Commerce, Economy / Finance, Globalization

Xi Jinping in Europe: A Tale of 2 Countries

Mar 27 2019

By Shannon Tiezzi* – The Diplomat

Xi’s receptions in Italy and France were markedly different. So were the benefits for the hosts – but not in the way you’d expect.

As has been widely covered in the media, Italy signed on to China’s Belt and Road Initiative on Saturday, becoming the first G-7 country to do so.

The inking of the memorandum of understanding came during Chinese President Xi Jinping’s visit to Rome this week, and Italy’s government was keen to celebrate. Xi was roundly feted in the Italian capital, on par with the treatment normally granted to visiting monarchs. In return, Chinese and Italian companies signed deals worth 2.5 billion euros ($2.8 billion), including agreements for Italy’s Cassa Depositi e Prestiti (CDP) to sell “Panda” bands and cooperate with China’s Silk Road Fund on international investments and for Italian railways and airports to boost Chinese tourism through cooperation with the online travel agency Ctrip. Most directly tied to the BRI, China Communications Construction Company (CCCC) signed agreements with Trieste and Genoa ports.

The impression left by these deals was somewhat underwhelming. The total value fell well shy of expectations, with prior reports suggesting up to 7 billion euros in deals were in the offering. Considering that China had apparently used the prospect of deals — or the threatened lack thereof — as leverage to force Italy’s hand on the BRI agreement, critics say Rome may have sold its cooperation too cheaply.

The lack of any headline agreements, other than the BRI memorandum of understanding itself, left Deputy Prime Minister Luigi Di Maio – one the strongest supporters of Italy’s China push – straining a bit for something to highlight. In the end, he was left to gush about the first shipment of oranges by air from Sicily to China, which he tried to spin as a “small revolution for our ‘Made in Italy’ products.”

Di Maio also said that the deals signed on Saturday had a potential value of 20 billion euros, but any future expansions will likely involve separate deals with their own headlines. For now, Rome is left with the 2.5 billion figure – and the controversy of its BRI inclusion. Those results are not likely to assuage different factions of the Italian government who question the wisdom of cozying up to China at the expense of relationships with the United States and the European Union.

Xi’s trip to France, following close on the heels of his Italy visit, provided a fascinating contrast to the Italian approach. French President Emmanuel Macron made a pointed show of European unity by inviting German Chancellor Angela Merkel and European Commission President Jean-Claude Juncker to join him for talks with Xi. All three signaled that they expected China’s markets to open more before they will consider joining the BRI. “We, as Europeans, want to play an active part [in the Belt and Road project],” Merkel said. “That must lead to a certain reciprocity, and we are still wrangling over that a bit.”

Macron added later, in a meeting with Xi, that China and the EU must “accelerate work… on modernizing the WTO to better respond to issues around transparency, overcapacity, state subsidies and dispute settlement.” He also pushed against China’s human rights record, promising France would continue to bring up “concerns … on the question of respecting fundamental rights in China.” Macron even referred to China’s oppression of the Muslim Uyghur ethnic group, a point of neuralgia for Beijing.

And yet, perplexingly, France’s reward for this more confrontational stance far surpassed Italy’s payment for its warm BRI embrace. France and China signed deals worth 40 billions euros during Xi’s visit – more than double even Di Maio’s hypothetical, maybe-someday top figure for the China-Italy deals. The vast majority of that value – 30 billion euros — came from a single agreement for China to purchase planes from Airbus. But even if that contract is excluded from France’s haul, that still leaves 10 billion euros in other deals – over four times Italy’s total.

The lesson from these two widely disparate visits is that embracing China is less lucrative than some might imagine – and, conversely, firm (but still diplomatic) pushback on issues of concern is less costly than some might fear. It also drives home the reality that a BRI deal is more symbol than substance, and no guarantee of major increases in Chinese investments. This is something Poland, one of the earliest European supporters of the Belt and Road, found out the hard way, after its backing failed to yield the expected boom in Chinese funds. The truth is that Chinese investments in Italy, including in ports and other infrastructure, predated Saturday’s BRI agreement – and don’t look likely to increase substantially after it.

On the flip side, none of the largest recipients of Chinese investments in Europe have joined the Belt and Road. As of 2017, according to the China Power Project at CSIS, the top European destinations for Chinese funds were Germany ($1.6 billion), the Netherlands ($1.6 billion), the United Kingdom ($1.5 billion), and France ($1.4 billion). Germany and France, in particular, have also been among the most outspoken critics of China’s trade practices and human rights records. Clearly, refraining from criticizing China isn’t necessary for winning big deals – provided your market is attractive enough.

