Chinese President Xi Jinping will visit France and Italy in May in a bid to improve faltering relations with the European Union, which are impacting EU trade with the world's second-largest economy. Analysts say European companies in China are facing more uncertain business conditions, forcing them to devote more resources to managing ballooning risks.
Trade will be high on the agenda when French President Emmanuel Macron meets his Chinese counterpart in Paris in May, diplomatic sources say.
It will be Xi's first Europe trip in five years amid mounting EU-China tensions. It comes after Macron visited China in April last year.
During that trip, Macron took a softer line with Beijing compared to his EU partners, suggesting in one controversial interview that Brussels should interfere less in Chinese policy.
France is increasingly wary of Beijing's growing assertiveness, especially in the Pacific, where Paris has its own interests in the shape of its overseas territories New Caledonia, Wallis and Futuna and French Polynesia. Its 2023 Indo-Pacific Strategy warns against "China’s increasing power and territorial claims" in the region.
But Macron's remarks diverged from the general EU line that China is a "systemic rival".
Impact on business
In recent years, the relationship with the EU has worsened over China's assertiveness in the South China Sea, its imposition of the draconic national security law in Hong Kong, and growing EU criticism of Beijing's human rights record, especially on minorities like Tibetans and Uyghurs.
They are the most visible targets of an omnipresent surveillance state that infringes on the privacy of virtually everybody residing within Chinese borders.
Foreign businesses are feeling the effects too. In a report released this week, the European Union Chamber of Commerce in China urged the country’s leaders to address risks that have “grown exponentially” in recent years.
“This report comes at a time when the global business environment is becoming increasingly politicised, and companies are having to make some very tough decisions about how, or in some cases if, they can continue to engage with the Chinese market,” it says.
The study echoes concerns raised by European and US companies operating in China. Foreign investment fell 8 percent last year as companies recalibrated their commitments in the world’s second-largest economy.
EU business chamber officials said China’s changing business environment partly reflects moves by Beijing to minimise risks due to trade barriers and dependence on imports of key commodities or industrial products.
That's especially the case given trade friction with Washington and discussions about “decoupling” supply chains from China after the disruptions that occurred during the Covid pandemic.
But they said European companies also must manage their own risks.
Hope for common ground?
China has sought to emphasise its openness to foreign companies and investment.
Its cabinet, the State Council, on Tuesday issued an action plan to promote foreign investment – especially in high-tech areas favoured for growth, such as computer chips, biopharmaceuticals and advanced equipment.
It promised tariff exemptions and called for an end to discriminatory practices against foreign companies.
But other actions have run counter to that spirit of openness. Raids on foreign businesses in China, unclear state secrets laws and tightening rules for data handling have generated unease among many foreign businesspeople in the country.
“The number and severity of risks companies find themselves having to navigate has grown exponentially in recent years,” Jens Eskelund, president of the EU business chamber in China, told reporters in a briefing before the report’s release.
At the same time, Beijing has not addressed many of the issues raised by foreign businesses, among them access to government procurement contracts, which are vital given the role of state-owned companies in the economy.
Eskelund called on China to restore predictability to the regulatory environment.
“Predictability was one of the main things that made China so enormously attractive,” he said. “We might not like everything we saw but we knew what we got.”
He said the report's purpose was to bring the debate over de-risking and national security down to specific industries and commodities, so that the various sides weren't just arguing over abstract concepts.
“We want to find common ground,” he said. “We want to work with China on these issues. We want to work with Europe on these issues.”
Xi's visit to France in two months' time may help break the ice.
It comes as China and France celebrate 60 years of diplomatic relations – often rocky – and both parties have indicated that they want to steer into less turbulent waters.
(with AP)
