China strives to stabilize relationship with Europe as the US hikes tariffs on Chinese products over fresh “overcapacity” accusations against China
China-France-Europe：Chinese President Xi Jinping attends a China-FranceEU trilateral meeting with French President Emmanuel Macron and European Commission President Ursula von der Leyen at the Élysée Palace, Paris, May 6, 2024 (Photo by Xinhua)
Chinese President Xi Jinping wrapped up his European tour on May 10, with visits to France, Serbia and Hungary. The trip was Xi’s first visit to Europe in five years. In Paris, Xi held talks with French President Emmanuel Macron, reaffirming the comprehensive strategic partnership between the two countries and signing four joint statements and 18 cooperation agreements between government agencies. Xi also held a trilateral meeting with Macron and European Commission President Ursula von der Leyen. China and the EU first established diplomatic relations on May 6, 1975.
At a press briefing on May 11, Chinese Foreign Minister Wang Yi said Xi’s trip “consolidated China’s relations with the three European countries and relaunched China-EU cooperation.” Scholars believe that keeping stable relations is more important than ever for China and the EU, given the global geopolitical and economic challenges currently.
Serbia and Hungary
In Belgrade, Xi was received with a grand welcome ceremony held by Serbian President Aleksandar Vucic in front of an audience of 15,000. The two leaders signed a joint statement on the building of a China-Serbia community with a shared future in the new era, an upgrade of relations from the comprehensive strategic partnership established in 2016. Serbia is the first European country to build such a community with China. China and Serbia signed a free trade deal in October 2023.
The two countries also agreed to advance cooperation in transportation and energy infrastructure areas under the Belt and Road Initiative (BRI) while expanding collaboration in fields including trade, science and technology and innovation.
In Budapest, Xi met with Hungarian Prime Minister Viktor Orbán and said that China is willing to work with Hungary to continuously lead in the right direction of Belt and Road cooperation as well as cooperation between China and Central and Eastern European countries. In the joint statement following their meeting, the two sides agreed to elevate their bilateral relationship to an “all-weather comprehensive strategic partnership for the new era.” The two countries also pledged to promote infrastructure connectivity, including the quality and efficiency of the freight China-Europe Railway Express, and to provide support for deepening economic and trade cooperation between the two countries.
Hungary and Serbia were among the first countries to sign a cooperation document with China on joint promotion of the BRI. In 2014, China, Hungary and Serbia reached an agreement to construct the Belgrade-Budapest high-speed rail project, a flagship project under the BRI.
Connecting the capital cities of Hungary and Serbia, the Budapest-Belgrade railway is a 350-kilometer-long doubletrack electrified high-speed rail line. On April 25, construction on the HungarySerbia railway reached a milestone when the track-laying work for a 108-kilometer section between Novi Sad and Subotica, a city near the Hungarian border in Serbia, was completed. The 75-kilometer section from Belgrade to Novi Sad opened in March 2022. Construction on other sections is ongoing.
Analysts believe Xi’s visit to the three countries is carefully calibrated and aimed to restore and reshape ChinaEurope relations. “As China-Europe relations are currently at a crossroads, President Xi’s decision to make Europe the first destination of his overseas visits this year demonstrates the significance of China-Europe relations and Xi’s profound understanding of their development patterns,” said Cui Hongjian, director of the Department for European Studies at the China Institute of International Studies, as quoted in an article released by domestic media guancha.cn on May 8.
“All three countries President Xi visited demonstrate varying degrees of independence within Europe and have shown their intentions to strengthen relationships with countries outside the West, and they may become the main forces in promoting and maintaining Europe’s strategic autonomy in the future,” Cui added.
After China-Europe relations reached their nadir in 2022, there has been a gradual recovery since 2023 when highlevel talks were resumed following the end of the global pandemic. German Chancellor Olaf Scholz and French President Macron made high-profile visits to China in April last year separately, both explicitly rejecting decoupling as a viable path for their relations with China.
This year, top leaders of several major European countries have paid visits to China, including Belgian Prime Minister Alexander De Croo, Spanish Prime Minister Pedro Sánchez in March, German Chancellor Olaf Scholz, and outgoing Prime Minister of the Netherlands Mark Rutte in April. It is reported that Italy’s president and prime minister are planning a trip later this year.
The Experience Center of the Central European Trade and Logistics Cooperation Zone (CECZ) in Budapest, Hungary, April 29, 2024 (Photo by Xinhua)
Rising Anxiety
According to Cui, against the backdrop of the Russia-Ukraine war and a deteriorating economic situation, there are strong incentives for European countries to stabilize and improve their relationships with China. “With the ongoing Russia-Ukraine war and IsraelGaza conflict, anxiety over security in Europe has been on the rise. In order to maintain global strategic stability, achieve an early ceasefire, and resolve regional conflicts, European countries need China more than ever before,” Cui said.
The European Union’s anxiety manifests in the maxim “Lose-Lose?” adopted by the 2024 Munich Security Conference (MSC) that took place from February 16 to 18. The MSC report with the same title, “Lose-Lose?” warns that political fragmentation of the world could lead to a downward spiral of “selfperpetuating rivalries” and give rise to “lose-lose” dynamics, pushing governments to focus more on relative gains rather than absolute gains and mutually beneficial cooperation.
Cautioning that “relative-gains” thinking will be “unavoidable” in a much more competitive geopolitical environment, the report called for European countries to “revive positive-sum cooperation,” something China has repeatedly called for.
