Xi Jinping in Europe and tensions with China rising again in Australia
A trip of non-results: Xi Jinping in Europe
This week, Xi Jinping visited Europe for a short trip first to France, then to Serbia and lastly Hungary. Xi’s stop-overs in Paris, Belgrade and Budapest were mostly relevant on the symbolic level rather than in terms of concrete results and outcomes. Particularly, Hungary was important for Xi symbolically, though, because the friendly reception he received in Hungary serves to showcase that China does still have friends in Europe.
France
First the visit to France. The biggest symbolic message that probably emanated from this one is the presence of the head of the European Commission, Ursula von der Leyen. It sends the message that at least Macron intends to see the relations with China through a European lens and does not intend to prioritise engagement with China on a bilateral level – the way the Chinese government usually prefers to engage with other countries.
Another aspect on the atmospheric level that is worth mentioning is Macron’s attempt to engage with Xi on a more personal level. Macron invited Xi to the Pyrénées in southern France, a region that Macron has a personal connection to. It might have been an attempt of Macron to create a more personal atmosphere to discuss the thorny issues of global politics with Xi, including the war in Ukraine.
If that was indeed the intention, it was met by the Chinese side with friendly diplomatic phrases. The official press release of the Chinese Ministry of Foreign Affairs describes the weather and the view as well as traditional cultural performances that the two presidents witnessed. In terms of political discussions, the official release simply states that the two presidents “had strategic communication on a number of important issues critical to the world”. Even for official Chinese diplomatic publications, this is reasonably thin.
The French press, on the contrary, is divided on the rationalities and reasonableness of the engagement with Xi. On the one hand, there is criticism of inviting Xi in light of China’s increasingly aggressive behaviour and challenging human rights record. On the other hand, there is also assumption that Macron obviously believes in the usefulness and necessity of engaging in dialogue with China, also on the war in Ukraine.
The main take-away from Xi’s visit to France is hence that there is not a lot of take-away. France and Europe are talking to China and that in itself can be seen as a result. However, if anyone had expected any tangible outcomes or breakthroughs from this meeting, they will be disappointed. In light of tense relations, this might, for the time being, the new normal.
Serbia and Hungary
Similar to the Xi’s visit in France, his trip to Serbia was also mostly atmospheric in nature. In contrast to France, Xi was a very welcome guest in Serbia. China is a significant investor in the Serbian economy and Serbia also signed up to China’s Belt and Road Initiative, with a free trade agreement with China coming into effect this year. This certainly moves Serbia further away from the European Union and will make economic engagement with the EU more difficult.
However, in spite of these close economic relations and a warm welcome that Xi received in Belgrade, the tangible outcomes of this meeting were also limited. A lot of the documents that were signed during the visit were mostly memorandums of understanding and non-binding agreements. At the same time, Chinese investments are also seen increasingly critically in Serbia as well. Among others, significant debt of the Serbian government as well as environmental impacts of China’s investments are criticised within Serbia as well.
The visit in Hungary falls into a similar category. Xi was received in a very friendly manner and Hungarian President Victor Orban is interested in Chinese investment in Hungary at a time when the EU has frozen large sums of money from the EU household over disagreement on Hungarian judicial reforms. In spite of the this, the tangible outcomes of Xi’s visit in Hungary were also limited. The “outcome list” for the visit on the website of the Chinese Ministry of Foreign Affairs mainly lists non-binding Memorandums of Understanding as the achievements of the visit. In other words, like the other visits, the one to Hungary was also more atmospheric in nature than anything else.
Nevertheless, the most important goal for Xi on this trip was probably to send the message that China does have friends in Europe. Even if Serbia is not a member of the EU, it is important for China to create the impression that there is no single and reasonably united China-critical block in Europe. Particularly in times of escalating tensions with the US, China does not have an interest in a critical united front in Europe. The visit to Serbia already served to underline this and Xi’s visit to China-friendly EU member state Hungary is even more important for that. It directly counteracts the message that Macron intended to send by inviting Ursula von der Leyen to Paris: that there is a European position on how to engage with China.
For businesses, particularly in the EU, this means that no bad news is good news. While the visit to France, in terms of tangible outcomes, was rather a non-event, it also means that no new tensions have arisen so far. Europe is continuing its dance on a rather thin wall between economic desires, security concerns and human rights. For businesses, it still means to keep close track of any potential changes in geopolitical environment and keep their risk management strategies updated.