And there’s the rub: Italy, which received just $500 million in Chinese investment in 2017, clearly hopes that signing on to the BRI will help it be more competitive in attracting Europe-bound investment. But the dirty secret of China deals is that, for all the political influence the Chinese government has over economic decisions, Chinese companies are still ultimately seeking a profit. A BRI agreement is not a panacea that suddenly makes a country’s investment climate irresistible for Chinese firms – and no piece of paper will change the fact that France is selling jet planes to China while Italy is offering oranges. March 27, 2019

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*Editor-in-Chief at The Diplomat. Her main focus is on China, and she writes on China’s foreign relations, domestic politics, and economy. Shannon previously served as a research associate at the U.S.-China Policy Foundation, where she hosted the weekly television show China Forum.

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Did Xi Jinping Conquer Italy or Just Buy a Lot of Blood Oranges?

By Ilaria Maria Sala* – The New York Times

The government in Rome is a very unreliable partner, even for China.

China, a country the size of a small continent, tends to leverage its heft by negotiating with other states one-on-one rather than through regional blocs. It has put this technique to use with Asean, the Southeast Asian association, using bilateral deals to divide members. Judging by the tone of President Xi Jinping’s visit to Italy and France over the past week, China has adopted the same approach in Europe — this time pitting the Italian government, which is anti-European Union, against the pro-E.U. French government of Emmanuel Macron, among others.

As expected, Italy signed a wide-ranging memorandum of understanding, or M.O.U., with China, becoming the first major Western economy to endorse Beijing’s colossal and controversial “One Belt, One Road” infrastructure initiative. Most contentious, perhaps, was the Italian government’s decision to grant a Chinese state-owned company access to two ports, including one used by the United States Navy that is just 100 kilometers from NATO’s largest air base in the Mediterranean region.

But did Mr. Xi really get out of Italy what he came for?

Since June 2018, when the awkward motley coalition formed by the populist Five Star Movement and the extreme-right, anti-immigration League came to power, the Italian government has been as triumphalist as its politics have been amateurish and confused. The same goes for its recent dealings with Mr. Xi.

Essential terms of the M.O.U. — and of the 29 contracts signed along with it, which range from the frivolous to the reckless — are exceedingly vague. In fact, some commitments are inherently noncommittal.

Sicilian blood oranges are to be flown to China for distribution by the e-commerce giant Alibaba. The cities of Verona and Hangzhou have been twinned, as have the region of Langhe with its vineyards and that of Yunnan province and its rice terraces. New media partnerships, including with Chinese state news outlets, were announced — even as, on the margins of a meeting Friday between Mr. Xi and the Italian president at the presidential palace in Rome, a member of the Chinese embassy’s staff told an Italian journalist to stop “writing critically about China.” The M.O.U. mentions “synergies,” “reciprocal interests” and “collaboration” — notably regarding infrastructure, energy and telecommunications — while skipping over crucial details. (So, Chinese 5G technology or not?)

The risks for Italy seem plain, but there are pitfalls for China, too. A provision in the M.O.U. stipulates that either party can back out of the agreement by giving just three months’ notice. Another section states that the deal is not legally binding.

China, which is eager to sell more of its products in more markets, is urging the Italian government to finally push through a plan for a high-speed rail link between Turin, Italy, and Lyon, France. That project has been a bane of Italian politicians for two decades, repeatedly blocked by activists opposing its costs and its possible environmental impact. It remains an issue today, notably for a part of the Five Star Movement’s core constituency. China’s global ambitions will also have to contend with local politics.

For all the pomp surrounding Mr. Xi’s welcome last week — royal honors, mounted guards, a soul-rending performance by the tenor Andrea Bocelli — Matteo Salvini, one of Italy’s two deputy prime ministers and its interior minister, skipped the festivities altogether.

As Mr. Xi was arriving in Rome on Thursday evening, Mr. Salvini, who heads the League, left the city to campaign for regional elections in Basilicata, in the southeast. On Saturday, the day the M.O.U. was signed, he attended an industrial forum in Lombardia, his home province, where he said: “Do not tell me that China is a free market. Italy loses 60 billion euros a year to Chinese counterfeits.” As Mr. Xi was wrapping up his visit Sunday morning, Mr. Salvini posed with a cow and tweeted the picture with a kiss emoji saying “Happy Sunday from us.”

Here is Italy’s most popular politician spurning his own government’s most important international agreement to date. Why? Does Mr. Salvini want to claim plausible deniability should any of the deals Italy has signed with China go sour or displease voters?

If nothing else, his snubs and provocations suggest major divisions, or at least deep confusion, within the Italian government. It should concern China to have such a partner.

After the general elections last year, Italy struggled for several months to form a government, and the void allowed political novices to find their way to important positions. Among these is Michele Geraci, a former economics professor and trader who spent a decade in China. Today he is the main force behind Italy’s participation in One Belt, One Road, and under secretary of state at the Ministry of Economic Development, where he oversees international trade and heads a new China task force. Since assuming that post, he has said, “we are all Sino-Italians.” He has also asked his staff to forgo WhatsApp in favor of WeChat, a Chinese messaging app riddled with security loopholes.

