Europe Warms To China Outreach

"A tepid economic recovery, and the prospect of a Donald Trump electoral victory in the U.S. are nudging Europe closer to China.

On Sunday, German Chancellor Olaf Scholz landed in the southwestern Chinese city of Chongqing for a three-day, three-city tour of China focused on economic re-engagement with Beijing. Leading a blue-ribbon delegation of German companies and flanked by three cabinet ministers, Scholz will meet Chinese leader Xi Jinping on Tuesday in the capital, Beijing.

Next month, Xi will travel to Paris to meet French President Emmanuel Macron, according to diplomats there, capping a series of events and festivities to mark 60 years of diplomatic relations between the two countries. The talks, following Beijing's lavish welcome for Macron last year, are expected to focus on trade.

The diplomatic ballet follows overtures by Beijing. In November, it allowed nationals from the European Union's five biggest economies to travel visa-free to China, a privilege it has since extended to an additional six European nations -- but not the U.S. 

In January, China reauthorized Irish beef imports, suspended last year on health grounds, and lifted a 2018 ban on Belgian pork.

This marks an inflection point. In just a few months, the EU has launched four investigations into China's subsidizing of its train, wind turbine, solar panel and EV manufacturers in an effort to curb a flood of cheap Chinese imports. The EU is also pushing European companies to reduce their reliance on certain raw materials from China.

European governments have also largely heeded Washington's calls to cut China off from advanced chip-making technologies. Germany, China's biggest European trade partner, unveiled its first China strategy paper last July, calling China a partner and competitor but also a systemic rival and pledging to reduce Germany's exposure to the Asian giant.

German companies have complained about increasing competition from Chinese rivals in sectors -- from luxury autos to advanced industrial machines -- that used to be Western preserves.

But as Europe's economy struggles to recover from the Covid-19 pandemic and sanctions on Russia, the mood is shifting in some European countries -- if not in Brussels. In the U.S., Trump's steady poll lead over President Biden is raising concerns about trans-Atlantic tensions and a new global trade war.

"Brussels is moving aggressively against China," said Noah Barkin, a Europe-China analyst at Rhodium Group, an independent research group. "But some big European countries like Germany are more preoccupied with sanctions on Russia and Trump. . .This raises questions about how forcefully they are going to push back against China."

The threats have led some to question why they should be following America's lead while China represents a more distant threat -- and a bigger economic opportunity -- for Europe than Russia.

"We are a manufacturing, export-oriented nation. Our wealth depends on access to international markets," said Bernd Westphal, a lawmaker for Scholz's Social Democratic Party.

After Scholz's election in 2021, Germany adopted a tough-on-China approach, cutting state guarantees for German investments there, intensifying export controls and blocking several prominent Chinese acquisitions of German companies.

Among the myriad products made by Trumpf, a private German engineering company, are lasers essential for making high-end semiconductors. Berlin doesn't allow those to be sold to China, but last year, the company's CEO lashed out at the German government, saying it was slow-walking export permits for a range of innocuous products.

In recent months, however, "things have really improved," said Stephan Mayer, Trumpf's China chief.

Chinese analysts said Beijing will use Scholz's visit to defuse growing trade tensions with Europe and ask Berlin to help dilute antisubsidy investigations launched by the EU. Germany is skeptical about EU plans to place tariffs on Chinese electric vehicles because German car manufacturers fear retaliatory measures." [1]

Finaly, Mr. Scholz is doing at least something good for industrial power - Germany.

1. World News: Europe Warms To China Outreach. Bertrand, Benoit; Sha Hua.  Wall Street Journal, Eastern edition; New York, N.Y.. 15 Apr 2024: A.8.