“European countries are facing a series of economic challenges. Especially with the current uncertainty of the upcoming US presidential election, Europe needs to prepare for a potentially more severe economic environment in the future,” Cui said. “China-Europe economic and trade cooperation has a solid foundation, potential and room for growth. For the sustainable development of the European economy, Europe’s need for China’s market, capital, technology and cooperation is greater than it’s ever been.” Moreover, strengthening cooperation with China can help Europe better address internal challenges such as the rise of populism and the far right in the upcoming European Parliament elections to be held in June. “Both the upcoming European Parliament elections and the US presidential elections can potentially bring significant political shocks to Europe. In this context, it is essential for European countries to have a reliable partner like China,” Cui said.
But a significant challenge for ChinaEurope cooperation is that the EU is currently divided on its approach to China. “There are pragmatic forces, who advocate for developing relations with China along the existing trajectory, and there are radical forces, often referred to as Atlanticists, who are inclined to align with the US and view China-EU relations through the lens of transatlantic relations,” Cui said.
The first trial flight of an A321neo aircraft assembled in north China’s Tianjin Municipality for Hungarian airline Wizz Air, June 9, 2023, which was delivered on June 27, 2023 (Photo by VCG)
SAIC Anji Sincerity, the world’s largest dual-fuel liquefied natural gas (LNG) ro-ro ship developed by China State Shipbuilding Corporation Limited (CSSC) in Shanghai, is about to set sail on its maiden voayage from Shanghai to Europe, carrying about 5,000 vehicles and construction machinery, January 17, 2024 (Photo by VCG)
Construction site of a 100 GWh battery plant in Debrecen, Hungary, for CATL, a world leading new energy battery manufacturer based in China’s Fujian Province, May 5, 2024. The 7.34 billion euro project is its second battery plant in Europe after its German plant (Photo by VCG)
‘Overcapacity’ Accusations
In the past few months, a new issue has emerged to trouble the ChinaEurope relationship – accusations of alleged “overcapacity” in various industries of China, including photovoltaic products, electric vehicles (EVs) and lithium-ion batteries. In October 2023, the EU conducted anti-subsidy investigations into China’s EV sector. Since February 2024, US officials started issuing frequent warnings about China’s “production oversupply.” During US Treasury Secretary Janet Yellen’s visit to China in early April, she brazenly blamed Chinese industrial overcapacity for distorting global prices and production and harming US business and workers.
China categorically rejected the accusation. In a press conference held on April 19, Lin Jian, a spokesperson for China’s Foreign Ministry, said that the alleged “overcapacity” accusations, while sounding like an economic concept, are a malign attempt to curb China’s industrial development and a form of economic coercion and bullying.
The issue was raised in the trilateral meeting between Xi, Macron and Von der Leyen on May 6. “Europe cannot accept market-distorting practices that could lead to deindustrialization here at home,” Von der Leyen said, adding that the bloc “will not waver from making tough decisions.” For his part, Xi said that there is no such thing as “China’s overcapacity problem,” whether viewed from the perspective of comparative advantage or global market demand. China’s success in the new energy industry is achieved in open competition and represents advanced production capacity, Xi noted, adding that it not only increases global supply and alleviates the pressure of global inflation, but also contributes significantly to the global climate response and green transition.
On May 14, the US unveiled new tariffs on Chinese imports, including a 100-percent tariff on electric vehicles, 50 percent tariffs on solar cells and semiconductors, and 25 percent tariffs on lithium batteries and critical minerals.
When asked about the issue at a joint press conference between Swedish Prime Minister Ulf Kristersson and the visiting German Chancellor Olaf Scholz in Stockholm on the same day, neither leader said they support the EU following suit. “As far as tariffs are concerned, we are in agreement that it is a bad idea to dismantle global trade,” Kristersson told reporters.
Scholz stressed that half the EVs the EU imports from China are produced by Western manufacturers. “There are European and North American manufacturers that succeed on the Chinese market and sell their vehicles in China; we need to remember that,” he added.
On May 16, He Yadong, a spokesperson for the Chinese Ministry of Commerce, said that US and European assertions of overcapacity are “naked trade protectionism.” “A country cannot be labeled as having excess capacity just because it has more capacity than it needs,” He said. “Production and consumption are global, and supply and demand need to match and be adjusted according to a global perspective,” He added.
According to Professor Li Daokui, an economist at the Beijing-based Tsinghua University, disputes about “overcapacity” between China and the West reflect their different stances on globalization.
“The production of China’s new energy industry is established in a friendly environment toward globalization, with the assumption that the world is a global market,” Li told NewsChina, warning that the accusations of alleged Chinese overcapacity suggest that China should not be allowed to sell its products outside its domestic market, and that is essentially a rejection of the necessity of global trade. “The fundamental problem is that China still embraces globalization, while the West is now reluctant to do so,” Li added.
As the EU’s investigation over China’s EVs is ongoing, it remains unclear whether the bloc will join with the US in raising tariffs on Chinese products.
According to Jian Junbo, an associate professor at the Center for China-EU Relations at Shanghai-based Fudan University, given the EU’s internal divisions over its position in the US-China rivalry and various political and economic uncertainties both inside and outside Europe, the bloc is now caught in the ambiguity and confusion of positioning China as a “partner, competitor and systemic rival” at the same time.
However, as the results of the EU parliament elections, the US presidential election, as well as the trajectory of Russia-Ukraine and other conflicts become more apparent, the direction of the China-Europe relationship could also take a turn. “The year 2024 will be a critical year for China-Europe relations,” Jian told NewsChina.
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