Mr. Geraci’s Sinophilia couldn’t stand in starker contrast to Mr. Salvini’s “Italians first” slogan, yet both men are prominent League members.

That divergence is only one example of the messiness of Italian politics today. Against that backdrop, Mr. Xi may have come out of his visit to Italy looking like the only adult in the room. But that doesn’t mean he is in control or will get what he wants. If the Italian government is an unreliable partner for its own constituents, other Europeans and NATO, it may be for China as well.

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*Ilaria Maria Sala is an Italian journalist based in Hong Kong.

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Macron and Xi pledge unity at unprecedented Paris summit

Lara Marlowe*  –  The Irish Times.

Chinese president and EU leaders test the limits of their relationship at the Élysée Palace

Paris – On the last day of his state visit to France, Chinese president Xi Jinping met with president Emmanuel Macron, German chancellor Angela Merkel and Jean-Claude Juncker, the president of the European Commission, at an unprecedented summit at the Élysée Palace.

Mr Macron labelled the summit a “seminar on global governance” and it delivered multiple messages. Though he was never named, US president Donald Trump was the intended addressee of the paeons to multilateralism, the UN and international co-operation.

UN secretary general António Guterres responded to the summit by sending a statement rejoicing in Chinese and European commitment to “strong and efficient multilateralism, which places the UN at its centre”.

A seven-page joint declaration by France and China contained other messages for Mr Trump. It highlighted the two countries’ will “to confront together the challenges of climate change, the erosion of biodiversity and protection of the environment”.

It reaffirmed both countries’ commitment to the Paris accord on climate change and the nuclear agreement with Iran, both of which Mr Trump has renounced. It also called for improvements to “world economic governance” centred on the World Trade Organisation, another body which Mr Trump disparages.

By bringing the three most important leaders in the EU together with Mr Xi, Mr Macron wanted to symbolise the power of Europe, and partially compensate for the imbalance between China, with 1.4 billion inhabitants and a €12.24 trillion GDP, and France, with fewer than 70 million citizens and a GDP one-fifth of China’s.

The European and Chinese leaders seemed to be testing the parameters of their relationship. The Europeans were wary. Mr Xi tried to reassure them.

“Co-operation is better than confrontation, and we have more to gain from opening than from being closed,” Mr Macron said.

European anxiety

The summit comes as EU leaders view some Chinese investments in Europe with anxiety, for example, the purchase by the Chinese Midea Group of leading German robot-maker Kuka.

The European Parliament adopted a screening method for investments in strategic sectors in Europe, which was aimed at China, last month. The parliament has now turned its attention to developing a method to ensure greater European access to Chinese markets.

“We want two-way silk routes,” Mr Macron said. “I would like European companies to find the same openness that Chinese companies do in Europe,” Mr Juncker added.

“We have our differences. None of us are naive,” Mr Macron continued. “But we respect China, and we naturally expect that our great partners respect the unity of the EU and the values that it represents.”

The French and Germans are also uneasy about the way Beijing hives off individual countries to enlist them in its giant Belt and Road Initiative on transport infrastructure. Mr Xi has focused on bilateral relations, signing an agreement with Italy and visiting Monaco last weekend. Relations with the EU have been entrusted to his far less powerful prime minister, Li Keqiang.

Mr Xi sought to reassure his European interlocutors. “Yes, there are points of disagreement,” he said at the conclusion of the summit. “But it is positive competition . . . We must foster respect and mutual confidence. We need less mistrust.”

‘Taming the dragon’

French media have made much of the fact that Makelong – the Chinese transcription of Mr Macron’s name – means “the horse that tames the dragon”. Yet Mr Xi’s European hosts seemed daunted by the sheer size of China, which is expected to replace the US as the world’s largest economy about 2030. “In 40 years, we have achieved what it took western countries three centuries to do,” Mr Xi boasted on Tuesday.

Fourteen large contracts were signed during Mr Xi’s stay in Paris. The most important, for China to buy 300 Airbus aircraft, is worth an estimated €30 billion – almost as much as France’s €32 billion trade deficit with China. That contract was also a message to Mr Trump, since Boeing lost out. Other contracts included agreements for French-built container ships and maritime wind turbines.

In their joint declaration, Mr Macron and Mr Xi promised to “promote the protection of human rights and fundamental liberties in conformity with the United Nations charter”. About 500 exiles staged a demonstration at the Trocadéro on Monday to protest at China’s treatment of Muslim Uighurs, Tibetans and members of Falun Gong. Up to one million Uighurs are held in “re-education camps” in the country.

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*Lara Marlowe is Paris Correspondent with The Irish Times.

 

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