues, I think that would not only apply to the U.S. but China would adjust its overall position to apply to all countries,” said Shen Dingli, a Shanghai based analyst of international relations. The new foreign investment law, which was approved by the Chinese legislature this month, will apply to all countries and not just the U.S., he pointed out.

Both the U.S. and EU were driven into action because of concerns that China’s government has long been giving Chinese companies a competitive leg up through subsidies, inadequate transparency, lax standards on protection of labor, environment and intellectual property.

Helping China

Ding Yuan, dean at the China Europe International Business School, does not agree with the claim that a lack of transparency in business dealings gives Chinese companies a competitive edge over their counterparts in the rest of the world.

“Lack of transparency is never an advantage. If lack of transparency was an advantage, China shouldn’t have done the economic reforms and opening, and Soviet Union should have been there still, stronger than the U.S.,” he said.

Ding believes the critics and business rivals may be working at cross-purposes. They are actually helping China to take forward its reforms agenda and consolidate its position in the industrial world, he said.

“By blaming China on the role of the state, by promoting (the idea) Chinese state intervention as the core competence or the core competitive advantage of the Chinese success story, actually we are consolidating, helping Chinese authorities to consolidate their approach,” he said.