The 20th Party Congress is over. Xi Jinping is the clear winner and a ‘new era’ of international competition has just started. How will The United States of America and Europe deal with an increasingly autocratic China? Did any opportunity of striking deals with Xi vanish? Should the West isolate Beijing under legitimate democratic concerns? The German Chancellor Olaf Scholz will try to answer these questions soon, as he is the first Western leader to travel to Beijing since the pandemic.
The West looks at China with new eyes
The picture of Hu Jintao escorted out of the hall upon Xi Jinping’s request clearly represents the outcome of the Chinese Congress. Xi has strengthened his control over the party by replacing Hu’s allies with his own. Ten years ago, when Hu stepped back and Xi took his place, some sort of check and balances within the political system was still in place, but today Xi’s power is facing almost no limits.
After taking over the party, Xi is now resolute to achieve a full modernisation for his country by the mid of this century. Indeed, to weigh heavily over the existing world order, China needs to reach technological supremacy. Thus, to strengthen China’s capacity to challenge the technological primacy of the West, Xi has already pursued ‘friendship’ with other autocratic regimes in the last decade.
All of these factors led Western countries to look at China differently. Once seen as a relevant market for the international community, the country has evolved into an all-rounded economic competitor with irreconcilable political views. In the eyes of Western leaders, Beijing is now trying to redesign the liberal world order through the weaponisation of trade and technology.
The pandemic played a pivotal role in reshaping the relations between the West and China. Not only did the virus broke out in Wuhan, but the contingency measures disrupted several global supply chains. Suddenly, the world discovered that international trade had been relying upon asymmetric interdependences, which could be used as leverages to achieve political gains. The Russian invasion of Ukraine further made this truth abundantly clear, emphasising the need to reduce economic exposure to countries with conflicting worldviews.
The German trailblazer
In this scenario, Scholz is to travel to Beijing on November 4th. His visit has already encountered several criticisms. The Baltic countries lamented the lack of a European common approach. Indeed, the last European Council discussed for three hours in a row over the future of its relations with China, without reaching any agreement.
Dissent voices also raised at home. Before leaving Germany, Scholz had to deal with a partial buyout of a terminal at Hamburg’s port by the Chinese company COSCO – which was already the harbour’s largest customer. Many feared that hindering the company’s activity would have favoured competitors such as Antwerp and Zeebrugge. Other commentators were afraid of an increased Chinese presence in such an important infrastructure. COSCO initially aimed at buying a 35% share of the terminal but ended up with only 24,9%. The deal was largely seen as a compromise, since such a share does not give them a say in strategic decisions.
Scholz was already aware of the risks and opportunities of the acquisition, since he had served as major of Hamburg between 2008 and 2011, so he supported the final deal. Yet, his government was initially expected to take a tougher stance on China compared to Angela Merkel’s. The long-serving Chancellor was widely known for pursuing strong economic ties with China. Merkel supported the ‘change-through-trade’ narrative, which sought to influence Chinese policies by economic integration. Indeed, she ended her term as the Council of the EU rotating chairman by signing the Comprehensive Agreement on Investment.
On the contrary, the Scholz cabinet is supported by a coalition which includes the Green Party. The latter’s member Annalena Baerbock, Federal Minister for Foreign Affairs, had vowed to get tough on China in the past. On top of this, the Greens’ Member of the European Parliament, Reinhard Bütikofer, is co-chair of the China-sceptic Inter-Parliamentary Alliance on China (IPAC) – ‘an international, cross-party group of legislators working towards reform on how democratic countries approach China’. Bütikofer was even sanctioned by China in 2021 for his positions.
Despite being supported by China-sceptics, Scholz is travelling to Beijing with representatives from 12 of the biggest national firms (in fact, 100 more apparently expressed their desire to join the trip).
The start of a new era
If the Greens were not able to help Scholz make up his mind, the economy could soon force Berlin to reconsider its position. After having largely benefitted from China’s growth, in 2021 Chinese export to Germany surpassed imports and Automotive exports are rising, too. This means that the trade balance is turning against the European powerhouse, hitting on its most important voice of GDP.
During the next days, Scholz will also feel Biden’s hand over his shoulder, as the US look closely at his visit. Biden has recently unveiled its National Security Strategy, labelling the next decades as the ‘age of competition’. The US Department of Commerce launched a set of export limitations to slow China’s semiconductor industry down and it is planning to extend them to other sectors as well.
However, the US cannot act alone, they need to find allies with a shared view. For now, this seems at odds with Scholz’s choices. Yet, this could just be the beginning of a new era, when the relationship with Beijing are expected to re-shape industrial policies, not only in China but also in Europe and in the United States.