Securitisation of the relationship: Australia’s week with China
In contrast to the not very eventful week of Chinese state visits in Europe, the Australia-China space has been dominated by security issues. The incident with an Australian Seahawk helicopter in the Yellow Sea points to increasingly dangerous engagements, the budget about to be handed down by the Australian Government hints at an emphasis on securitisation of government spending and Australia’s latest mutual support agreement with Tuvalu also indicates a growing security competition with China. Businesses need to be aware that security is the major theme driving Australian engagement with China. While companies might hope for uninterrupted business-as-usual economic engagement, the security elephant in the room is becoming bigger and bigger.
The Yellow Sea incident
The first major security-related issue that occurred this week is the clash of Australian and Chinese militaries in the Yellow Sea. While on a mission to enforce UN sanctions against North Korea, an Australian Seahawk helicopter was intercepted by flares fired from a Chinese fighter jet and had to undertake evasion manoeuvres. Massive diplomatic protests from Australia followed the incident and the Australian government stated that it raised the issue with the Chinese government through foreign policy and defence channels.
The messages from the Chinese side on the incident were somewhat contradictory and point to the worrying possibility of fragmented actors. The Chinese government first claimed that the Australian helicopter had entered Chinese territorial space before backtracking on this statement and accusing the Australian military of spying on Chinese military exercises. While we have no way of knowing for certain what triggered the contradictory Chinese statements, they might point to the fact that different agencies are involved behind the scenes in China. In spite of what outside observers often assume, the Chinese government is not a monolithic bureaucracy but a rather fragmented structure with many different agencies leading a life of their own. If this contradictory communication is indeed the result of different agencies (including the military) reporting different things to their government and offering their own perspective on the issue, this is a dangerous development. It will make communication with the Chinese side more difficult and will require all sides to step very carefully in order to prevent such an incident from developing into a bigger conflict.
Security spending in the budget
The securitisation of Australia’s relationship with China is also visible in some of the items that will appear in the budget about to be handed down next week. Among others, the federal government is committed to spending $18 billion on upgrading defence bases in the Northern Territory. Based on the assumption that in a “missile age”, Australia will no longer be protected by its geography, the federal government wants to significantly upgrade military capacities in the Northern Territory to serve as a strong base of defence.
While increased defence spending obviously does have the ability to boost the economy and create jobs, it also pushes economic growth and government spending into a more defence-oriented direction. This is good news for all businesses in the defence sector, but it is less good news for businesses in other sectors. It means that in times of limited public funds, money has to be allocated. Considering the increasing security lens for looking on Australia’s relations with China, defence spending is clearly an important consideration for allocating money when it comes to dealing with China.
Australia’s climate and security agreement with Tuvalu
The third big development in Australia’s political China space this week is the climate and security agreement that Australia concluded with Pacific Islands nation Tuvalu. The agreement includes Australian financial development assistance for Tuvalu, support with climate change adaptation and also a security agreement. This involves Australia agreeing to providing support to Tuvalu in case of military aggression, humanitarian disasters or a global pandemic. In exchange for that, the agreement reserves the right for Australia to (dis)agree to any other security agreement that Tuvalu wants to enter into with any other country.
This is clearly a diplomatic move directed against China. There are hardly any scenarios imaginable that do not involve China and that would lead to Australia objecting to a security agreement the government of Tuvalu would like to conclude. From an Australian perspective, this is first and foremost understandable. After the Chinese security agreements for example with the Solomon Islands, Australia would like to prevent this from happening again.
At the same time, this move bears the risk of alienating parts of the political establishment and public opinion in Tuvalu and other Pacific islands nations. The right of Australia to veto security agreements with other countries might be perceived as an infringement on the sovereignty of Tuvalu. Particularly if Australia wants to (or has to) engage in an economic and security competition with China in the Pacific region, this is a very fine line to walk.
In terms of the bigger picture, the agreement does, like the other issues in today’s newsletter, point to in increasing securitisation of Australia’s relation with China. Particularly Australian politics increasingly sees China as a security threat and prepares to engage with it on those terms. Businesses, who still see China mainly as a huge market and significant economic opportunities, will have to start reconciling these two perspectives. Independent of whether one or the other (or both) are right or wrong, it is time to acknowledge that they exist and that political and security establishments increasingly see China through a different lens other than business.