There’s a lot to like about $35 billion. That’s the size of the Airbus order Xi Jinping brought with him to Paris, where he met French President Emmanuel Macron, German Chancellor Angela Merkel and European Commission President Jean-Claude Juncker.
President Xi was in Rome before that, signing Italy up as the first G-7 country to join China’s Belt and Road Initiative. There are many reasons why China and Europe might be drawn closer together.
Climate change is one issue where they align. The Iran nuclear deal is another. And though Europe has as many complaints about Chinese trade practices as America does, Brussels and Beijing are both avowed supporters of solving those disputes through multilateral institutions, not with tariffs.
But there’s also much suspicion. Italy’s decision to join the Belt and Road Initiative has spurred concerns over growing Chinese influence. A week before President Xi’s visit, the European Commission called China both a partner and a strategic rival. The ability of European companies to compete against Chinese ones has been another concern.
None of that, though, will discourage China from looking for ways to strengthen ties. Europe is a key trading partner and its companies have been among China’s largest foreign investors. And as China tussles with the U.S. over trade, Beijing is keen to avoid Europe entering the fray as an American ally. All the more reason for the charm offensive to continue.
U.S. and Chinese negotiators kicked off a new round of talks in Beijing this week, with plans to continue next week in Washington. U.S. President Donald Trump is known to be pushing for a swift agreement, but according to White House economic adviser Larry Kudlow, the administration is prepared to keep negotiating for weeks or even months in the quest for “a great deal.”
China has also acknowledged that reaching a resolution may take some time. Making it a tricky proposition are myriad other issues from Huawei to Taiwan contributing to an increasingly competitive relationship.
One area of rivalry that’s highly visible is technology. The U.S. has pushed allies to ban equipment produced by China’s Huawei from their 5G networks, arguing it could facilitate spying. China has pushed back. The scorecard so far shows countries accounting for a third of global GDP have banned Huawei. Countries accounting for 40 percent are either embracing the company or appear unlikely to ban its gear.
Less is More
Countries worldwide are looking for ways to foster innovation. For electric cars, China has decided it can do that by scaling back the amount of government subsidies it offers. Concerns have grown in Beijing that companies have become too reliant on those funds, so much so that it’s stunting their drive to create new and innovative products. Another prong of China’s strategy is better protection of intellectual property.
We live in an ever more interconnected world. For example, volatility in the Turkish lira can plunge a Chinese hedge fund into a $139 million loss, which in turn causes Citigroup enough pain that its board in New York reorganises its prime brokerage business. Or political upheaval in Venezuela can precipitate tensions between the U.S. and Russia and the cancellation of an Inter-American Development Bank meeting scheduled for the Chinese city of Chengdu.
And finally, there’s a battle being fought for China’s middle class. In one corner is Alibaba, the champion of Chinese e-commerce, and in the other is the upstart, Meituan. At stake is the rapidly growing market to deliver meals, groceries and any other range of goods that the country’s urbanites are ordering from their mobile phones.
Among the most-powerful weapons each has deployed in that confrontation have been massive discounts of the food their services sell. The quickest way to Chinese consumers hearts may be through their stomachs.